Tuesday, August 30, 2011

Lessons From WikiLeaks About Apple's Intellectual Property Enforcement in China

Mark Milan of CNN has read the Wikileaks cable from the U.S. Beijing embassy on Apple, read here, see original text here.

WikiLeaks cored Apple in China
The Wikileaks suggest that Apple, in regard to the enforcement of intellectual property in China dealt with the following challenges:
  • It seems that Apple realised there was a serious problem quite late and only in 2008 it formed a security team, experienced in the protection of Pfizer, that took action; Lesson: assess the markets, have a budget and a team to enforce ready before you do business.
  • Like many companies it does not want to start high profile raids; Lesson: It can be an effective deterrent to potential counterfeiters if you are known as an aggressive enforcer
  • Like many companies enforcing their intellectual property rights in China, Apple experienced that its product categories are no priority for Beijing (unlike medicines); Lesson: it takes time, effort and money to lobby via U.S. government or EU politicians with Beijing for your particular industry to be noticed
  • Apple like many other companies tried to scare consumers away from buying counterfeit products (don't know whether batteries really blew up. Then again I personally have come across phony phones with high level of radiation that gives you a headache after a mere two minutes if your skull is less than 1 inch thick); Lesson: transparency about health and safety issues can work
  • That it can be hard to close down factories which manufacture infringing goods, because this could lead to unemployment, which on its turn could have a negative influence on the local economy, which increases the possibility of social instability. Typical example of local protectionism; Lesson: become part of local communities and economies to really have some influence. Choose your battles wisely: do forum shopping to sue infringers in those courts that you trust.  
  • That to close down shops in malls can be difficult because the authorities do not want to disturb the shopping in the mall. Another example of local protectionism (sometimes called localism). Lesson: be innovative. Use for example contractual solutions, such as the landlord liability schemes.
UPDATE August 31, 2011:
Philip Elmer-DeWitt published for Forbes the full text of the U.S. Beijing embassy cable here.

UPDATE September 1, 2011:
Chenfei Zhang of Newsy, pointed me to their "multisource video news analysis" about the subject. Thanks Chenfei.

1 comment:

Mac said...

On tricky part Apple faced was, to quote the cable:

"Apple is studying what this costs the Chinese Government per counterfeit device sold"

What is the cost to the Chinese Government?

If there are 1 million fakes, all that it makes it just means that a million products were sold which SHOULD have been labelled "Brand A" instead of "Brand B".

It doesn't mean that people would have actually paid the 'real' price for Brand B.

Consider the real options:

1) "Official Apple Product" (Expensive),
2) "Fake Apple Product" (Cheap) or
3) "Brand B that looks very similar to Apple Product, but doesn't infringe" (Cheap)

By eliminating (2) how do you figure out what proportion would have gone to (1), how many would go to (3) and how many would have simply not purchased?

Worst still - how does that make a difference to the Government ?