China’s intellectual property revolution

When Donald Trump launched his trade war against China by accusing it of stealing American intellectual property (IP) and “forcing” US firms to transfer technology to Chinese enterprises, it was doubtful if anyone took those charges seriously. Not even US firms whose cause he was supposedly championing. Many of these companies were, in fact, playing catch up with China’s amazing strides in technological innovation.

Since then, US companies have been engaged in intense negotiations with Chinese firms, particularly in the telecom sector, to lease their cutting edge technology following Trump’s decision to put them on a trade blacklist.

This captures, in essence, the amazing transformation of China from a copycat nation, which was a byword for piracy, into a powerhouse of innovation. This makeover is the result of unprecedented changes in the way China has looked at IP rights and set about overhauling the system in an extraordinarily short time.

China, it must be noted, had no patent office till the 1980s, which means its engagement with protecting IP rights and setting up an administrative system — that is now getting a global reputation for its quick and fair litigation — is less than four decades old. This is remarkable given that the US and leading European nations were engaged in rampant piracy and industrial espionage in the 18th and 19th centuries.

Some years ago, Doron Ben-Atar, professor of history at Fordham University, had told this columnist that piracy and outright theft of technology had laid the foundations for the economic development of the West.

Ben-Atar, author of Trade Secrets: Intellectual Piracy and the Origins of American Industrial Power, had revealed that the US patent office was handing out patents liberally for devices that were in use elsewhere. So, if it took more than a 100 years for western economies to reform their piratical behaviour, China’s transformation, accomplished in 30-odd years, is extraordinary.

Clearly, it had an eye on the future. Today, its own enterprises, both private and state-owned, boast sophisticated IP departments that keep their innovations and advanced R&D well protected. Think of the IP of leading Chinese companies such as Huawei, Xiaomi and Alibaba!

The legislative framework and the administrative machinery that China has set up is nothing short of impressive. Some of the more objective western IP analysts have written in praise of the system, noting that it’s easier to protect cutting-edge software, business-methods and biotechnical inventions in China than in the US. Special IP courts in China hear more cases than elsewhere—10 times more than in the US — and the damages awarded are said to be much higher.

China’s leadership in innovation is underwritten by a huge investment in R&D that is over two per cent of its GDP and its “Made in China 2025” project is aimed at a comprehensive upgrade of the Chinese industry. In India, the patent administrative machinery although much older, is creaky and crying for reform.

Judicial interpretations of the patent law vary widely and no IP expert has yet come forward to sing its praises. Manufacturing is in the doldrums. With a political mindset fixated on a mythical past of imagined scientific prowess, Indians might have bragging rights, but no IP rights to boast of.

(This article was first published in Down To Earth's print edition dated October 1-15, 2019)

Trade Economy India