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From copyright thief to innovation leader: The story of IP protection in China

In 2011, an American blogger stumbled upon an Apple Store in Kunming, China. She thought this odd. As far as she knew, China’s only Apple stores were in Beijing and Shanghai at the time. Other curiosities began to emerge as she explored further. The storefront had a large sign reading “Apple Store”, something which most Apple Stores don’t have. Members of staff wore tags that simply read “Staff”, again diverging from the personalised name tags of other Apple Stores.

Eventually, the truth became clear: this Apple Store was fake. But it was a fake so convincing that even its employees believed they worked for Apple.

The blog post was picked up by the western media, with several publications further exploring what emerged to be the widespread phenomenon of fake Apple Stores in China. It wasn’t just Apple Stores either. Reporters found fake Disney Stores, Nike shops, McDonald’s restaurants and Starbucks Cafes among others in several Chinese cities.

This kind of blatant disregard for intellectual property rights has earned China a reputation. Westerners see China as a country in which IP is barely protected, or not protected at all, no matter how big or small. Despite this firmly lodged stereotype, the country has changed over the seven years since this story broke. Now, China boasts its own powerful IP protection rules. As a result, the country’s economy has been flooded with innovation, the kind that the US’s Silicon Valley can only dream of.

China’s new IP protection rules have encouraged, and been encouraged by, innovation

Followers of tech news will know that one particular area is expected to dominate the sector for the foreseeable future: blockchain. Pioneered by Satoshi Nakamoto, the pseudonymous creator of Bitcoin, blockchain technology works like a real-world ledger book, keeping an accurate record of transactions and interactions between parties that is always accurate. Developers are finding ways to use blockchain for everything from music to voting.

But blockchain technology’s biggest innovator is not the US. According to the World Intellectual Property Organisation (WIPO), more than half of blockchain patents last year were filed in China.

China’s increase in patent filings comes hand in hand with improved patent laws. According to Global Voices, it’s possible to protect an IP or invention around the world by registering a patent internationally. “Most countries will protect works created in other countries in the same way that they protect their own citizens’ creations.” In China, however, this has not been the case historically. The problem was not in China’s patent laws themselves, but in the way those laws were, or as it happens were not, enforced.

A widely-reported phenomenon known as ‘local judicial protectionism’ meant that many IP cases tried at a regional level would rule in favour of defendants based in the local area, rather than plaintiffs from outside or abroad.

This issue has been largely eradicated in recent years. In 2014, Shanghai, Guangzhou, and Beijing opened specialised Intellectual Property dispute courts. And in the years since, many other provinces have followed suit. Unlike the previous tribunals, which oversaw all local matters including IP cases, these courts look at every case objectively, regardless of where each plaintiff is from.

With more robust protection for IPs, more companies and individuals are likely to file for patents. And the results, particularly in the blockchain market, speak for themselves. China is on track to continue its economic rise on a trajectory that is very worrying for companies in the US. It’s ironic, then, that China could never have driven this much innovation if it wasn’t for US companies themselves.

China’s world-conquering economic rise was ‘made in the USA’

The establishment of the new IP courts was part of the Chinese government’s explicit tactic to shift the country’s economy towards innovation. Previously, around the time China was weak on intellectual property, the country had developed a reputation as ‘the workshop of the world’. The phrase ‘Made in China’ was ubiquitous, found on everything from children’s toys to furniture.

The US tech sector, too, has relied heavily on Chinese manufacturing. American entrepreneurs like Steve Jobs turned a blind eye to China’s notorious exploitation of factory workers, signing lucrative contracts to have their smartphones, tablets, laptops, televisions, and other appliances built there.

It would appear that these entrepreneurs are ashamed of this, at least on some level. Siri, for example, is “not allowed” to reveal where an iPhone was manufactured when asked. While the human cost of building smartphones is no doubt large, US business leaders have another reason to be embarrassed about their over-reliance on Chinese manufacturing. The wealth they have granted China has allowed the country to turn its ambitions towards a traditionally US-dominated innovation-based economy.

Raconteur, paraphrasing the Chinese government, describes the country’s history thusly: “China has evolved from a produce-and-copy economy, which turned a blind eye to copyright infringements in the pursuit of growth at any cost, to one that is focused on high-quality development.” It couldn’t have done it without help from the US companies who now resent China’s newfound success.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.

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