China and Intellectual Property Managment

Introduction

The Chinese government has realized the large-scale infringements of intellectual property rights may hinder the development of national economic interest and foreign investment. Therefore Chinese government established many measures to combat intellectual property violations and to make aware people of the importance of IPR. In this essay, I am going to highlight some issues about intellectual property in China, such as the measures that the Chinese government has done regarding protecting IPR, and I will discuss how china should be compelled to improve its IP enforcement even it harms to some extent local Chinese business.

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A brief history of intellectual property in China

China has amended its Copyright Ac in the year 2001 in tune with requirements of WTO requirements with moderate deviations. The basic code of Chinese legal codifying is that principal statue ought to be both common and flexible (Keller, 1994). The copyright law functions in concurrence with the regulation for the functioning of the copyright law of the PRC. The “state council “too formulated Regulation on “Computer Software Protection.” After it was introduced in 1991 the copyright Law and amendments were made in 2002. Copyright Laws of China is mainly dealt with the topic of copyright, details who possess the copyright, and then detail what moral and economic privileges are entitled by the creators of the copyright. The applying ordinances function as an annexure to the parent law and elucidate elucidations of rights, theme, presumptions, and immunities of the parent copyright regulation

Chinese culture

China is considered to be the globe’s leading IP regulation evading nation having marketed in 1993 nearly 45 million counterfeit compact discs. Thus China is considered to be a secure haven for pirates and bootleggers due to its fragile copyright safeguard before it adapted TRIPS in the year 2001. Chinese factories have the production capacity to produce over one lac million CDs per annum while China’s home requirement is only about 4.9 million. The balance CDs are supposed to be plagiarised copies of famous film videos and albums that are sold and exported at an unbelievably lower price.

During Clinton’s presidential regime, the US warned to impose trade sanctions on over a billion dollars in Chinese exports for the failure on the part of China to implement the intellectual property rights three times, and each time China has concurred at the last minute to renew its enforcement efforts to shun sanctions. It is opined that there is now enough enforcement on the safeguard of intellectual property rights. But one can see even today that pirated music DVDs are available on the streets of major Chinese cities. Qiao Shi, former head of the Chinese People’s congress was quoted humorously “China imaybe the country with strong leaders but not with strong laws. Thus the power of law in China is submissive to the power of bureaucrats and leaders.

History of IP law in China

The first patent law was introduced by KMT, the nationalists. Trademark regulations were first introduced in 1923 by KMT and at the end of 1948, there were about 50,000 trademark enrolments. There was no safeguard for trademarks registered in China when there was a disagreement between local and foreign trademark proprietors as foreigners were protected from court trials in China. (Panitchpakdi & Clifford 2002:10). However, when the Mao Tsedong government came to power in 1949, it scrapped the first patent and copyrights laws enacted under the KMT regime. The Mao Tsedong government however implemented an incentive system for innovations. “The Provisional Regulations on the Protection of Invention Rights and Patent Rights” was enacted by China in 1950. (Liu 1996:174). “The law of Regulations on Trademark Administration” and its execution were introduced in 1963 and however this act did not specify any stipulation on the protection of trademarks and due to this, the trademark administration was virtually non-existent during the Cultural Revolution. (Zheng 1997:244). In 1980, China became a “member of the World Intellectual Property Organisation. (WIPO).” “The Paris Convention” was ratified by China in 1985 and the Madrid Agreement was ratified by China in 1989 and thus became a party nation for the “Integrated Circuits Treaty in 1989. “China enacted its Trademark law in 1983 and Patent Law in 1985 and Copyright Law in 1990. (Yang 2003:26).

The changes that happened in IP after China joined WTO

China joined the WTO as a member on 11th December 2001. By joining WTO, China agreed to introduce IP enforcements and legislations that would live up to the expectations of WTO’s TRIPS agreement. Thus, China is under obligation to redraft, amend, insert or delete numerous IP laws and to establish a domestic IP regime that would be at par with its WTO commitments and also China had established a chamber of specialized IP courts throughout China.

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The plastic toy manufacturer LEGO won an IP case against a local Chinese company in January 2003 for copying its blocks illegally. The offender was asked to tender a public apology, to cease the production and government agencies destroyed its counterfeit LEGO toys and asked to pay RMB 67,000 equivalent to $8000. (Gulati & Lee 2004:119).

IP Category in China

Intellectual creations are intangible assets that can not be controlled exclusively. A fence-like structure is created around it to protect the same which we term as intellectual property law or copyright law and this protects and controls its exploitation by lawbreakers. If no protection is extended, then the said creations would be pilfered by the intruders for monetary benefits.

A protective law like copyright law is regarded as an essential element in promoting and introducing novel innovations. It acts as a motivation for inventors and music companies to put in inventive production and recoup a return on their capital. Though the copyright empowers the creator to commercialize and earn revenues it also restricts the talent of the creator to obtain, remix and sample present culture.

Copyright

As regards the topic, copyright guards the definition or manifestation of the inspiration but not the inspiration itself. Expressions and ideas on their part are not copyright provided that we articulate those in a meticulous kind, copyright law will be applicable. It has been specifically mentioned in Articles 6 of the “Regulation on computer software protection “that the safeguard of software copyright under these rules shall not apply to processing, thoughts, mathematical concepts, functioning concepts, or the one employed in the development of software

Trademark

China started to adopt a country-wide trademark system in the year 1980 onwards and had about ten lacs trademarks registered in the year 2000 and this had swelled to 3 million in the year 2005. The fast development of the Chinese economy offers a conducive environment for the development of IPR and during these years, public awareness of IPR has also been increased much.

Patent

The filing of patent applications also swelled in the past five years which equaled the filings between 1986 and 2005. In just four and a half years, its patent registration reached second million levels whereas the first million levels took nearly fifteen years to achieve.

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The Chinese government action on IPR. [What Chinese government done]

Between August 2004 and at the close of 2005, China’s Copyright and Publication administration examined and booked more than 50 million pirated and counterfeit products and ordered the winding up of more than 19,000 illegal businesses. The patent administration registered a fresh 2820 new cases associated with the infringement of patents and passed the order on about 3200 counterfeit patent cases and 23 cases have been handed over to police to initiate criminal action.

Between 2000 and 2004, Chinese authorities arrested about 2540 accused who were involved in the infringement of IPR and initiated cases against 2600 individuals in the courts.

Chinese government perused various public awareness programs among the public about IPR’s. It decided to organize every year from April 20 to April 26 as IPR week to spread knowledge about IP. During this week, many IPR educational events like competitions on IP knowledge, seminars, and public advertisements are being carried out. (SIPO.gov.cn)

Even after china endorsed TRIPS, piracy of music recordings has become a major industry in China. The scale of piracy has grown from small local firms to a major export industry in which Chinese manufactured pirated copies of music records showing up as if it has been made in Eastern Europe and Canada. Though China has agreed to end this global problem due to the involvement of the People Liberation Army and senior Chinese leaders in this business, the end is yet to come.

It is estimated that piracy rates in the music and film industry remain at between 80% and 95% in China. It is the opinion of the observers that these levels of VCD, DVD, and CD counterfeiting are not supposed to end suddenly. As there is a rapid change in the economic, social, legal environment and technological atmosphere, China’s creative industries are finding it difficult to cope with such changes. From 1980 onwards, copying music products and film has become faster and cheaper thanks to the availability of CD, VCD players, tape recorders, televisions at cheaper rates in the Chinese market as China is believed to be the global center for electronic goods. As of late, there is a sudden increase of Chinese citizens who by way of accessing through internet and resorted to instantaneous exchanging of copyrighted creations like music. The number of internet users in mainland China had reached 86.9 million by June 2004 and bandwidth in China has also increased more than 200% over a year. Further, there is a tremendous increase in several users shopping online, and “internet mobile phones “ and other ICT are surfacing as even more imperative mediums for the delivery of copyright products. Though the Chinese consumers are commonly benefited because of this technological development. China’s music and film industries are resisting competing with the inflow of unrestricted low-cost imported copyrighted materials as it has stripped their revenues and has compelled them to develop a reliable source of Income. The piracy rate is so abnormal in China that it is arduous for percentage associated business replicas that dictate another market to function efficiently.

Improve the enforcement of IP and it fostered public awareness of IP

Despite the introduction of much new legislation on IPR after 2001 in China, it has no antimonopoly rules for IPR and there are no restrictive efforts to forbid IPR infringement. Further, many regulations and rules of China are restrictive. For instance, Chinese patent law requires notices which will take nearly one and half years and examination of a patent for new inventions could take as long as 36 months. Due to this, a patent approval in China will take nearly five to six years to complete. Because of this inordinate delay, Chinese industries find it difficult to innovate and government procedures dampen incentives for technological progress. Further, the efficacy level of IPR safeguards in China is quite low despite having a vibrant IPR safeguard regime on paper.

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China can improve its enforcement of IP and can foster public awareness on IP by introducing the following fiscal reforms:

  1. It can uniform the income tax on both the domestic and foreign-invested enterprises. This will help domestic SMEs and companies to compete efficiently and equally in the market.
  2. It should speed up the reforms on value-added tax (VAT) to encourage the modernization of equipment and technological upgrades. This will redundant the negative impact of double taxation.
  3. For those organizations that invest in R&D, greater pre-income tax deductions should be offered.
  4. China should consider implementing universal import VAT and import customs deductions and exemption for equipment imports employed for R&D and testing purposes. This will assist to standardise import duties and shoring up larger technology imports for domestic innovations.
  5. China should allow companies to create R&D funds as a percentage of its sales exclusively for employment in R&D technology.
  6. Companies should be allowed to improve the depreciation of R&D equipment and instruments. (Fan 2008:146).

The official government policy

For infringement of copyright Act, administrative and civil relief are stipulated using pecuniary damages, public confession, injunction, and annihilation of offending materials. These remedies are stated in the “Articles 46 & 47” and 49 & 50 of the “copyright law and Articles 23, 24 of the Regulations on computer software protection.” Under Articles 48, a legal fine of up to 50000 RMP (equivalent to the US $ 6300) is provided. Further, there are criminal liabilities under the criminal law of 1997 which stipulates penalties including imprisonment up to 7 years. Enforcement and distribution of privileges through technology have become significant both in China and in Western jurisdictions. Under Article 47, digital rights management is toughened by the anti-circumvention law and administration privileges to amend rules which makes it illegitimate to interfere or circumvent with technological safeguard initiatives.

Enacted legislation on IP

Due to international pressure, China introduced reforms and revisions on its IPR –associated regulations between 2001 and 2005. Thus, China can create exhaustively and complete IPR legal provisions in tune with the international laws and thus pave a way to create strong national IPR provisions. The new regulations introduced by China in this province are detailed below:

Law on Copyright

Patent law

Law on Trademarks

Regulations on Computer Software Protection

Regulations on Customs Intellectual Property Protection

Regulations on Olympic Signs Protection

Regulations on Integrated Circuit Design Protection

Regulation on Collective Copyright

Regulation on National Defence Patents

Regulation on Audio-visual Products

Regulation on Special Signals (SIPO.gov.cn)

The enforcement of IP in China

[A] There are two main routes for IP enforcement in China *Administrative route

Under the administration system, an IP owner may file a complaint to administrative authorities to enforce their IP privileges without approaching any court. No damages are available to the patent owner under this system. However, a fine is levied on the infringer and any secret profits earned may be confiscated by the authorities. In case of non-satisfaction, an IP owner can approach the court for remedy. In case of any infringement, the authority will issue a mandate to the infringer to stop the production, selling the counterfeit products. Despite the order, if the infringer does not stop his activity, the authority may approach the court for its direction. (Wininger & Sun 2007).

Judicial route

Under the judicial route, the plaintiff must demonstrate that there is infringement. Relief ordered by the court includes damages, injunctions, and recovery of any profit made. (Wininger & Sun 2007).

Customs the third route of IP enforcement in China.

Registration of IP with the Chinese customs will facilitate seizing and confiscating the infringed products in China. Thus, it is two-way beneficial as it forbids imports and exports of counterfeit products. (Wininger & Sun 2007).

The foreign enforcement of IP in China. (How foreign countries enforce IP in China)

USA business community persuaded” U.S Department of Commerce” to compel China to enforce stronger protection for foreign workers. As the result of this lobbying, the USA invoked special 301 against China and threatened to impose trade sanctions against it unless it granted more protection to USA’s intellectual property works. After many rounds of negotiation, in January 1992, an MOU was arrived at on the issue of safeguarding intellectual property rights. This MOU compelled China to extend effective protection and enforcement to IPR and China was asked to join two international conventions namely “Convention for the Protection of Producers of Phonograms against Unauthorised Duplication of Their Phonograms and the Berne Convention.” China joined these conventions in 1993 and 1992 respectively. Due to China’s adherence, USA removed the China from “the Priority Foreign Country List.”

Subsequently, due to the failure and sluggishness of China to enforce the Intellectual property laws, the USA again warned to impose Special 301 trade sanctions worth $ 1.1 billion on Chinese manufactured goods in 1994. The government of China hinted back at imposing its trade sanction against the USA.

The two countries avoided a trade war by signing an Agreement regarding intellectual property rights in 1995.

As usual, even after the 1995 agreement, China failed to make strict enforcement and failed to crack down on pirated music works and also had not shut down 29 illegal compact disc factories. Again China was placed on the Priority Foreign Country List and China also retaliated by imposing a sanction against imports made from the US with 100% tariff. Again on 17th June 1996, another agreement was reached between China and USA. After that, the US withdrew its threat of trade sanctions of $ 2.1 billion against China as it had closed down 15 factories manufacturing pirated CDs and deployment of China’s mighty national police. After signing the agreement in 1996, China was very serious and has closed down 39 factories manufacturing an unlawful copy of U.S music and had arrested more than 250 individuals. The USA has promised to inflict a trade embargo should China shrink its attempts to combat piracy against U.S. music works. The piracy of U.S goods in China is a gamut of controversy between the USA and China and the USA is wrestling with schemes to fight China’s piracy of priceless U.S intellectual products.

In 2005, China reiterated that it would prosecute more for the copyright violation and to review the suggested rules that may curtail the Chinese government’s purchase of American Software. The USA in its continuous efforts is trying to curtail piracy in China that costs genuine Chinese and foreign manufacturers billions of loss in revenue in a year. Though China has promised to exercise strict enforcement for the violation of the Copyright Right Act, still piracy is rampant and unchecked. Again China has promised to book more offenders and the USA and China have concurred to establish joint committees to manage cross-border infringements and China will post a high-level official in Washington to handle product piracy complaints. Further, China has agreed to reconsider its directions that instructed its offices to purchase only Chinese-made software to curtail the use of foreign software which may cost about $ 8 billion a year.

Despite assurance to stop music piracy, illegal copying is rampant in China during 2005. US claims that almost about 66% of all seizures of fake products by US customs officials are emanating from China. It is reported that about 63% of seizure of shipment during 2004 or trade worth $ 88 million as compared to 66% or trade worth $ 63 million and about 49% in 2002 and 46% in 2001 are from China. The USA is continuously urging China to stop this piracy through WTO.

List of References

  1. Fan Qimiao. (2008) Innovation for Development and the Role of Government. New York: World Bank Publications.
  2. Gulati, Anuradha Dayal & Lee, Angela Y. (2004). Kellogg on China. Northwestern: Northwestern University Press.
  3. SIPO.gov.cn. (2008) IP Achievements in 10th Five Year Plan. [online] Web.
  4. Wininger Aaron & Sun Peiyu. (2007). China. Recent Developments and Routes for Enforcing Intellectual Rights in China. [Online] Web.
  5. Yang Deli. (2003) Intellectual Property and Doing Business in China. New York: Emerald Group Publishing.

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