China Esquire

Actually, I make no claim to be a China expert, though I am flattered to be considered one now. An expanded article of mine, originally a blog post that reviewed IP enforcement in China, is on China Success Stories. It is an expanded version because my original blog post just reviewed Professor Gruner’s article, whereas this article takes on some of the ideas there. Ultimately, I think IP enforcement is far more unpredictable than Gruner thought.

Here are the key excerpts I think:

Gruner observes that in the First China, “local authorities have strong motivations to pursue IPR enforcement as a means to both reward and enhance local innovators and to entice outsiders . . . to inject new technologies into the local economy through IP licensing.” He approximates the level of IP interest as being similar to those of highly technical western counties like the U.S.

Coastal China’s manufacturing “involves technologies originating in other parts of China or copied (often without proper IP licenses) from foreign sources. The interests of this region are thus largely tied to the . . . profitability of local manufacturing without any reciprocal concern over the lack of IP-based rewards for local innovators.” Gruner concludes about this area:

This region represents the greatest challenges for IP enforcement in China due to both its present economic interests in weak IP enforcement and the breathtaking scope of its infringement capacity in large-scale, low-cost manufacturing of unlicensed goods covered by IPR.

* * *

Second, it is increasingly difficult to try to segregate out Beijing, Shanghai, and Hong Kong (the “first tier” cities) from other major “second-tier” cities, such as Qingdao, Tianjin, or Dalian. Ironically, most of these second tier cities happen to be the Coastal Regions. Which do they fall under?

And how about a second tier city like Hangzhou? It is neither coastal nor within the direct influence of Shanghai. And yet, it is the Hangzhou Intermediate People’s Court that made headlines with the G2000 v. 2000 case. There, the court assessed damages of 20 million yuan–far beyond the damages of any of other China’s first-tier courts.

I think the first two categories are problematic to some degree. I still agree that the Beijing-Shanghai-Hong Kong triumvirate will provide greater IPR enforcement in general. But I also believe that Coastal China and China’s second-tier cities are much harder to group. Some areas will have strong enforcement while others fall directly into Gruner’s description. A better categorization would be that urbanized areas and coastal China outside of the 3 major cities fall within a sliding scale that is hard to determine. If you or your clients plan to be in these areas, then you need to do your due diligence to understand the extent of IPR enforcement.

Read the whole thing here and decide for yourself.

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