INSIGHT: Lessons learned for poor IPR enforcement

19 January 2006 15:21  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS news)--Companies in China and elsewhere that turn a blind eye to counterfeiting and piracy may reap short-term gains but will stumble eventually when they move fraudulent products into the world market.

The developed world, where intellectual property rights (IPR) are the foundation of commerce, will not let them. Two recent incidents serve as object lessons for companies and countries that are cavalier about IPR.

In November last year, BASF and other manufacturers won court injunctions against 19 companies - including 13 Chinese firms - who were selling pirated BASF agrochemicals at a major trade fair in Glasgow, Scotland.

Earlier this month, DSM Dyneema filed a patent infringement suit in France against China’s Hangzhou Pivot International (HPI) to halt HPI’s alleged piracy of Dyneema’s polyethylene-based high performance fibres. Dyneema also obtained court orders for confiscation of fibre, rope and finished products that HPI was exhibiting at a Paris show.

The fact that so many foreign firms thought they could flaunt phoney wares is a measure of their audacity and the breadth of the piracy problem.

Although both cases are but small victories in a broad global fight against piracy and counterfeiting - which costs legitimate producers worldwide some $750bn (Euro619bn) annually - they represent a significant development.

For while it is relatively easy for pirates to operate in their home markets under lax domestic IPR enforcement, it is quite another matter when they try to sell their stolen wares in the global marketplace.

“So many more Chinese companies are exporting these days,” notes Jonathan Huneke, vice president at the US Council for International Business (USCIB), “but to the extent that their exports are based on fraudulent technology, they will increasingly come face-to-face with IPR enforcement in developed markets.” USCIB is part of an international private sector campaign to combat IPR violations and lax IPR enforcement by host countries.

“China’s industry is not the same rudimentary enterprise it was ten or twenty years ago,” Huneke noted. “China and other developing economies where IPR enforcement is weak are producing more and more technology of their own.” As those economies continue to advance, he said, it will be in their interest to increase IPR enforcement.

In addition, developing nations and their emerging industries will become increasingly aware of how important IPR enforcement is to foreign investment. A country with poor IPR protection presents an obvious disincentive to foreign development funds and technology investments.

“Right now China is a large market with still larger potential, so many foreign companies are willing to risk investing despite its lax IPR environment,” Huneke said. But as developing countries’ economies continue to mature, he said, they will learn that their economies are going to be dependent on IPR enforcement and good governance.

Some of those lessons have already been taught in Glasgow and Paris.

By: Joe Kamalick
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