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Cutting the Head Off the Snake - Why China Will Always Go Slow On Piracy

All things socio-political seem to move in distinct cycles in China, and the technology industry is certainly no different. Periodically there’ll be a crackdown on pornography and internet fraud or perhaps a consumer rights campaign targeting foreign vendors – as Apple found to its cost recently. At the moment in the People’s Republic it’s all about turning the screw on pirates and counterfeiters.

Like all similar initiatives it has been punctuated by some tell-tale symbolic gestures, publicised willingly by state-run media. On World Intellectual Property Day at the end of April, the police shut down the country’s largest pirated movie site, Silu HD, and arrested several employees for intellectual property offences. Now the site, which boasts over 140 million members, has been around for a decade, so why now? Meanwhile, execs from openv.com and video-streaming website 365pub.com were arrested on similar charges.

At around the same time, China’s pre-eminent eCommerce provider, Alibaba Group – which owns the country’s answer to eBay (Taobao) and the “Amazon of China” (TMall) – announced a “milestone” anti-piracy agreement with the government and law enforcement agencies. Designed, according to founder Jack Ma, to remove the “tumour in society” that is piracy, the agreement will see Alibaba share transactional and other data on suspect merchants with the authorities so they can follow-up offline. “Internet technology … when paired with offline efforts can be used to create targeted initiatives to drive intellectual property protection as well as cut off the head of the snake in an attempt to purge society of counterfeit goods,” said Alibaba Chief Risk Officer Polo Shao.

The announcement can certainly be seen in terms of Alibaba’s increasing efforts to act more responsibly (it was, until recently, listed on the US Trade Representative (USTR)’s blacklist of notorious markets), and will play well to potential investors who hover in anticipation of an IPO. However, the timing would seem to indicate the guiding hand of the government again. So will these latest efforts work in helping to transform China into a “reputable” superpower with a strong IPR regime, and more to the point, does Beijing even need it to work?

Well, no and no.  First up, the hard facts.  The USTR’s latest annual Special 301 Report on global IP rights says there are still “serious obstacles to effective protection of IPR in all forms”, and that “real world conditions offer little significant improvement”.

The Business Software Alliance claimed in its most recent global report of 2011 that China has a software piracy rate of 77%, down just a percentage point from the year before and one of the world’s worst offenders. Next, in Gartner’s Analysis of China as an Offshore Services Location, China was rated “poor” for its Data and IP Security and Privacy. It has the following: “China has basic data privacy and IP protection laws, but implementation has been a critical issue … Despite some improvement, China has a long way to go to improve its privacy and data protection.”

Counterfeiters are everywhere in China. Fake electronics, pirated DVDs and CD-ROMs, Gucci handbags, Abercrombie hoodies – every street corner and every market across the land is filled with them. Online is no different, and just as the hawkers scatter when they see the cops, so online stores jump URLs and set up home elsewhere when they feel the strong arm of the law.

Of course, the Communist Party has shown itself to be a ruthless and effective force whenever its authority is threatened: just witness the marvel that is the Great Firewall. Even Google’s Sergey Brin had to admit last year that he was wrong when he said China would not be able to put “the genie back in the bottle” with regard to web freedoms. The issue with piracy, is that ultimately it’s not going to hugely affect social order or force the Party out of power, so it will never be given the same urgent attention as, say, online censorship.

Another major reason for China creating a strong IPR regime is to encourage greater investment in the country. However, that’s happening anyway. Western firms are so keen to tap the huge market of 1bn+ people that most view the IPR situation as a necessary risk. As Forrester said in its Understanding China report of last year: “Any seasoned foreign business exec in China will tell you that if you are concerned about intellectual property (IP), you shouldn't even consider entering the Chinese market.”

What will have a greater bearing on whether China can achieve its ambitious IPR goals is how serious it is about turning the country into an innovation-driven nation, as set out in the 12th five year plan. Beijing has built its IP laws according to global standards but despite the recent propaganda blitz they are generally not enforced. Unless this changes, the snake will continue to evade capture.

 

John Anderson has been writing about technology and all things Asia for over a decade. From his perch in the Far East he keeps a keen eye on the global significance of emerging trends in the region. 

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John Anderson

John Anderson has been writing about technology and all things Asia for over a decade, having started out on some of the UK's best known best-known IT trade titles. From his perch in the Far East he keeps a keen eye on the global significance of emerging trends in the region. 

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