Intellectual property (IP) is a type of asset which comprises the imagined creations of the human intellect. The most popular categories of intellectual properties include patents, copyrights, and trademarks. The ease of access to such forms of property has increased, thus, making other individuals profit from the intellectual abilities of others through illegal duplications. According to Branstetter (2017), China has the world’s highest copyright infringement rate and counterfeiting of trademarks. This paper aims to explore the impact of the Chinese IP policies on multinational enterprises.
Property security mechanisms have evolved worldwide due to the rise of human civilization and the commodity industry. Intellectual property has gradually become an important legal resource in many countries with regard to protecting individual innovations. However, China has not been strict with the IP laws, meaning that the country, hence, its protection policies, have not been in existence for long (Prud’homme, 2019). Therefore, enterprises must be protected against piracy, especially by the country’s law in which it operates.
The Chinese government acknowledges that the IP defense framework plays an important role in fostering the development of science and technology, empowering heritage, and improving the economy. Garcia et al. (2016) state that most of the contemporary IP protection debates in China take a legal view and emphasize patent protection approaches. The Chinese government’s strategy on indigenous advancements in technology consents to the improvement of an original invention by the integration of foreign innovations to convert international technology into its own.
The stand seems to favor their own businesses since many multinational enterprises (MNEs) view it as a basis for technological theft. Although the policies exist, they are not implemented fairly and satisfactorily to all the companies in China, which grants trademarks, patents, and copyrights on a first-to-file basis. According to Prud’homme (2019), productions such as designs and inventions are presented with the permit rule, whereby ingenuity and practicality must be demonstrated. The designs must be unique and in no conflict with the current ones. Therefore, once they are granted, no individuals can use the patent unless the owner provides permission.
The approval procedure in China may take about eighteen months to allow any dissatisfied party to file a case in court. According to China’s trademark laws, for any approval, MNEs must integrate with the Chinese agencies (Garcia et al., 2016). The nation’s copyright law notes that implementing a voluntary registration scheme protects creators along the dimensions of their literary, art, and research work (Prud’homme, 2019).
Moreover, innovators can securely justify their rights through a copyright conflict by obtaining an issued certificate and profit from a tax subsidy (Prud’homme, 2019). In terms of the policy on trade secrets, China defines them as any technical material relating to business activities unavailable to the citizens, having business principles, and the proprietor taking secret actions. The guideline on IP further states that a third party that knows about any violation of corporate business secrets may also be regarded as a suspected accomplice to the trade secret infringement (Prud’homme, 2019). Despite having the relevant IP laws, China has failed to institute measures to protect the MNEs.
The impact of the above policies on MNEs in China is of great essence. Garcia et al. (2016) state that the main obstacle for multinational companies operating in China is intellectual protection. It is estimated that China may have been involved in almost 80% of all IP piracy acts against U.S. companies in 2013 (Prud’homme, 2019). However, to protect their IPs, MNEs should design and execute a plan for their companies. It can be done by taking specific measures such as recording company IP security policies and efforts as well as using information technology software to track and protect the data (Branstetter, 2017). Therefore, the MNEs must balance their international needs for IP protection with the business prospects for Chinese licensed goods and services.
Implementing such actions may be done by undertaking a practical review of the market risks and rewards of IP transition to China if the owner is a foreigner. Since China is now an active member of global economic development, it has been forced to demonstrate its progress in addressing the IP protection concerns to the rest of the world (Prud’homme, 2019). China has also joined almost all key international Intellectual Property Rights (IPR) conventions, such as the Berne, the Paris Pact of 1985, among others. The IPR resolutions are thus considered essential business agreements that can help to protect the rights of the MNEs.
In comparison with other countries, the rate of piracy in China is still high. The ruling party places the country above local and international laws, making it different from other nations in terms of the legal framework (Prud’homme, 2019). In short, it means that the protection of MNEs in China can only be possible if the government system is changed. In most cases where domestic companies seem to breach the IPR of international firms, the Chinese government is often slow or, in the worst cases, declines to enforce the law justly. Therefore, it shows that China does not have a robust legal framework to protect the IP of MNEs.
In conclusion, China lacks excellent legal frameworks, policies, and guidelines which can protect the MNEs from IP theft cases. To make it worse, it is not willing to implement the law justly, especially when it concerns the cases which relate to the foreign MNEs. During the issuance of trademarks, copyrights, and patents, the agencies adhere to a first-to-file rule which promises penalties and compensations to pirates and their victims. China has, however, failed to adhere to the rule, specifically because of its communist political and economic structure.
References
Branstetter, L. (2017). Intellectual property rights, innovation and development: Is Asia different? Millennial Asia, 8(1), 5–25.
Garcia, A., Jiang, J., Turley, C., & Wang, M. (2016). The evolving environment for intellectual property tax management in China. In D. Prud’homme and H. Song (Eds.), Economic impacts of intellectual property-conditioned government incentives (pp. 205–233). Springer.
Prud’homme, D. (2019). Re-conceptualizing intellectual property regimes in international business research: Foreign-friendliness paradoxes facing MNCs in China. Journal of World Business, 54(4), 399–419. Web.