China’s government has restructured an agency and empowered it to crack down on violations, taking the boldest step in decades to strengthen the country’s protection of intellectual property rights, as the world’s factory evolved from a notorious maker of counterfeit goods into a leading holder of patents.
The restructuring of the agency – the State Intellectual Property Office – was first announced early last month during the annual meetings of China’s legislature, but given a fresh impetus and prominence in Chinese President Xi Jinping’s keynote speech at the Boao Forum for Asia conference in Hainan.
China is seeking the “normal” technology cooperation with foreign companies and would protect “legitimate” intellectual property rights of foreign firms in China, Xi said in his televised speech.
The president’s remarks reflect a recognition that China needs to move away from the long shadow of counterfeits and bootlegs that cast a pall over the push for the “Made in China 2025” blueprint to transform the country into an advanced manufacturing economy.
The rules and process related to China’s patents and other intellectual property rights have been the “most sensitive” issue among European businesses operating in the country, taking precedence even before access to the financial markets, said Romano Prodi, former Italian Prime Minister and President of the European Commission.
“This is what people are saying, that the Chinese are copying everything,” Prodi said on the sidelines of Boao. “We have to have rules to regulate that.”
The Chinese president’s pledge is very important, but “must translate into concrete negotiation, discussion, starting from some sort of platform with precise and concrete measures,” Prodi said, adding that it’s also in China’s own interest to improve the country’s protection of intellectual property, since research and Chinese innovation has advanced by so much in the past decade.
Besides the more pedestrian sales of bootleg fashion wear, leather goods and toys, China’s government also stands accused of facilitating the theft of overseas technology through hackers and cyber thieves.
The Trump administration announced plans to slap punitive tariffs on Chinese products, as well as measures to restrict US investments by Chinese companies, based on a Section 301 investigation of China’s IP and industrial policies.
US action may actually be a mixed blessing as it compels the Chinese government to improve the country’s protection of intellectual property, even if the punitive measures hurt Chinese enterprises first, said Zhang Yue, chairman of the Broad Group, one of China’s biggest air-conditioner makers.
“The legislative framework and enforcement of intellectual property protection are extremely weak in China,” Zhang said at Boao, adding that there would be no incentive for innovation if the very fruits of creation are not protected.
“Public awareness is also very weak. We are not shy about stealing knowledge.”
Those words were greeted rapturously by US President Donald Trump on Wednesday, who tweeted: “Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!”
To underscore the point, China has been leading the world in filing for patents and trademarks, with 42.8 per cent of all filings last year, an increase of 4.8 percentage points from the previous year according to data by the World Intellectual Property Organisation (WIPO) in Switzerland. The US was second place last year, with 19.4 per cent of global filings, the data showed.
“The cost of defending intellectual property right is high, but the penalty for violations have generally been low in China,” said Xie Xianghui, a partner at Shenzhen-based Grandall law firm.
“This has led to frequent infringements. It has been the biggest problem for innovation and hi-tech firms in China, which either makes it hard for enforcers to recover their costs, or unwilling to invest more in research.”
Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!
— Donald J. Trump (@realDonaldTrump) April 10, 2018
China’s own awareness of the country’s home-grown innovations has also heightened, especially in so-called dual-use technologies that have both military and civilian applications, including supercomputers, drones, dredgers and rocket launch simulators.
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The State Intellectual Property Office (SIPO), located at Jimenqiao in the Chinese capital, reports to the National Markets Supervision Administration (NMSA), which itself was the merger of three agencies with responsibilities overseeing industry and commerce, inspection and quarantine, as well as food and drugs.
SIPO’s current director Shen Changyu, 54, is a specialist in mouldings and fabrications, with a doctoral degree. He was the chief scientist in the Chinese government’s “973 Programme,” a state project since 1980 for conducting research into fundamental sciences, including studies in agriculture, energy, information and resources.