Academic journal article China Perspectives

The Protection and Enforcement of Intellectual Property in China since Accession to the WTO: Progress and Retreat

Academic journal article China Perspectives

The Protection and Enforcement of Intellectual Property in China since Accession to the WTO: Progress and Retreat

Article excerpt

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The People's Republic of China ("China") has over the past three decades experienced unprecedented rapid economic growth. In large part, China's success results from an export-oriented economy relying on foreign direct investment (FDI), government subsidies, and low input and labour costs. The downside to this strategy, however, is a reputation as a sweatshop producing low-quality goods without recognising or managing externalities such as product standards and environmental protection.!1)

Primarily following a government-interventionist model utilised by the early-industrialising countries of East Asia, the Chinese government has managed and controlled almost every aspect of its economy and social development. Such management and control can be seen in China's policies concerning, inter alia, its currency and exchange rate, FDI, export subsidies, and indigenous innovation policies, and even in its policies concerning the protection and enforcement of intellectual property rights (IPRs). In these and in other sectors and issues China has vigilantly pursued policies that arguably conflict with the rules and norms of international law, including those of the World Trade Organization (WTO).(2>

Again, similarly to the early-industrialising countries, China now realises it must innovate in order to maintain its economic growth and developmental path. It is dear that in order to do so, China must advance beyond a low-level producer. (3> In this regard, China has become adept at absorbing foreign technology by learning from multi-national enterprises (MNEs) that have invested in China, building internal capacity, and then utilising the acquired capacity to directly compete with MNEs. At the same time, China has seemingly accepted that it must increase the protection and enforcement of IPRs in order to assist its progress beyond that of a "world factory" and toward a true innovator nation.!4) Accession to the WTO has accelerated the pace of change, with most now considering China's IP laws to generally comply with its commitments under the WTO's Agreement on Trade-Related Measures on intellectual property rights (TRIPS). Enforcement of these laws, however, remains problematic.

China is the world's leading IP infringer. China is by some measure a producer of counterfeit and pirated goods (it is estimated that China accounts for over 80 percent of the world's counterfeits),!5) producing large quantities of goods such as knock-off designer-brand clothing and accessories, shoes, and apparel, pirated films and books, and fake consumer electronics, aircraft, and car parts for both the local and export market. *6> China also is a largescale infringer of patents, with both industrial giants and technology-related industry appearing to blatantly ignore the patent rights of foreign companies.

Legitimate businesses are estimated to suffer annual losses of US$250750 billion in lost sales as a result of counterfeit and pirated goods, while unsuspecting consumers have suffered great losses - including loss of life - from poorly-made imitation products.*7> It is almost impossible to predict the losses suffered from patent infringement. Membership in the WTO has done nothing to curtail the infringements; ironically, liberalised trade policies (including fewer export restrictions and the cessation of the state-trading monopoly on exporting) coupled with the rise of the Internet and e-commerce has led to a dramatic rise in counterfeiting and piracy over the last decade. Indeed, estimates from the Chinese government, United States (US) Congressional Research Service, and others conclude that counterfeits constitute between 15 percent and 20 percent of all Chinese-made products, and that upwards of 90 percent of software in China is pirated. *8> Rather amazingly, 85 percent of all infringing goods seized at EU borders are sent from China (with an additional 2 percent coming from the Hong Kong SAR), with around 90 percent seized for trademark infringement. …

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