Chinese Pirates Like Chinese Brands Too

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A great deal of time is given over to discussion of the hurt felt by foreign companies whose products are pirated in China (e.g. Pfizer, NEC , and Starbucks). Less time is given to consideration of local companies. But all that is starting to change, not least due to the emergence of Chinese brands that offer the opportunity for what we might call a “pirate premium”. One such example is highlighted in an article by Mercury News. The paper reports on Foshan Rifeng Enterprise Co., which is a manufacturer of flexible tubing systems in Guangdong:

    “Early in the decade, Foshan Rifeng seized a good share of China’s market for specialized piping used for heating, cooling, gas distribution and medical uses. The company now claims to be among the world’s three top piping manufacturers…But as the company’s reputation grew, its executives found that competitors were stealing designs and even the trademark name ‘Rifeng’, which means ‘Sun Harvest’.”

More and more Chinese companies, like Foshan Rifeng, are following the lead of the foreign brands, hiring lawyers, and taking the pirates to court:

    “China is the most litigious country in the world in terms of intellectual property lawsuits. This shocks most people in the U.S. It’s Chinese against Chinese,” said J. Benjamin Bai, who works both in Shanghai and Houston for Jones Day, a major global law firm.

Mercury notes that civil lawsuits involving intellectual property in China rose 32 percent in 2004 and by 20.6 percent in 2005, bringing the total for that year to 16,583 cases – of which only about 5 percent involved foreign companies (though the figure may not reflect the value of those cases).

As I have reported before, one of the reasons for this is the growth in Chinese patent applications (up 44 percent in 2005 to an estimated 2,452 – against international growth of 10 percent to 134,000. Another, related reason, is that the Chinese government has value-creation high on its agenda, and is keen to promote innovation and R&D. They are well aware that the investment will not come unless protection is also offered.

Of course, no article on this issue would be complete without a quote from the guys at China Law Blog / Harris & Moure…and Mercury was able to provide one:

    “‘[Chinese companies] would not go to court if they thought it was an empty exercise’, said Steven M. Dickinson, a lawyer for a boutique Seattle law firm, Harris & Moure”.

While intellectual property rights (IPR) abuses remain a real risk when doing business in China, it is clear that the legal environment is improving, and that the courts are increasingly willing to enforce judgments against infringers. Although the size of the fines imposed may not yet be commercially significant, the trend certainly is.

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3 Responses to “Chinese Pirates Like Chinese Brands Too”

  1. ip dragon Says:

    Hi interesting blog you have,

    Based on your blog and Tim Johnson’s article I wrote an article about the need for an enforcement ratio when interpreting statistics about the number of litigations.

    http://ipdragon.blogspot.com/2006/08/more-ipr-litigation-in-china-is-nice.html

    Cheers,

    IP Dragon

  2. Jeremy Gordon Says:

    Thanks for that. I have added a comment on your article, and agree that a ratio would be interesting to see (if difficult to devise). The litigation route does however seem to be an increasingly useful one.

  3. IP Lawsuits in China Says:

    […] Blog (an excellent blog on doing business in China) did a nice post the other day, entitled, “Chinese Pirates Like Chinese Brands Too,” on increasing intellectual property litigation in China between Chinese […]

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