Intellectual Property Right Protection in China - Research Paper Example

The protection of intellectual property right in China is a very serious issue that affects business operations in the country. The laws of the country regarding intellectual property protection do not place strict measures that ensure an effective means of dealing with the infringement in the right of intellectual property. The large number of cases that involve infringement of right of intellectual property by organizations based in China is because of the inefficiency in the court system of the country that awards damages that do not adequately match the magnitude of the loss suffered by the plaintiff. This writing focused on the manner that China handles the issue of intellectual property protection in comparison with other countries like United States and New Zealand. Intellectual Property Right Protection in China Introduction The manner that a country provides protection to the rights of intellectual property has a very significant role in shaping the manner, which the country relates with other countries in all matters especially business activities. China is now among the leading economies in the world but its intellectual property environment is the most atavistic. Over the last few years, the country has shown improvements in the manner it provides protection to intellectual property (McHardy 31). This is because of its current development level as well as the need of showing commitment to international standards. Therefore, the country joined in various multinational agreements to enhance the protection of intellectual property. In addition, it has been drafting and promulgating domestic intellectual property right laws to make its system match that of the international community. The country has also established special intellectual property divisions in various courts and defined the processes of enforcement. After the country became a member of the World Trade Organization in 2001, the country introduced many changes in its legal system and amended the laws regarding the protection of intellectual property (McHardy 31). However, a difference in the manner the country deals with the issue still exists. This article will compare and contrast the process of intellectual property right protection in China with other countries in the world. China’s intellectual property law Two major ways that the owner of an intellectual property can use in asserting his intellectual property right in the country exists. One is through an administrative approach and the other one is through civil judicial or criminal approach. The judicial approach is very similar to the approach found in many other countries like United States and the European countries (McHardy 31). However, the administrative approach has unique features that make it very different from that used in other countries. Surprisingly, the administrative approach is the most common used in the country to deal with matters regarding intellectual property. In fact, it is the approach used in dealing with almost all matters concerning copyrights and trademarks. Though it provides an effective means of adjudicating disputes regarding the rights of intellectual property, it does not provide compensation for the owner of intellectual property. However, the type of intellectual property fraction will determine the exact course of action. Generally, the owner of the intellectual property that has suspected any infringement has the permission of compiling evidence to authenticate his claim (Sepetys and Cox 3). He also indicates the location of the facility that the suspected infringement of intellectual property is happening. Here, it is possible to hire private investigators to assist in the process of compiling the evidence. The local division of the agency in charge of the protection of the intellectual property receives the evidence gathered. In a condition where the agency examines the evidence and feel it is satisfactory to take legal action, it can carry out raids to confiscate all the illegal products and the equipment and attempt to obtain more evidence. The agency will also order the infringer to stop the production process. In some conditions, it will also ask the parties involved to arbitrate the disagreement. Unlike in other countries, the administrative approach does not provide compensation to the holder of the intellectual property following the infringement of his right. However, it imposes costs on the individual who did the act of infringement (Zhao 1190). The agencies that deal with matters regarding copyright have the power of fining the infringer as well as the one in the process of passing off the patent that belong to another individual organization. They also have the power of seizing the products or the equipment that assist in the manufacture of the products. Contrary to what happens in many other countries around the world, the information concerning all the actions done is confidential and the public have no opportunity of accessing the information (Zhao 1190). It is thus very difficult to assess the effectiveness of the process. In some cases, the amount of products confiscated is too small and thus cannot interfere with the normal operations of the infringer. This is among the issues that raise questions in the ability of the legal system of the country to deal with the violation of the right of intellectual property. The parties in dispute can also pursue communal judicial acts in the local court of the people. Despite the fact that a small number of intellectual property owners continue to prefer the administrative approach, the number of intellectual property cases presented in the court keeps on increasing. This is because of the amendments of the laws that have strengthened the enforcement of intellectual rights in the court system (Sepetys and Cox 4). There is also proper guidance and transparency in the parties seeking for remedies. There is also some training offered to the judges to improve their capability of handling such cases. In other words, the court system tends to borrow significantly, the international procedures involved in the protection of intellectual property right. In connection with the order to stop the acts of infringement of intellectual property, there is compensation awarded to the owner of the right. In cases involving the infringement of copyright, the individual who carried out the act of infringement must make an apology to the public (Smarzynska 40). This is to some degree, a procedure that appears compatible with that found in many other countries. However, despite the fact that criminal prosecution that include imprisonment can occur under the law regarding the protection of intellectual property right, such cases are very rare in the country. Mostly, the intermediate courts of the people at the provincial and municipal levels are the first to receive the cases. However, the higher courts of the people will receive the case if it is large enough for the intermediate courts. In the intermediate courts of the people, there are small jurisdictions responsible of dealing with matters regarding intellectual properties right. At least sixty-nine intermediate courts of the people exist in the whole country. In the courts where such divisions do not exist, there are special panels that deal with matters regarding intellectual property right. In the year 1996, the supreme court of the people established a division that deals with matters regarding intellectual property right. This shows that the court system of the country, just like in many other countries aim at dealing with all matters regarding intellectual property right violation at all levels and depending on their magnitude. Just like in many other countries, if an individual feels dissatisfied by the decision made in a lower court, he can appeal to higher court. However, there is no chance for further appeal after the second judgment (Zhao 1185). Unlike in many other countries, the compensation provided to the person because of the infringement of his intellectual property right, base on very simple calculations that comparatively do not include all the important considerations (Maskus 471). For example, the plaintiff may receive compensation large enough to restore profits on the belief that the sales of the plaintiff would continue at a similar rate as that before the beginning of the infringement. The major advantage of such calculations is that they are easier to implement. However, they do not consider adequately, the manner that that market would develop if the infringement were not there. For example, the products of the owner of the intellectual property could have been in the earlier stages at the time the infringement occurred. In this situation, the sales of the intellectual property of the owner as well as the market share would grow steadily in the future if it were not the act of infringement. The infringement of the right might interfere with this growth of the market share and sales and hence denying the owner more profits (Maskus 471). Therefore, the sales of the intellectual property before the infringement will not give a true assessment of the sales of the owner of the property in the absence of the infringement. In addition, if the simple calculations of the court assume that the overall loss occurred because of the act of infringement, then it will result to an overestimation of the case. In this form, it will therefore mean that the person who did the infringement was able to compete well and take out some of the sales of the owner of the intellectual right without infringement. Such matters that involve responses or behavior of the market require both business and market analysis to obtain accurate estimation of the damages suffered by the owner of the intellectual property. The law of the country therefore needs to adjust to the international approaches to risk and loss assessment to be able to provide fair judgments as other countries in the world. In the courts of China, the computation of the damages base on the unjust enrichment of the individual doing the act of infringement. This is because; individuals doing acts of infringement sell their unlawful products at a smaller price than the price offered by the owner of the intellectual property. This means that awarding damages base on the unjust enrichment is much lower in comparison with the award paid based on the profits lost by the owner of the intellectual property. In addition, some of the individuals doing these acts of infringement do not maintain a record of their infringement and hence very difficult to assess the level of their gain. The courts in China, award legal fees but can constantly renew them if conditions compel them to do so. They cannot award fees that consider them excess (Smarzynska 39). In China, a high limitation of discovery exist compared with many other countries like the United States, Britain, New Zealand, Australia and many more countries that follow the jurisdictions of the common law (Sepetys and Cox 3). For example, in the United States, the parties involved in the dispute have an entitlement to the documents from the records of the opposing party that may provide information concerning the matter in question. However, in China, the plaintiff can just petition the court of the people to guarantee the preservation of the evidence. In some conditions, the evidence may be missing or even very difficult to obtain the evidence to table enough evidence for the act of infringement. Changes are therefore necessary in China to allow a more comprehensive means of discovery to make the system effective. Currently, the economic awards and damages awarded by the courts in China are lower in comparison with those awarded in the United States and many other countries in the world. This is because; the laws of China regarding the violation of intellectual property right do not fix specific limitations regarding the award of damages (Sepetys and Cox 4). It always appears that the plaintiff did not have the ability to provide enough evidence to the court about the high damages he suffered from the infringement act of the defendant. This places both financial benefits as well as costs. The advantage of awarding low damages to the plaintiff is that it reduces the chances of the plaintiff to receive a higher or excessive award that does not match the loss he suffered from the act of infringement. The act of awarding low damages cause a wide spread use of technology that will benefit consumers in the market since business organizations expect that, upon convicted of acts of infringement of intellectual property, it will not suffer heavy losses because of the low award for the damages it caused to the owner of the property. The low awards will in addition encourage business organizations to make attempts in designing against a particular patent that has an effect of causing technological developments. However, the idea of awarding low damages lower than the actual financial loss suffered by the plaintiff can cause huge economic costs in the economy of the country. The absence of enough protection of the right of intellectual property discourages innovators and the morale for carrying out exploration as well as development will diminish (Sepetys and Cox 4). There is the recognition that low damages in China, are compromising the efficiency of the system of intellectual property right in the country. The biggest challenge faced by the system is to establish a balance between the provision of enough compensation to the individuals that suffered losses because of contravention and not awarding too high damages to inhibit innovation by organizations that are making efforts to design products around the patents of others. For some time, both Japanese and western organizations considered organizations in China as global pirates of intellectual property. They anticipate that companies in China will steal their business methods as well as software. Intellectual property is difficult to protect just because of their inefficient system hence their property will be in use by many people in the country. The survey conducted by AmCham in 2011 revealed that many countries in the world regard the system of protection of intellectual property as an important issue of concern. It showed that about fifty-five percent of the countries are not happy by the violations of their intellectual property rights in China (McHardy 31). It also showed that forty four percent of United States companies that are operating in China believed that violation of their intellectual rights in China during the year 2005 increased. The infringement of intellectual property right is one of the major challenges that face international companies operating in China. They have to take enough precautions before introducing new products into the market. As we can see in table 1 below, majority of the plaintiffs are organizations from outside China while the defendants are mostly organizations from China. Most of the plaintiffs are organizations based in the United States, Japan, France or Germany. The organizations in China account for only around thirty-eight percent of the plaintiffs. It also indicates that most of the defendants are organizations from China accounting for about ninety-three percent of all the defendants in cases involving infringement of the right of intellectual property. These findings by AmCham reveal the seriousness of the problem regarding infringement of the right of intellectual property in China. Table 1. Leading five home Countries as Plaintiff and Defendant in 2011 Plaintiff Defendant Country Percentage of Cases Country Percentage of Cases China 38 China 93 USA 26 USA 2 France 9 France 1 Japan 9 Japan 1 Germany 6 Germany 1 Table 2 below shows the damages claimed and awarded to both Chinese and foreign organizations. The figures are very low in comparison with those awarded in many other countries like United States, Britain, New Zealand and many other countries. This explains why the problem is very serious in the country interfering with business operations in the country. Table 2. Damages Claimed and awarded in 2011 Chinese plaintiffs Foreign plaintiffs Number of Cases Amount in US dollars Number of Cases Amount in US dollars Median damages claimed 32 266,887 53 65,478 Total damages awarded 41 5,926,826 84 3,864,354 Median damages awarded 12,500 21,630 Median damages awarded as a percentage of median damages claimed 5% 33% For all cases in NERA database (Retrieved from http://www.mondaq.com/x/74524/Trademark/Intellectual+Property+Rights+Protection+In+China+Trends+In+Litigation+And+Economic+Damages++Part+2+of+2) Conclusion China has the responsibility of harmonizing its laws regarding the protection of intellectual property right to comply with those of the international community. This will open up business activities and foreign investment in the country by removing all uncertainties concerning the protection of intellectual property. New techniques can assist China to come up with an accurate and comprehensive means of estimating damages that occur because of infringement in the right of intellectual property. For example, the use of retail scanner data can help in collecting information concerning sales of products of individuals that have infringed intellectual property. Furthermore, surveys can also help in developing an effective means of assessing awards occurred because of an act of infringement of intellectual property. The analysis of the literature concerning intellectual property right in China shows that mutually, the damages claimed or awarded, tend to be very small in comparison with those found in other countries. The plaintiffs based in China receive lower rewards from damages that they suffer from infringement of their intellectual right than those plaintiffs from other countries in the world. The improvement in the calculation of damages suffered by plaintiff will discourage the culture of infringement of intellectual property in the country and help to provide better compensation that is equivalent to the magnitude of the loss suffered. Such improvements are very important to the economic development of the country. The process is very important to the process of globalization of the world economy. Works cited Maskus, Keith E. "Intellectual property rights and economic development." Case W. Res. J. Intl L. 32 (2000): 471. McHardy Rei, David. "Intellectual Property Rights: A Comparative Perspective on Asia, the EU, and North America." Norteamérica 7.1 (2012): 31-666. Sepetys, Kristina, and Alan Cox. "Intellectual property rights protection in China: Trends in litigation and economic damages." NERA Economic Consulting (2009). Smarzynska Javorcik, Beata. "The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies." European economic review 48.1 (2004): 39-62. Zhao, Minyuan. "Conducting R&D in countries with weak intellectual property rights protection." Management Science 52.8 (2006): 1185-1199. Read More