China: Fostering Innovation through Intellectual Property Protection

July 8, 2016
Entrepreneurship, Innovation

China is in a funding boom for scientific research, but the country's nascent intellectual property protections must grow stronger to foster innovation, business leaders told the 2016 Duke International Forum at Duke Kunshan University.

But while China has set up specialized courts to handle claims of copyright and trademark infringement - and is now home to the largest patent office in the world - it must do more to protect trademarks, copyrights and other intellectual property if innovation is to take hold, experts said.

Despite its 1.3 billion population, rampant software piracy means China generates less revenue for Microsoft than countries in Europe with a tiny fraction of China's population, according to Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai.

"That just gives you a sense of the scale of the problem," he said.

Patent applications have climbed sharply in China. The U.K. Intellectual Property Office studied the patents issued by five major international patent offices in 2012 and China placed fourth in the area of information technology, higher than all of Europe and Taiwan.

Protection of intellectual property is crucial to the growth of new industry. Jarrett has watched the development of local laws and their enforcement since he worked on the China desk of the U.S. State Department in the 1980s. Intellectual property concerns in China have swung between knockoffs of luxury items, pirated movies and music, and protection of trade secrets in pharmaceutical and other industries.

"IP is a critical part of the ecosystem for innovation and it's of particular concern to foreign multinationals in China," Jarrett said. "The most significant impact is on their investments here in China and what they're willing to in the area of research and development. You have many R&D centers in China, and in Shanghai in particular. There's a lot of emphasis on trying to encourage foreign companies to place R&D facilities there. But much of the R&D is on the development side. Because of concerns about weak IP regimes, companies are unwilling to bring their cutting edge technology to China."

Xiqing Gao, former president of the China Investment Corporation, said the lack of a system to protect intellectual property is part of what has stifled creativity and innovation in China.

Gao, a law professor at Tsinghua University, said that while intellectual property protections are now in place, it takes time for attitudes to shift.

"In reality we know things are not quite there yet, but at the same time we know compared to 20 or 30 years ago, we've made a tremendous amount of progress."

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