The protection of Intellectual Property Rights (IPR) was a major chapter during China’s negotiations with the World Trade Organization (WTO) prior to its accession in 2001. Since then many reforms and improvements have been made and the Chinese government heavily promotes its achievements in the fight against product piracy. But according to the latest OECD survey, still 4 out of 10 counterfeited goods on the global market are “made in China”.
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Interestingly to know, that not only the big names, such as Apple, Gucci, Nike or Universal, fall victim to product piracy and counterfeit – also small and medium sized companies lose immense amounts of money, because their innovative products get imitated in some Chinese backyard and are than sold at dumping prices. Repeatedly companies were made aware of IPR violations just because an angry customer called up the headquarters and complained about the poor quality of the product or asked for after-sales services.
C’est la vie en Chine?! Is product piracy merely one of the side effects one has to simply accept, when doing business in China? Not at all! Although one has to be aware that even the best strategies might fail on the Chinese market, there are 3 simple ways to reduce the potential risks for your company significantly.
1. Know the market!
Knowing the current market environment for your industry is the key for a successful performance on the Chinese market. IPR violations may happen in any industry, but the better you understand how your industry functions on the Chinese market, who your (Chinese) competitors are and what previous cases of counterfeit in the industry took place, the better you can prepare and protect your company against it.
If your company does not have the resources to get all the necessary information, you may be well advised on hiring a skilled local marketing or PR firm that is specialized in market research and truly understands the Chinese market.
2. Know the law
Since its accession to the WTO in 2001, the Chinese legal system improved significantly, although the actual implementation is far from perfect. On paper the Chinese IPR regulations do meet international standards, but most companies, when getting involved in counterfeit issues, do face a frankly unmanageable number of barriers, such as the Chinese language, the complexity of Chinese bureaucracy and the overall costs of a time-consuming lawsuit. Nevertheless, the best advice in case of an IPR violation still is to take legal action, instead of capitulating and depreciating the loss.
Be aware that the costs for an average lawsuit on IPR violations may be between USD250,000 (international law firm) and USD10,000 (local law firm). Therefore it is important to do some research and compare the actual cost-performance ratio beforehand.
3. Know your allies
Most national governments do offer some sort of investment protection for companies that are expanding their business to China. These agencies generally offer legal advice in case of IPR violations as well as financial support during a lawsuit.
Get in touch with the Chinese representatives of your home country’s chamber of commerce or the business section of your embassy for further information, or speak to Allegravita for an obligation-free consultation.
Article by Anja Knass, Allegravita’s corporate affairs manager.