1. Some Reflections on Formulating Chinese National IPR (Intellectual Property Rights) Strategy
(Speaker: Dr. ZHANG Qin – zhangqin@sipo.gov.cn)
Phases of formulation:
- Phase 1: 2004 – Formulating Proposal, pre-study on outline, organizing the formulation system (leading group headed by Wu Yi, 28 formal members plus 5 informal members, Office settled at SIPO), getting approval from state council
- Phase 2: Jan 2005 – Aug 2005: Formulating the study framework: 1+20
- Phase 3: Aug 2005 – Jan 2007: Study of 20 related subjects and 1 outline
- Phase 4: Feb 2007 – now: Formulation of the outline
Features of the formulation:
Questions that need to be answered in IPR strategy formulation:
- What is it
- Why
- What to do
- How to do it
(-> 3 & 4 lead to the actual strategy formulation)
What is IPR?
(Brief outline of the presentation)
- IPR
- The institution of IPR
- The FUNCTION of the IPR institution
- The background of the IPR strategy
- The principle of the IPR strategy
- IPR problems in China
Scope of IPR
- Patents
- Trademarks
- Copyrights
- Industrial design
- New variety of a plant
- Geographical indication
- Integrated circuit layout design
- Trade secret
- Traditional knowledge
…
Simpe IPR definition in Chinese IPR textbooks:
“IPR is a natural or legal person’s property right prescribed in law based on the
achievent of intellectual activity”
OBJECT: Achievement of intellectual activity
SUBJECT: Natural or legal person
TARGET: Property right
DERIVATION: Prescribed in law
Problems with this definition:
Proposed IPR definition to rectify the problem:
“IPR is the legislated property right and the mental right of the civil subject
on specific useful information”
OBJECT: Specific useful information
SUBJECT: Civil subject (natural or legal person, non-legal person organization
TARGET: Property right & mental right (the property right is important in China; it is man-made and TRANSFERABLE; the mental right is a right by fact/by natural law, it is NON-TRANSFERABLE)
DERIVATION: legislated (different – here IPR is man-made, not natural!)
Scope of IPR institution
- IPR laws and regulations
- IPR examination / registration system (2 separate departments in charge of these tasks!)
- IPR enforcement system (judicial and administrative) – work done by courts as well as government agencies; In China, there are 2 types of protection (judicial, and administrative (through courts))
- IPR policies
Functions of the IPR institution
- Encourage innovation and creation
- Encourage knowledge dissemination (other people can profit from a discovery without repeating the entire research)
- Inherit TK & protect genetic resources
- Maintain fair competition
- Protect consumers (If goods are counterfeited, consumers cannot find the good they really wanted to buy)
- Promote national culture
Background of IPR strategy
- Knowledge economy (economy based on the knowledge with IPR) -> knowledge is not free in our time!
- Globalization of the economy -> globalizatuion of IPR regulations (TRIPS), and development of the global economy -> IPR becomes a basic economical institution
- Challenge to China: Its main source of competitiveness comes from cheap labor, but it needs to start paying its labor more, so production costs will rise. Another challenge is China’s huge need for energy, and its increasing dependence on imports. This also bears environmental costs. So, China must improve the QUALITY of its competitiveness (depend less on cheap labor and become more energy-efficient in order to avoid depending too strongly on oil imports; focus the economy on becoming more of a knowledge/technology – based economy
- Need for an IPR strategy (what to do and how to do it?)
Principle of IPR strategy in China
The goal of any country's IPR strategy must be to maximize the total national benefit
- Synthetic benefit (IPR, trade, research, education, culture, defense – short & long term benefits, etc.)
- The IPR strategy must fit the development level of a country
- Balance the benefits of rights holders, users, and consumers/public
- Balance between domestic innovation and attraction of foreign technology / culture / brand / management / investment / etc. (China doesn’t want to close its border to the outside world, but encourage foreign contributions to its development)
- Win-win situation for various countries
- Together development of different geographical areas (-> Eastern China, cities very developed; but 2/3 of China are in the mountains, and these areas are very poor) -> different areas of China are at different levels of development; China should try to have its areas develop together
IPR problems in China
- Shortage of IPR innovation/application
- Weakness in IPR protection enforcement
- Difficulty in prohibiting IPR abuse (China has a big problem with counterfeits, copies, trademark violations, etc.; this hampers China’s growth and weakens it -> the cost is still very high for a patent holder to have his rights protected in China)
- There are two elements of IPR: 1) protect the right, 2) prohibition of abuse; China protects IPR very well, but is not so strong on the prohibition of abuse (much of IPR abuse in China hurts its economy and culture, but it doesn’t have the means to fight this abuse completely)
- Shortage of IPR culture (awareness, basic knowledge, respect, creativity, protection of mental rights, professional, etc.) -> need for more education for managers, students,… need to increase people’s knowledge about the meaning of IPR
- Imperfect IPR institution
Why? (A critical look at the reason for IPR's)
- example: comparison between Joanne K. Rowling’s riches from writing “Harry Potter”, while Homer and Shakespeare never became rich…
- Why are the famous Chinese “basic” inventions such as gunpowder, paper manufacturing, etc. not Chinese intellectual property, while white tea, silk, chinaware ARE Chinese intellectual property?
- Why are Albert Einstein’s discoveries (e=mc^2) not IPR?
- Why is industrialization based on China’s own independent innovation illegal? (Because somebody else may have already happened to patent it one day earlier…); if a scientist forgets/fails to get a patent, his IPR is lost, he is prohibited from reproducing his own invention!!
- Are all IPR infringements "stealing", in the same sense as stealing cars is?
- Since developed countries usually apply for patents usually earlier than developing countries, should the latter lose their right to apply the technology they could have also achieved later, unless they pay much as the “earlier inventors” want? (Ex. DVD player: most of the sale price of DVD players produced in China must be paid as royalty (about 60%!!) as royalty; often pay $13-18 in royalty and only earn $1 per player sold; is it fair that the right holder can simply fix a royalty price and demand that it be paid?)
- Why is the history of IPR only a few hundred years old (it is less than 30 years old in China!) while the history of private (tangible) property is thousands of years old?
- Is IPR “natural” private property, based on the principle of “whoever creates something, owns it”?
- Is TRIPS the protection of human rights?
- Why can’t discoveries be patented?
- Why is IPR protection valid for so long (invention: 20 years, copyright: until 50 years after author's death, etc.)
- Why is IPR law different from country to country (ex. software rights different in Europe and China from the USA), while the property rights for TANGIBLE goods are almost the same in many different countries? (a person can trade goods in almost any country, without needing to know the local property laws for tangible goods; the same is not applicable to intellectual property)
Proposed answer
All answers can be found in the correct DEFINITION of IPR!
- The object of IPR is (useful) information
- Information is not scarce once it is created or obtained
- Open information cannot be held by the creator in the same way as a tangible object can be (-> it is non-exclusive!)
- Non-tradable secret information is not the object of IPR, but the skill of the holder (ex. painting skill; it can’t be legally protected, but can be used in trading on the market)
- IPR law prohibits only ILLEGAL obtainment, sale or opening of trade secrets, but there is another LEGAL way
- IPR does not protect IPR objects, because information cannot be returned and removed from the “thief” of it; information made available to the public cannot be made “unavailable” again or removed..
- Information itself cannot be property, in NATURE, because there is no scarcity… (normal property has 2 properties: 1) it must be useful, 2) it must be scarce -> information, like air or sea water, is useful, but not scarce, so it cannot be treated as private property)
- In history, it is the non-property feature of knowledge/information that makes human achievement become a driving force of progress
- Tragedy of the commons: If discoveries/inventions are made freely available, then nobody will innovate or try to discover things..
- IPR has thus been recently designed, in order to legislate a sort of “artificial” scarcity of knowledge/information
- The scarcity is related to only the right to use the information, but not the information itself (only the ACCESS, but not the OBJECT is meant to be protected in IPR -> the object itself is still public, by law even, because the patent must be detailed and public, but only specific subjects (the right holders) may put it to commercial use)
- The scarcity is created only by legislation (thus, it is completely artificial)
- The IPR law is designed by the legislator
- A legislator tends to represent only his national benefits, rather than the benefits of the entire society
- Einstein’s discovery is too great, too basic to patented; it must be rewarded, but not through IPR
- Discovery should only be patented if this improves society as a whole (-> gene patenting…)
- Different legislators in different countries at different levels of development see different benefits, thus they create different criteria for IPR laws
…
Tangible property rights
OBJECT: tangible, consumable, naturally exclusive, naturally scarce, protected by law
RIGHT: based on natural law, right before it became law, same in all countries, non-separable from the object, disappears if the object disappears
Intellectual Property Rights (IPR):
OBJECT: Intangible, non-consumable, naturally non exclusive, naturally not scarce, not protected by law (historically)
RIGHT: man-made right, law comes before the right, different in different countries, separable from countries, disappears while object still exists
Further doubts on IPR protection:
- Low quality counterfeits = IPR infringements? (There is no reason to link bad-quality products to IPR; rather, it concerns basic consumer protection rights)
- Hit to illegal disk/CD production = enforcement of IPR protection? Questionable… Believes that this is competition law, not IPR law… Under IPR law, one should first prove that something is being counterfeited…
- Who should pay for IPR protection? In Mr. Zhang’s opinion, the patent holder should!! But most people believe that China’s government should pay for this…
- Why and in what cases is the government responsible for IPR protection?
- Should private property rights by enforced by courts (judicial) only?
Conclusions
- IPR is not simply based on natural law or human rights, but based on benefits for different countries
- Developed countries generally want strong IPR protection, and developing countries usually want weak IPR protection, because they have different costs / benefits facing them; BOTH sides’ views are reasonable, and BOTH sides should gain from this, rather than only one!
- International IPR regulation should be a balance of different benefits, and should result in a win-win situation
- Every country should be aware of what its costs and benefits are…
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2. A Comment on Dr. Qin ZHANG’s seminar
(Speaker: Prof. Dominique FORAY - EPFL, Lausanne)
Introductory remarks:
- A national IP strategy needs to fit the development level of the country
- BEFORE defining a strategy, one must ask: Where are the payoffs? (Should a country focus on CREATING knowledge, or more RE-CREATING or INNOVATING on existing knowledge??)
- Pre-TRIPS history provides numerous examples of countries able to frame IP institutions to fit their growth strategy: Switzerland (excluded all chemical companies from patent laws, allowing current companies such as Novartis, Roche to become competitive, then introduced IPR!!; Switzerland’s IP strategy was to protect DOMESTIC IPR’s, but not FOREIGN IPR’s!!) and India
- TRIPS leaves policy with some space for adjusting institutions
- Policymakers should ask: What are the capacities I want to support through adequate institutions: reverse invention, radical innovation,... ?
China at the frontier? (At what development stage is China, and what will be its driver for future growth)-
- Intel's CEO in 2003 identified China’s rising technological capacities as constituting a competitive threat to US high tech
- UNCTAD World Investment report 2005
- China's exports overlap to a surprising extend with OECD countries' exports
Increase in R&D investment in China expected:
- But, R&D operations by US MNC’s in China lower than rest of world (except Africa)
- US patent data suggests that China is not an important generator of US patents
- China’s ability to innovate, as evidenced by numbers of US patents with at least one China-based inventor, remains well behind Japan, Taiwan and South Korea
- China exports huge quantities of high-tech goods, but it is usually importing the high value-added components of these goods!
- -> China is NOT yet becoming a technological superpower; there is rapid growth in R&D, but from an extremely small base
The Economist: “Invention is costly and frustrating work; China has better things to do.” (->China could find more lucrative uses for its resources)
Conclusion:
- Basically agrees with Dr. ZHANG
- There is no CONSTANT ‘best form’ of IP institutions (“Take 20 different economists, and they will have 20 different views on China”)
- Regional differences also matter
- There must be a co-evolution of national IP strategies and R&D capabilities.
______________________
3. Another commentary on Dr. ZHANG’s seminar
(Speaker: Prof Kiyoshi ADACHI - UNCTAD)
- UNCTAD follows intellectual property rights in developing countries: China’s IP strategy will be important as an example for many developing countries!!
- Increasingly, we must expect other countries such as China, India, Brazil to take on an important as reference points as decision makers concerning IPR’s (whereas at the moment, the European / American rules are usually the only ones applied)
- In India, a very strict law was adopted, making it very difficult to have something patented (-> An example of IPR adapted to India’s level of development!)
- Where to strike the balance between exclusive rights and public domain? This involves many philosophical questions..
- Not simply a matter of mimicking an existing law; an IP strategy must be thought about thoroughly
- IPR was not approached for IPR’s sake, but in the view of accomplishing something: independent innovation (in the case of China)
- With so many stakeholders, it is impossible to develop a strategy that would please everybody
- With every strategy, there will be a need for periodic reviews!
- Nathan J. Wooden
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