TGIF: Intellectual Property Enforcement Coordinator Says The Darndest Things

Online copyright piracy is a serious problem. China has started a campaign of three months to blacklist websites with pirated content so that Chinese telecom operators can take them offline. Now one can question the effectiveness of this temporary measure, see here. But there are even worse solutions... Look at the idea of Brad Sherman, U.S. democratic representative, which goes.. let's say a bridge too far. Doug Palmer reported for Reuters that Sherman said the U.S. government should use cyber-combat techniques to take down internet sites in China, Russia and other countries that sell pirated U.S. music and movies. Of course the US could take Chinese websites offline if they are based on servers in the US, subject to US laws. But if the servers are in China, this would be obviously a violation of China's sovereignty and could be answered with similar cyber-combat strikes at US websites based on US servers.

Incredibly, Victoria Espinel, the US White House Intellectual Property Enforcement Coordinator responded allegedly, according to Palmer's Reuters article: "That is something we're actively investigating." And then Espinel allegedly continued: "But while it is technically possible, it does not take long for the sites to pop up in new locations." Was she seriously considering this or just like a thought experiment? Read more here.

The same article is a nice follow-up on the misguided use of hyperboles when one only wants to say that the level of IPR enforcement in China is unacceptably low. Sir Arthur Bamford called it "cancer", see here, and William Delahunt is taking the hyperbole one step further and calls China's low IPR enforcement "economic terrorism". These words are probably not conducive to solving the IPR enforcement challenge in China.

One might better use arguments for protection and enforcement of IPR in China (regardless whether these are in the hands of domestic or international companies/persons) that show China's advantages, based on David Ricardo's theory of comparative advantage, and disadvantage if it engages in mercantilistic policies. This is hard, now that China's economy is so successful and the importance of its domestic market is growing. Ms Espinel, and many international IPR holders are facing a daunting task to protect and enforce IPR in China.

Copyright Piracy in China: China Did Not Shed Its Fetish For Temporary Mass Campaigns

Blacklisting until the blacklisting goes on black again...

The National Copyright Administration of China (NCAC) has started a campaign on July 21, which will last until the end of October, to blacklist websites that are found to contain pirated content.

According to IPR Focus, who run the People's Daily Online article, the action was announced jointly by the National Copyright Administration, the Ministry of Public Security and the Ministry of Industry and Information Technology. Read here.

It seems that in regard to intellectual property rights (IPR) enforcement China did not lose its fetisch for temporary mass campaigns. We have seen these kind of campaigns over and over (see page 74 of my thesis Paper Tiger or Roaring Dragon). And the only thing that is missing is a nice poetic name.

The procedure to put the names on the website of the NCAC, so China's three telecom operators (China Telecom, China Unicom and China Mobile) can take them offline evokes questions. Do the websites get the chance to take down the pirated content first? What is wrong with a more durable solution to obligate websites to take down pirated content, and if they don't and the content is confirmed pirated by the NCAC, to let one of the telecom operators take the website offline.

Unsurprisingly the crack down will also focus on all content related to the Shanghai Expo and Guangzhou Asian Games. "Anyone who reports cases of infringement and piracy will get reward betwen 1,000 and 10,000 yuan." I guess the latter measure is only focused to enforce the IPR of these public events. Instead of spending the money on informers, the NCAC could enforce themselves or spend it on campaigns that should raise the awareness about IPR in general. China should know by now that there is more IPR to protect and enforce than the IPR of the Beijing Olympic Games, Shanghai World Expo and Guangzhou Asian Games.

JCB's Chairman Compares China's IPR Enforcement To Disease At Banquet With Premier Wen

Jonathan Guthrie's article for the Financial Times about the travails of JCB, the manufacturer of loaders, forklifts etc. to survive the economic crisis, includes quotes of its chairman. This Sir Anthony Bamford allegedly said to the Chinese premier Wen Jiabao during a banquet that the unlicensed copying of Western technology by Asian manufacturers equals "cancer".

Is this an effective metaphor or a hyperbole that is offensive to those who suffer from it directly or indirectly? According to Wikipedia, cancer is a class of diseases in which a group of cells display uncontrolled growth, invasion and sometimes metastasis. Many times the counterfeit and piracy can grow beyond the control of the rights holder. Invastion (intrusion on and destruction of adjacent tissues): it can destroy market share of the genuine product. Metastasis (spread to other locations in the body via lymph or blood): spread to other locations via export or up and downloading. It might be accurate at some level, but very stylish it is not. And these expletives lead to inflation of meaning. What's next? Godwin's law comes to mind.

One cannot accuse Sir Anthony of using euphemisms or much talent for diplomacy. Then again he is not mentioning China but uses the more generic category of Asian manufacturers. But premier Wen took the hint that he was meaning China and Guthrie reported that premier Wen answered according to Sir Anthony: "He said that China was a big country with millions of mouths to be fed, and that many Chinese businesses were suing Chinese competitors for the same reason".

In the first part of the answer "China is a big country with millions of mouths to be fed" the premier plays the "China as a developing country" argument. And the latter part "many Chinese businesses were suing Chinese competitors" contends that the problem that bothers foreign businesses also bothers Chinese companies. In other words the problem is distributed equally over foreign and domestic companies. This remains to be the question. China can easily come up with a number of intellectual property rights (IPR) disputes between Chinese companies that outnumber those IPR disputes where a foreign companies' IPR in China is involved, in absolute terms. However, if one looks at the relative numbers I am positive that the percentage of foreign firms whose IPR are infringed in China is higher than the percentage of domestic companies' IPR that is being infringed in China.

In short: domestic companies' IPR infringed divided by all domestic companies with IPR versus

foreign companies' IPR in China infringed divided by all foreign companies with IPR in China

Openly critizising China's IPR enforcement to the Chinese premier during a banquet is a route not much travelled by fellow captains of industry. To my knowledge it is the first time (let me know if I have missed other examples). Most company representatives are afraid that critique will lead to repercussions, in the form of covert barriers. Let's look how JCB fares in China in the future.

Read Mr Guthrie's article here.

CNBC: "The Most Profitable Criminal Enterprise: Counterfeit Goods"

CNBC presents "Crime Inc.: Counterfeit Goods," presented by Carl Quintanilla will be aired July 14. "At around 7% of all global trade, Counterfeit Goods are a big business with low overhead. It makes too much money to go away any time soon."

UPDATE, Friday July 30, 2010: Lies, damn lies and statistics. Felix Salmon could already fry the numbers used in the trailer for the CNBC documentary on counterfeit goods, read here.

Chinese Counterfeit Cisco Products Because of Profit Seeking Or State Sponsored Cyber Terrorism?

After 'Cisco Raider/Operation Network Raider' about counterfeit Cisco Systems router products which originate from China, Professor Peter Navarro poses the question whether the intention was only profit seeking by unscrupulous Chinese counterfeiters, or whether these products are trojan horses that are designed to make the US defense more vulnerable to state sponsored cyberterrorism. Professor Navarro (University of California-Irvine) is the author of 'The Coming China Wars'.

Professor Navarro lashes out against China's alleged mercantilist trade practices in 2008, see here.