Innovation: "Paradoxes, Google and China"

Google and China have found each other in a marriage of convenience, in order to serve the one god they both live by: innovation. This article deals with censorship and intellectual property. Two of the biggest challenges that the internet present to the legal community. The main characters are two of the biggest actors on the internet stage: Google and China. Google wants to offer all the information available to everyone, while not doing evil. China interprets having all the information available to everyone as an evil that will lead to instability.


Download the chapter here of Friedmann, Danny, Paradoxes, Google and China - How Censorship Can Harm and Intellectual Property Can Harness Innovation (July 1, 2011), which is a chapter of the book: Aurelio Lopez-Tarruella (Ed), Google and the Law, IT and the Law Series, TMC Asser, Forthcoming. 

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Parallel Universe Shenzhen: Where The iPads Run on Android

Androids have landed on Shenzhen's beach
Photo Danny Friedmann

By Michiel Tjoe-Awie

The market penetration of Google's Android mobile operating system came second, behind Nokia's Symbian but was preferred above Apple's iOS. The iPad is still the most popular “pad”. Wouldn’t it be great if we could have the best of both worlds. I mean that Apple would strike a deal with Google to make a variation of iPad, running on Google's Android operating system. Unthinkable? Why? Just because it should contradict Apple’s goal to dominate the market for operating systems? Remember you once learned the difference between a consumers (demand) market, and a manufacturers (supply) market? If the consumer dictates the manufacturer what to make we talk about a demand market, a manufacturers market works the other way around. The Chinese plan economy was a typical example of the latter. But thinks has changed. Now it provides only what the market wants. No boundaries. The market has made it’s request and has produced a miraculous new product. Something like a beautiful woman that likes to watch football or a child that likes to listen or a dog that doesn’t smell or an iPad with a Android operating system. What? I said: “an iPad with an Android operating system!”

Copycats are not hindered by the animosity between Steve Jobs and Eric Schmidt (from Google). So the unthinkable has become true in the parallel universe of cloning:

Neo of Shanzhai reports that the second generation iPad inspired device in that parallel universe for clones, copycats and counterfeiters Shenzhen will be manufactured with a Google's Android 2.2 operating system.
By the way in this case the Apple logo was not used on the clone. Design patents and copyright, and even trademark (for the use of the name iPad or when the form was registered as trademark) might be infringed.
Read the Shanzhai article with pictures of genuine and clone for that parlour game: find the differences here.

Text Michiel Tjoe-Awie

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WikiLeaks U.S. Cable: "Chinese Government Ordered Hack Google"

Ellen Nakashima of the Washington Post wrote: "The penetrations resulted in the theft of "significant" intellectual property, Google officials said." Read her article her.

Whether it is true or not is unsure: the source is anonymous and the leaker too (are not necessarily the same). The reason why Google withdrew partly from China might be more complex.

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Best of Google's White Paper: Censorship is Hurting China's Economy

Intellectual property and market access are interdependent subjects. If there is a barrier to the free flow of information (the market access is challenged, regulated or censored when it refers to copyrighted goods), no intellectual property can be exploited and this will feed a demand for pirated works and counterfeit products.

Google has problems accessing the market in China, because it cannot offer its users unrestricted access via its search engine and other applications. In the hope of solving this problem it published a white paper of 25 pages, see here: Enabling Trade in the Era of Information Technologies: Breaking Down Barriers to the Free Flow of Information, in which it appeals to basically everyone:

• "Focus on and publicly highlight as unfair trade barriers those practices by governments that restrict or disrupt the flow of online information services.
• Take appropriate action where government restrictions on the free flow of online information violate international trade rules.
• Establish new international trade rules under bilateral, regional, and multilateral agreements that provide further assurances in favor of the free flow of information on the Internet."

If this does not sound very innovative to you, it is because it is not.

The most persuasive argument: internet censorship is bad for the economy of the censoring country, because it is a restraint on global trade. The other arguments (trying to stop violation of international trade treaties such as WTO's TRIPs, unfair competition and favouring indigenous industry) might all be laudable and valid, but not as compelling to China right now.

Therefore it would be interesting to elaborate how censorship is hurting China's economy and stifling innovation. More about this subject later.

UPDATE November 18, 2010:

Ronald Yu pointed me to an interesting The Register article by Cade Metz 'Baidu boss: Google don't know China' that the problems Google is facing are not only related to market access. Thanks Ron.

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Ms Pagnattaro Does Not Keep It A Secret How To Protect Your Trade Secret In China

Marisa Anne Pagnattaro wrote a very good paper: ‘‘‘The Google Challenge’’: Enforcement of Noncompete and Trade Secret Agreements for Employees Working in China’, American Business Law Journal Volume 44, Issue 4, 603–637, Winter 2007.

If you don't need to share a product, idea or ingredient with the world, then don't. Keep it a business secret, just like Coca-Cola who never patented its drink's ingredients. Easier said than done, though. At Coca-Cola only two people in the board of directors have each half the number combination to a safe. And there are a lot of things you should pay attention to protecting your trade secret. Trade secret is considered often as the ugly stepdaughter of the IP system. But it can be very effective.

In China the Provisional Regulations of the State Council on Technology Transfer, promulgated
January 10, 1985, and the Regulations on the Administration of Technology Acquisition Contracts, May 24, 1985, hereinafter Technology Acquisition Regulations Detailed Rules and Regulations for the Implementation of the Regulations on the Administration of Technology Import Contracts, December 30, 1987, are relevant. However, all of these rules and regulations are contract based and, accordingly, are not binding on third parties. Additionally, no legal penalties are specified; the only remedy is for
breach of agreement.

The Law Against Unfair Competition, September 2, 1993, and Regional regulations: Labour Contract Regulations of Shanghai Municipality, effective May 1, 2002.

Ms Pagnattaro illustrates the relevance of protecting trade secrets by showing the case of Dr. Kai-fu Lee who first worked for Microsoft and then for Google. Even more interesting is the conclusions she is drawing from this case.

The duration of the noncompete agreement should be limited to the amount that is just enough to protect the employer. "The longer the period, the more evidence you need to prove that the period is reasonable and necessary to protect against unfair competition and not an undue restrain on the employee’s right to work."

Limit the Scope of the Information covered by the noncompete agreement. "It is advisable that the noncompete clause expressly states that it is designed to preserve business secrets, thereby tying the agreement to a legitimate business reason and undermining any defense that the agreement is an unfair restriction on labor or creates undue hardship on the employee."

Tailor the geographic scope of the noncompete agreement to protect legitimate business interests.

Provide compensation in exchange for the noncompete agreement.

Limit access to the trade secret information. Files and other places containing trade secrets should be labeled.

Ensure that the information claimed to be a trade secret has economic value and practical applicability realizable utility.

Take active steps to protect the business secret.

The policy should also include penalties for improper use or disclosure of the information and enforcement of the penalties.

Incorporate a provision addressing trade secrets developed by the employee.

Take Action When an Employee Resigns. "Notify new employers of the secrecy obligations after a key employee leaves, the employer may want to follow upon where the employee goes, to protect against breaches of the noncompete agreement as well as the development of any competitive practices that infringe on business secrets to which the former employee was privy."

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Goojje.com Infringes Intellectual Property Of Both Google And Baidu

Yu Le and Ralph Jennings have an article for Reuters on the PC Magazine website about a Google clone called Goojje.com, probably using Google's technology without permission, with part of the Baidu logo in its logo. It wants to compete with Google but also wants that Google stays in China. Read more here.

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R.I.P. Google.cn? Thanks To Censorship and IP Infringements Or Just Face-saving Exit?

Google.cn is threatening to pull out of China, because of "a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google." Read the official Google blog about it here.

- Of course it is not clear whether Google is bluffing? If they do, China probably would not care less, since Baidu, China's market leader, is China's preferred search engine anyways.
- If they don't bluff, the question is whether the censorship, vulnerability to sophisticated hacker-attacks (hacking does not seem to be a problem exclusively targeted to Google.cn or foreign companies only; days before Baidu was hacked) and the resulting intellectual property theft are the real reasons or whether Google wants to cut their losses after disappointing business results and do not want to lose face?

Many Chinese people have sympathy for Google's demands to be able to provide unfilitered search results and have laid flowers and wreaths at Google.cn headquarters at Zhongguancun, Beijing's high-tech centre, which the Chinese authorities called "illegal". Then again, Joel Martinsen of the always excellent Danwei.org has an article by Gao Youbin who quotes a survey by Huanqiu Online: 70 percent of respondents say that the Chinese government should not give in to Google's demands, read here (the second part of the 'Earth-shattering news').

IP Dragon would love to know what kinds of intellectual property rights were stolen, as Google alleges. Do you know?

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Sweet Irony: Is IP Dragon Liable For Hosting IPR Infringing AdWords?

Law is often walking a few steps behind the developments in society. I propose the term "law lag", whereby I apply the "cultural lag" concept developed by Thorstein Veblen to law. Of course intellectual property and cyberlaw are not immune for this. One important question that should be answered is to what degree are internet service providers liable for content that infringes intellectual property rights on their site. In Europe there have been cases of Louis Vuitton; Gucci; and Chanel against eBay. And of course in China there were the Baidu and Yahoo! China cases (both companies were sued by music companies at different times with different outcomes), see here.

Another category of cases that is of interest is about Adwords. September 22, 2009, the Advocat-General of the European Court of Justice gave his advice for a pre-judicial decision about whether a Google adwords (for example where Louis Vuitton products are promoted by other companies than authorised by Louis Vuitton or even selling fake Louis Vuitton products) can infringe Louis Vuitton's trademark, that was requested by the French Cour de cassation. In short the advice included: the links in AdWords used do not equal to trademarks (those could be infringed on the sites to which they lead), the AdWords do not prejudice the functions of the brand, guaranteeing quality of the goods or the communication- or the promotional function. Contributory infringement is not part of the legislation in most EU countries. However, if the trademark holder finds that the AdWords link to IPR infringing websites and requests Google to remove these links, Google will be held liable and the trademark holder can get damages. Google was not exempt from liability for hosting, because it is not a neutral information instrument, as is requested by article 14 EC directive 2000/31.

Why I am writing this, you might aks, since IP Dragon is about IPR in China and not EU law?

Well although most of the IPR infringing products, that are key in all of these cases, originate from China, I got the following email (September 24, 2009) that concerned yours truly:

"Dear Mr. Friedmann,
I am a regular reader of your blog, and I enjoy your articles about IP in China. That being said, I noticed today a peculiar Google Ad on your page: « Louis.V. Handbags 50% Off ».Intrigued, and you may guess why, I followed the link : http://www.handbagstime.com/?gclid=CMqR2oDQiZ0CFZQA4wodBG8J3A hum…. A quick look at the « contact us » page : http://www.yeslvgifts.com/contact_us.html It seems to confirm what I thought…What do you think ?
Cheers
Philippe"

This could happen, since IP Dragon writes frequently about fake, counterfeit and IPR infringing products and makes use of Google AdSense (which is the mirror of AdWords), which adapts its content to the subjects and some AdWord users choose these categories to promote their maybe dubious goods. If I would not block these AdWords after I was warned, in principle I would end up being liable. What do you think? Thanks, Philippe, for pointing me out the links.

Photo: Danny Friedmann

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WSJ Reports 90 Percent of China's Netizens Access Pirated Music

Mira Veda of the Huffington Post writes "The Wall Street Journal reports that 90% of China's Web Users, which is estimated to be about 162 million people, access pirated music from their computers every day ... " Read here.

Ms Veda, and with her many others, is doubting what the next best business model for the music industry will be in times of massive digital piracy: Google's advertising model (read 'Giving Away Music for Free to Destroy Copyright Piracy: Operation Succes, Patient Dead?') or France's three strikes system (read 'Taiwan's Three Strikes System Less Strict Than French Equivalent'), or some other model. Ms Veda is convinced that some regulation is a prerequisite for the world to see the potential of authors and performing artists that otherwise cannot afford to make music.

Below Ms Veda's article rjmiller (Rob Miller, who is a musician and songwriter) comments that regulation is not the answer and that it only hurts the extremely succesful musicians, quoting Tim O'Reilly 'Piracy is Progressive Taxation'. Mr Miller also wrote: "If you've ever spoken to an Indie artist, they don't worry about piracy, they worry about obscurity". 

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Google Will Continue To Investigate Trademarks as Keywords in China, Hong Kong and Macau

Imagine that your competitor can advertise with your name using Google AdWords. This nightmare can come true in the following jurisdictions: 'Regions for Which Google will not investigate the use of trademarks as keywords'. So far the People's Republic of China, Hong Kong SAR and Macau SAR are excluded from this practice. 

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Giving Away Music For Free to Destroy Copyright Piracy: Operation Success, Patient Dead?

Google is trying to get a bit closer to Baidu, the number one search engine in China. Therefore it is offering the users of google.cn free music downloads. It is legal, because all copyright holders have given permission.

Murad Ahmed of the Times Online wrote:

"The service is supported by 140 record labels, including the big four (Warner Music, Universal, EMO, Sony BMG), and will earn revenue from advertising on pages that let Chinese web users download or stream licensed music – 350,000 tracks are already available, with plans to have more than a million tracks within a few months. Warner Music said that it would make its entire global catalogue available as part of the deal." Read Mr Ahmed's article here.

Advertising seems to be the only feasible business model on the internet that has emerged and the music industry also wants to give it a try. The music industry might have realised that (to paraphrase Professor Lawrence Lessig in his excellent book Free Culture) to criminalise a whole generation is not the way to go forward.

There is no question about whether this business model decreases the urge to pirate copyrights, but the question is whether the music industry can survive this way. Is it a good idea, or will this turn out to be "operation succeeded, patient died"? 

What do you think?

UPDATE1:

Also listen to/read the interview of Bob Garfield of On the Media with Greg Kot, author of the upcoming book 'Ripped: How the Wired Generation Revolutionized Music'. 

Thanks for pointing out this interview Ron Yu of novacourses.com

UPDATE2:

Mira Veda wrote a nice article for the Huffington Post about it called 'Pirates Stealing Music in China ... US ... Everywhere', don't forget to read the commentaries below Ms Veda's article.

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Must Read Monday: "Shan Zhai Ji" in Google.cn Most Searched List

Sky Canaves and Juliet Ye of the Wall Street Journal's China Journal Blog dealt with the top ten lists of Google.cn 2008. Although most Chinese use Baidu, and Google is used by some of the higher educated Chinese, the most searched terms can give an indication of what is hot and what is not in China. Read the China Journal article here.

In the category "Most asked questions": Number 1. , unsurprisingly, given the enormous impact on China's society, was: What is melamine? Interestingly also on number 8 another question had also to do with substandard, counterfeit products: What is Shan Zhai Ji?

Ok, everything that shows up in a Google top ten is a trend. But what does this trend mean? So what means Shan Zhai Ji 山寨机? This is literally: Mountain Bandit Machine, and is a a knickname for cell/mobile phones with copied design and functions of branded cell/mobile phones offered for a much lower price, without permission of the brand owners.

According to Candy Yang and Lisa Li of China Youthology, which is "catching the pulse of Chinese youth", Shan Zhai Ji has developed into a subculture which can be defined as:

• Enjoying technology for a low price;
• Satisfaction with the level of technology and innovation of small bandit factories, which meets Chinese youth need to experience new technology and new functions and some humour;
• Pride for unpretentious, low quality low price products.
• Shan Zhai Ji might look vulgar and ‘out-dated’, but are considered cool and interesting by some youth.

Ms Yang and Ms Li did an informal survey about who is buying these Shan Zhai Ji products. The outcome is: creative youth, technology geeks and guys. In marketing terms the important group of early adopters. In other words: the opposite of brand chasing as the title of the article rightly put is, read the China Youthology article here. Conclusion: counterfeit trademarks and pirated copyright in China is not only caused by supply but also by demand. Brand holders need to work on both sides.

An example of a Shan Zhai Ji, you can see below a video of the iOrange, oops iOrgane. It has some extra functions compared to those of the iPhone.

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Guge Case: Business Name vs Trademark Dispute Or Practical Problem?

On June 29, the Beijing Haidian District People's Court accepted the case of Beijing Guge Science and Technology Ltd. versus Google's subsidiary in China called Guge for disrupting business.

Tian Yunshan, company secretary for Beijing Guge Science and Technology said that he applied the use of the business name 北京谷歌科技有限公司 (Beijing Guge Science and Technology) in March 2006, and opened business on April 19, 2006, said the Beijing News according to Joel Martinsen of Danwei. Read more here.

Google filed as early as January 2006 trademark applications in a variety of areas to register 谷歌信息技术（中国）有限公司 (Gu Ge) with China's Trademark Office of the State Administration for Industry and Commerce (SAIC), Google China said yesterday in an e-mail to Janet Oong of the Shanghai Daily. Read more here.

Beijing Guge Science and Technology asks Google to change its commercial name, because Google failed to be in a phone directory, so they Beijing Guge is flooded by people they think they are Google. Beijing Guge is not asking for damages.

Commercial names can be registered without a search for similar of same names, as is mandatory in case of a trademark search. It seems that Beijing Guge has registered its business name after Google registered its trademark. Actually, it actually could infringe Google's trademark, if it operates in the same line of business.

IP Australia did a very interesting survey in 2005 on the Australian business community's knowledge of the differences between business names and trademarks. The lack of awareness of the differences between the two and misconceptions were rather big. It would not be surprising if this were the case in other places too, including China. I paraphrase IP Australia: Business names are just business signifiers, not a form of entitlement or an active title that is owned exclusively by a business, nor does is confer rights upon and protects its owner. For this you need trademarks. Read more here.

In casu, the problem seems not too hard. Beijing Guge and Google and the phone directory 114 could come up with a practical solution, so Beijing Guge can continue to work. However, the question remains what does Beijing Guge really wants. And why did Tian decline to disclose the main businesses of the company?

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