Tradition of Copying in China Fuels the Piracy of Intellectual Property

During my nine years of law practice in Hong Kong, where I did a modicum of enforcement litigation on intellectual property rights, I marveled at the ingenuity with which counterfeiters violated the law.

First, unlike a reputable U.S. producer of compact discs--who would abandon a mold after processing a certain number of CDs, in order to maintain quality control--a pirate would use the same mold until it was no longer usable. The pirate’s best work would produce 100 CDs that would be sold at $10, with those of secondary caliber fetching $9 and third-rate ones selling for $8; those of the lowest quality might still be sold for $1. One commonly finds the $1 products at swap meets, the $9 products at top-notch department stores and the others in between. The counterfeiters use a seemingly more effective economy of value of pirated products.

Second, pirated brand-name products sold by peddlers would definitely not attract customers who truly wanted to buy authentic products. However, it is a grave error to ignore the pirate’s unlawful activities in the belief that a brand-name product sold at the high-end market would never be undermined.

Piracy multiplies exponentially like a malignant growth. A pirate’s ability to upgrade the quality of his fake products is absolutely mind-boggling. An infringer’s products can quickly compete with the authentic products on equal terms and eat into the top end of the market.

China certainly shares the characteristics of many developing countries in its record of violations of intellectual property laws. In the 1960s and ‘70s, Taiwan was a leading pirate of U.S. vinyl records and college textbooks. Purchasing the Taiwanese edition of Samuelson’s “Introduction to Economics” was the common practice adopted by most students taking introductory economics in Hong Kong and Taiwan in the 1960s. The books sold at about a tenth of the price of the authentic U.S. edition. Similarly, today it is beyond the purchasing power of most Chinese consumers to pay $20 for a U.S.-manufactured CD.

Any visitor to China or Southeast Asia witnesses the relentless drive of the people to possess consumer items: a color television, a radio, an air conditioner. That same pride of ownership is an attitude Western capitalism actively promotes, though it is taken for granted in the West.

As elsewhere, people in the East want to acquire CDs and listen to them at home. Driven by this unprecedented emergence of pride of ownership, increasing material affluence, a surge of consumerism and the West’s efforts to transplant its culture--including music and lifestyle--markets for fake products such as pirated CDs are proliferating.

This is no reason to condone blatant violations of intellectual property laws. Nonetheless, it explains the economic force driving the spread of illegal trading.

American copyright owners are particularly exasperated in China, because unlike Taiwan or Thailand--where counterfeiting is committed in the private sectors--the production of pirated products in China has actually come from factories owned, operated or protected by state-owned or quasi-state-owned civilian and military enterprises.

The role of the government in manufacturing renders the eradication of violations virtually impossible. Nor can the courts be relied on to enforce any crackdown on piracy. In the city of Zuhai in southern China, sheriffs who reportedly attempted to enforce court decrees or judicial orders of confiscation were sabotaged by local government officials.

Another cultural facet of piracy in China is that, traditionally, copying has been neither condemned nor illegal. On the contrary, many apprentices of Chinese art copy a master’s works or emulate them as closely as they can. Doing so is considered an acceptable and time-honored learning process. Such a cultural mind-set provides an additional incentive for training copycats and diminishes any sense of guilt.

The pressure exerted on China by U.S. Trade Representative Mickey Kantor to stop piracy is further mitigated by the uncontrollable decentralization of authority in China.

Many of the edicts issued by the central government are practically ignored--if not circumvented--by the provincial governments, particularly in the affluent coastal southern provinces such as Fujian and Guangdong, where most of the counterfeiting takes place.

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Indeed, efforts by the United States to compel China to enforce its own intellectual property laws are destined to run into the same problems already besetting the Chinese government, which is genuinely inadequate to do the policing on its own. For all its pledges of tough enforcement, the agreement reached between the two countries last week will hardly make a difference.

Rather, tangible changes will come about only if China’s widespread piracy harms the country’s own economy. That has already taken place in Taiwan, where piracy of domestic products raises enough concern for the local industrialists to put pressure on their government to enforce the law.

Until that happens in China--after another decade or longer--all the fine agreements put on paper by the two countries will not solve the piracy problem.