By Richard Kuslan, editor of Asia Business Intelligence, IP Dragon's first guest blogger
The world knows of China’s leadership in the business of counterfeiting. If it – Delco car battery, tiger claw, night-scan telescoping mast, Viagra, holy relic of Tibetan Buddhism – can be copied cheaply and sold for profit, some entrepreneur (thief?) will grab hold of the opportunity and shake vigorously.
Counterfeiting harms rights holders. That was a “duh, fer sure, dude” statement. But the 2004 testimony of Anthony Wayne, U.S. Assistant Secretary for Economic and Business Affairs, makes one want to holler “Oh, my God!” as if we’d personally discovered alien seed pods in Santa Mira. [See Invasion of the Body Snatchers.] Mr. Wayne “estimate[s] that U.S. companies' worldwide losses to counterfeiting and piracy range from $200 to $250 billion per year.” That figure far exceeds the GDP of many nations.
And yet counterfeit products are rarely interdicted at the borders. China’s share? Daniel Chow, a law professor at Ohio State University, testified:
“In 2003, China accounted for 66% or over $62 million of the $94 million of all counterfeit and infringing goods seized by the US Customs Service at ports of entry into the United States. Mid-year figures in 2004 indicate that seizures are sharply higher with $64 million seized in the first half of 2004 alone.” Extrapolating, Chinese counterfeits may account for US$150 billion of worldwide IP losses.
No wonder A.T. Kearney estimates that counterfeiting produces as much as 8% of China’s GDP. Counterfeiting inevitably accompanies – and benefits -- the growth of infant economies. In the 18th century, using cobalt mined in Connecticut, American potters imitated the fabulously popular China blue and white porcelain. And remember that Japan in the 1950s and 60s was rife with fake goods. Or more recently, Taiwan.
In the 1980s, a cousin did business in Taiwan. Being a profligate entertainer of major customers, he once decided to impress by holding an emperor’s banquet (金玉滿堂) at the Hilton in Hsi Men Ting (西門町), the older downtown section of Taipei (台北). The centerpiece of the table was bear paw (熊掌), a traditional delicacy in Chinese cuisine, favored by only the very wealthiest. In the Taipei of the 1980s, a prepared dish of bear paw cost a King’s Ransom of nearly US$750, equivalent to the monthly salary of an
office worker. A raw paw was shown to the guests before it was cooked. If I remember correctly, his guests were enormously impressed.
Several years later, a lady who had worked as a waitress in that same restaurant told me there was but one real paw in the refrigerator. Whenever the dish was ordered, the paw was trotted out to show the beaming guests and then immediately returned to cold storage. The chef would proceed to cook whatever meat he might have lying around that was less common than beef – alligator, venison, elk – and far less expensive. !Profit! And with just a little sleight of hand it descends in sheets. The crux of the bear paw con is dual, requiring a customer who’s neither ever tasted bear nor sees the paw cut up and cooked.
Yes, counterfeiting is a classic con. It needs but one sure thing -- a paying customer (a sucker?). An entrepreneur with energy, capital, nerve, imagination and a great product may still fail. The counterfeiting of an established brand requires similar elements, within a business environment favorable to the unhindered trespass upon individual property rights, to allow the con to flourish.
Counterfeiters in China have established world-class CD duplication facilities (capital); harnessed the production power of entire villages (energy); threatened the lives of children with fake infant formula (nerve); built secret manufactories or factories in ship containers for mobility (imagination). But there’s hardly any genuine risk in the endeavor. Someone else has built and crossed that bridge. The brand has already been established. The demand, created. The buyer, a certainty.
Even at a youthful age, I could not believe the premise of the movie, “The Sting,” (1973) the hit that starred my favorite pseudo-Oreo manufacturer, Paul Newman. Two good-natured gangsters (an oxymoron?) ante significant funds up front to replicate a bookie joint on the off chance they might score many times more dough from their mark. Several times, the scheme was nearly blown. The sucker could have simply walked away. Too much risk for a counterfeiter, don’t you think?
Despite two millennia of discourse and instruction on the Confucian ideal of 天下為公 (usually translated as “the world is a commonwealth”) and its modern diminutive, the Communist slogan, 为人民服务 (“serve the
people”), Chinese find impractical, to say the least, the integration of the individual and the family into a greater “public good.” [Is this simply a display of my western liberal arts education or a genuine preoccupation with a beneficial and unifying ideal?] That “public good” apparently mandates the more than occasional sacrifice of individual advantage to complete strangers with whom no bond is valued. Most undesirable. The Chinese individual thinks, “What is the value to me and mine?”
The novel concept of individual rights under the law, often seen written into a subtext of the phrase 合法权益, has been received to a powerfully positive reception by P.R.C. Chinese. Everyone now, it seems, has been granted an incompletely defined, nebulous, individual power. But the larger framework for these rights is barely constructed. The remnants of the old system do not suffice as its foundation. What can be built on detritus?
My strong impression from readings and discussions on this subject is that mainland Chinese view the law as but a tool – a means to an end – whereby individual gain can be gotten at the expense of a rival. They do not respect it – yet -- as a particularized expression of an encompassing framework established to protect the welfare of the populace at large, despite sloganeering to the contrary. The law is for “me,” but not, more importantly, for “us.”
Until that conceptual foundation has been built – who knows when and if, despite the efforts of brilliant intellectuals – the rights you hold in your intellectual property will be the object of stubborn disrespect and counterfeiting will continue to be a staple of the Chinese economy. The reach of the authorities is too weak to police it and the popular desire for wealth too strong to curtail it.
Well, dude, maybe that was just a bit too serious. Let us turn to some hilarity. Remember W.C. Fields’s epithet that one should never give a sucker an even break? [Translate that if you can!] Read this article for the story of a Chinese counterfeiter with a preposterous con who played upon the profundity of his wealthy collector-customer’s inexpertise. In doing so, he collected US$500 and the attention of the world’s media. Ah (deep breath) -- success!
Richard Kuslan (Asia Business Intelligence)
Note of IP Dragon: Bears and other animals that end up at plates in China are near extinction and are treated inhumanely, which is a euphemism, see China Bear Rescue.