Monday, September 21, 2009

EU Afraid To Share Sensitive Proprietary Info With China

The executive summary of the 2009 Position Paper of the European Union Chamber of Commerce about China shows the concerns the EU has about China's alleged industrial-intervention policies and foreign investment restrictions.

"The results of the European Chamber Business Confidence Survey 2009, [..], indicate that European investors in high-tech and branded goods are more interested than ever in the Chinese market. However they are extremely cautious about further investment. They have concerns about the protection of Intellectual Property Rights if they transfer technology, and about the relatively unpredictable mergers and acquisitions policies. Meanwhile, the barriers to market entry – the establishment costs in capital requirements, licensing, forced joint ventures and ownership caps – are making China less and less appealing as an investment destination for European companies."

The executive summary of the paper states that the EU is more important for China than vice versa. China's exports to the EU represent 7 percent of China's GDP, while the EU's export to China represents only 0.7 percent of the EU's GDP. Therefore, the EU claimes it is in the interest of China, to open up its markets, so that EU companies will continue to invest in China.

The paper itself consist of four themes:
  • market access (An important channel of knowlegde transfer is the licensing of patent-pending or patented inventions, which “typically involves the purchase of production or distribution rights and the underlying technical information and know-how”, according to Keith E. Maskus, who wrote extensively about the subject. See 'Transfer of Technology and Technological Capacity Building. ICTSD-UNCTAD Dialogue,' 2nd BellagioSeries on Development and Intellectual Property. Sept. 2003, pg 18-23. So, when the protection/enforcement of IPRs in a developing country is less than perfect, chances are bigger that companies from developed countries transfer technology via exports or foreign direct investments, instead of licensing. Also, according to the executive summary China made a not very generous offer during the negotiations of the World Procurement Agreement (WPA), which would delay China's accession. I hope to speak about the IPR implications of the WPA with
  • transparency "The promulgation by ministries ofadministrative rules and interpretations is still generally characterised by a disturbing lack of transparency.";
  • administrative coordination;
  • IPR: "there is a growing concern amongst European companies about the leakage of confidential information which can occur at various stages of business development, such as: project approvals, product certification, environmental impact assessments, patent filings, marketing approvals and registration. For example, during the CCC process (China Compulsory Certification, a precondition to market access for 130 product categories), highly confidential information, which goes far beyond the scope of information necessary for the approval concerned, is frequently requested by testing labratories."

In the same vein: the EU has problems with article 19 of the Third Amendment of the Patent Law (passed on December 27, 2008) which prescribes any entity or individual intending to file a patent application abraod for an invention-creation made in China, shall apply in advance for a confidentiality examination conducted by the patent administrative department under the State Council.

So in order to get market access or intellectual property protection EU companies need to share confidential information. However, they are afraid that if they do, there is a chance that this information is misappropriated. For example given to a Chinese company that can register first or make sure that the information belongs to the prior art or prior design.

Read the executive summary here (10pg PDF).

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