Intellectual Property Protection in China – the Practice

A Japanese manufacturer whom we visited, while in Shanghai, told this story when asked about IP infringement:

In 2005, we received a call from a client reporting a problem with one of our diagnostic kits. Upon investigation, we determined the kit was not created by our company. We sent the kit to Japan for testing. The test revealed that the chemical structure of the diagnostic kit contents was not even similar to the kit we sell to Chinese clients. We immediately had our lawyer write a letter to the rural manufacturer, telling them to cease and desist this activity. We then discussed this event with our distributor, warning them to watch for this problem. We added a barcode to our label on the product to make it more difficult to copy. And, we send our salespeople (with the distributor’s salespeople) out to the clients so that they can keep an eye out for suspicious activity.

Distinctly absent from this response and the retelling of the story, is any animosity or even legal action beyond the letter from the lawyer. My first inclination is that this is due to the absurdity of having success in the pursuit of justice; however, I’m not convinced of that rationale. My doubt was further strengthened by the sly grin which accompanied the recounting of the event. On the other hand, I don’t believe that the theft of the IP in this case was condoned either.

My conclusion is this: counterfeiting is currently best fought in China by innovating faster than the duplicators. If this pace of innovation is out of reach, then, the currency approach is helpful… make the duplication difficult and educate the maximum people (clients, distributors, stakeholders) on simple methods to detect and report counterfeit products. Incidentally, this will only work effectively if the client perceives significant additional value with the original vs. the copy. In this case, the test was not functional as duplicated.

Certainly, protection of IP is appropriate and desirable… in societal systems accustomed to this enforcement. However, common sense isn’t always common.