Intellectual Property Rights in China. Zhenqing Zhang
story is similar to the previous one. In spring 2007, Company C, an architecture material company also located in East China’s N Province, detected counterfeit goods on the market in Tiqian City and reported this to the city’s IPR enforcement agency. Through an investigation, the IPR enforcement officer discovered that the counterfeit goods were being produced by Company X, a smaller company located in the city’s jurisdiction. The IPR agency immediately confiscated the counterfeit goods, which were altogether worth over 1 million RMB (about $160,000).6 Because the total value of the counterfeit goods far exceeded the minimum amount needed for criminal prosecution, the IPR enforcement agency was ready to bring the case to the city court for criminal prosecution. However, the Party Secretary of the small town where Company X was located lobbied the IPR enforcement team not to sue Company X because it was one of the major contributors to the township’s tax revenue. With the help of one of the officials affiliated with the city IPR enforcement squad, I participated in several meetings among the township officials and the squad. The most cited reason by the township Party Secretary to protect Company X from legal punishment was that punishing Company X would reduce Q County’s tax revenue and would eliminate job opportunities. These reasons did not convince the Tiqian City IPR enforcement team in the beginning. However, when township officials told the IPR enforcement officers that many workers with Company X were previously laid-off employees of several other local, state-owned enterprises and that economic punishment of Company X would drive those workers to lose their jobs again and thus endanger social stability, the IPR enforcement officers started to soften their position. The township officials’ lobbying efforts received reinforcement from several female workers of Company X. When we stepped out of the meeting room after a lengthy round of bargaining that afternoon, several female workers of Company X approached us, grabbed the arms of the IPR enforcement officers, and appealed on behalf of the factory owner. The reason they cited was similar to that of the township Party Secretary: punishing the counterfeit factory would deprive them of their jobs and jeopardize their families’ well-being.
The lobbying efforts seemed to be effective because afterward, the legal procedures slowed greatly. Before I left Tiqian City in mid-August, some “insiders” were already predicting that Company X was unlikely to face criminal prosecution and that there would be only slight financial punishment.7 In November 2007, as expected, Company C and Company X reached an “outside court reconciliation.” According to this decision, Company X paid 50,000 RMB ($9,000) to Company C, a result that barely punished the trademark infringer.
Unlike the first case, which had received wide media coverage, the second case was never reported in the media. One can only estimate how many IPR enforcement cases in China are successful and unsuccessful due to the illegal nature of IPR infringement activities. Indeed, the Chinese government would not report accurate statistical data about the number of unsuccessful enforcement cases. However, even the Chinese top leadership does not deny the seriousness of the problem. During a national-level conference held by the Chinese State Council in November 2011, for example, then Chinese premier Wen Jiabao told the participants that “counterfeit activities remain rampant in some regions. IPR protection remains a difficult task.”8
Research Question and Book Argument
The contrast between the two aforementioned IPR enforcement cases indicates that China respects international intellectual property rights but only in certain circumstances. This invites the primary question that drives this book: why do effective IPR enforcement cases occur in only some cases and not others, even though China’s World Trade Organization (WTO) entry in 2001 was supposed to protect all intellectual property rights? To answer the question, we need to examine not only the Chinese state but also the Chinese society, particularly how it interacts with the Chinese state.
This book is about the ways in which the collaboration and competition among various state and society actors in China have shaped the evolution of the Chinese IPR policy. This, in turn, constitutes an important part of the enormous social and political change that China has gone through since the late 1970s. I argue that, aside from Chinese state actors, societal actors, such as domestic and foreign firms operating in China, domestic and foreign business associations, and Chinese consumers, play a significant role in shaping the country’s IPR policy. Instead of passively following the state’s direction, they vie for more influence in the making of IPR policies. They also try to affect the Chinese state to adopt policies in their favor.
I also argue that the degree of China’s (non)compliance with IPR norms should be understood as the result of balancing two factors: the need for short-term economic gains by violating others’ IPR and the aspiration for long-term, sustained growth by respecting IPR norms. Chinese IPR policy has emerged within the context of the legacy of the planned economy and an immature market mechanism. In this environment, only a small handful of elite Chinese domestic business actors are actively engaged in innovative activities, such as technological innovation, literary and artistic creation, and brand building. Most firms continue to rely on the input of natural resources and cheap labor to survive market competition. Although most foreign business investors in China hold IPR as a vital component of their competitiveness, Chinese economic nationalists interpret their business activities as exploiting Chinese wealth. As such, under some circumstances, the advocates of IPR norms—those few cutting-edge Chinese companies (such as The China No. 1 Pencil Company in the first case), along with foreign IPR holders—are strong enough to persuade Chinese government officials to comply with the IPR norms and achieve the country’s long-term economic development goals. However, in many other circumstances, Chinese local governments (such as the township officials in the second case) protect IPR infringers and ignore IPR norms—even though they possess the enforcement capacity—because of the short-term political interests in raising tax revenue and creating jobs.
The story does not end with IPR enforcement per se. My book also situates the study of Chinese IPR policy against the greater backdrop of China’s political and economic reforms. Not only do I study IPR enforcement across different issue areas, but I also trace the development of the Chinese IPR regime over time. I demonstrate that the struggle over IPR enforcement is not only merely an economic or legal issue but also a key manifestation of the gradual political reform in China. The IPR norms rest on protecting intellectual creation as private property, and private property constitutes one of the foundations of the Western concepts of civil society and the rule of law. However, in a country such as China that has been dominated for decades by socialist public ownership, the notion of private property has been nonexistent. Until recently, neither private entrepreneurs nor literary or artistic creators have existed as an independent social group in Chinese society. Protecting intellectual property rights also requires protecting important aspects of civil liberty, such as individual autonomy and the free flow of ideas, which, in turn, demands a thorough reform of the political and economic underpinnings of China’s communist system. Therefore, in an important way, the evolution of the Chinese IPR regime provides a useful angle to study the evolution of China’s political and economic reforms. China’s partial compliance with IPR norms reflects the coexistence between an emerging capitalist market economy and one of the world’s last remaining communist political systems. The uneven compliance level with IPR norms also reflects the differing thoroughness with which institutional reform has taken place in China.
Existing Explanations for Chinese IPR Policy
The rampancy of IPR infringement in China has attracted a lot of scholarly and political attention since the mid-1990s. Specifically, three dominant categories of theoretical attempts in international relations and comparative politics literature exist to address the adoption and compliance of international IPR norms: an external pressure argument, a culturalist argument, and a bureaucratic politics argument. I will evaluate these three strands of argument in this section. I argue that each of the existing explanations contains a grain of truth and provides a solid foundation for scholars’ academic exploration. However, each of those theories falls short at some stage of the analysis. Instead of rejecting the explanations as wrong, I argue that they should be improved so that more attention should be paid to address the role of Chinese societal actors and their interaction with the Chinese state.
External Pressure Argument
The most straightforward