NERA Economists Find Growing Awareness of Intellectual Property Rights in China
10 January 2006
Spurred in part by pressure from the United States and the European Union, China is moving closer to the intellectual property (IP) rights practices and standards of Western nations, according to two NERA economists.
Dr. Alan Cox and Kristina Sepetys cite the growing Chinese economy, more sophisticated laws, and greater attention to enforcement as reasons for the increase in Chinese intellectual property rights infringement cases. Their article, "Intellectual Property Rights Protection in China: Litigation, Economic Damages, and Case Strategies," appears in the new book, Economic Approaches to Intellectual Property: Policy, Litigation, and Management, edited by NERA economists Gregory K. Leonard and Lauren J. Stiroh.
The number of IP rights infringement cases being brought before Chinese authorities is still relatively small, and the fines and damages awarded are low compared to those in the US and other industrialized countries. But Cox and Sepetys write that these conditions are steadily changing. "In addition to the international concerns, there is more intellectual property being generated in China and with it a greater domestic interest in the protection of intellectual property rights and enforcement of IP laws. The combined effect is to increase the number of people being arrested and fined for IP violations," Alan Cox said.
As part of this trend, Chinese and foreign companies are increasingly using the Chinese IP laws to their advantage. For example, in July 2004, the State Intellectual Property Office of the People's Republic of China (SIPO) invalidated Pfizer's Chinese patent for Viagra -- the first time Chinese companies pursued legal remedies challenging a Chinese patent owned by a foreign company. A Chinese peripheral maker, Netac Technology Co., also recently sued Sony Electronics for USB flash memory disk patent infringement.
According to the article's co-authors, other IP infringement cases and resulting damages and fines reported within 2005 include:
| Companies | Type of Case | Violation | Damages (US $) |
| DEFENDANT: Fineart Corp. (based in Taiwan) PLAINTIFF: Beijing Hanwang Technology | Copyright | Defendant copied Plaintiff's software and sold online | $361,000 |
| DEFENDANT: Shanghai Zhongle Film & Television PLAINTIFF: Discreet (a Canadian division of Autodesk) | Copyright | Defendant used and exploited software without authorization | $60,000 awarded ($120,824 claimed) |
| DEFENDANTS: Beijing Central Press Union Technology; Tianjin Minzu Culture CD PLAINTIFF: Microsoft | Copyright | Defendants made 59,000 CDs with pirated Windows XP | Beijing paid $9,600 fine and "illegal turnover" of $1,250. Tianjin paid $1,200 and $70. |
| DEFENDANTS: Huaqi and Fuguanghi PLAINTIFF: Netac Technology Co. | Patent | Defendants infringed on Netac's USB flash memory drive patent, producing millions of dollars in alleged losses. | $120,000 awarded ($490,000 claimed) |
| DEFENDANTS: Beijing Jia Tu Wine Co. Ltd; JiangXi Happy Wine & Foodstuffs PLAINTIFF: China National Cereals, Oils & Foodstuffs (COFCO) | Trademark | Defendants used COFCO's trademarketed brand and image on their wine products | $1,876,050 awarded ($12 million claimed) |
| DEFENDANTS: Bonneterie Garment (Shensen) Co.; Yiwu Kinyipai Garment Co.; Li Zupeng PLAINTIFF: Benneteroe Cevenole SARL (of France) | Trademark | Violation involved trademark infringement over the name Montagut | $93,000 |
| DEFENDANT: Beijing Metals and Minerals Import and Export Co. PLAINTIFF: Nike | Trademark | Defendant attempted to export more than 100,000 imitation Nike clothing items to Russia | $20,000 |
Published by NERA Economic Consulting, Economic Approaches to Intellectual Property Policy, Litigation, and Management explores intellectual property issues that are more critical than ever in today's era of proliferating patents, high-stakes litigation, and global IP policy developments.
Co-edited by Dr. Gregory K. Leonard and Dr. Lauren J. Stiroh, the book consists of 23 articles by economists associated with NERA, whose analyses have played a crucial role in numerous landmark legal and regulatory cases. The volume discusses real-world tools and strategies at the forefront of economic thinking about many of today's most pressing intellectual property issues.
