IPR Battles

Google, the world's largest search engine, has run into an IPR dispute with rival Sohu.com, a Chinese Internet brand listed on the NASDAQ exchange.

Sohu has accused Google of stealing a dictionary of Chinese words and names from its Sogou Pinyin Input Method Editor (IME), for use in the Google Pinyin IME launched in early April.

"It's obvious that Google has stolen our IME ideas," said Sohu's CEO Zhang Chaoyang. He added that his firm had applied for four patents before Sogou Pinyin IME was released last June and the company now has more than 10 patents concerning IME technology.

In recent years Chinese hi-tech companies have faced a series of charges over IPR infringements from foreign competitors, so Sohu's accusation has turned the tables.

Responding to Sohu's accusation, Google apologized to Sohu immediately for using the firm's technology in a program that helps users to input Chinese characters on a computer. But the apology did not solve the problem, according to Zhang.

"We are very sorry that a leading U.S. company like Google, which comes from a country that respects IPR, has exhibited a complete disregard for intellectual property in China," he said.

Zhang disclosed that Sohu has issued a demand for Google to stop downloads of its Google Pinyin IME. But Google claimed it had also applied for patents for Chinese IME technology and said that a cease of downloads would be unacceptable. Sohu is now forming a legal team which could sue Google in China or the United States.

Mounting patent disputes

IPR disputes have brought pressure for Chinese companies that are becoming increasingly active in international competition. At the CeBIT, an information and telecommunications technology trade show, in Germany this March, more than 370 products from 30 exhibitors (mostly from China) were confiscated by the German Customs Administration because of suspected IPR violations.

The confiscated products included Chinese brands like Aigo, a consumer technology brand manufactured by the Chinese company Beijing Huaqi Information Digital Technology Co., Ltd.

But according to Feng Jun, CEO of the firm, the confiscation was a "misunderstanding" as his company has always respected IPR. The problem may have been that Huaqi paid the patent fees to the manufacturing factories, which did not pay the fees to the patent holders, he added.

The confiscation of Chinese products at the CeBIT in Germany drew attention from the Chinese Government. Lou Qinjian, Vice Minister of Ministry of Information Industry (MII), called for Chinese companies to study international business rules.

"It seems that we are talking too much about our obligations to the World Trade Organization (WTO) but our companies fail to look into its detailed rules," said Lou.

According to Guo Shoukang, a law professor at Renmin University of China, Chinese companies are failing to prepare for international competition and lack the awareness to respond to IPR disputes.

"I don't rule out that it was a tactic used by foreign competitors by which they kept Chinese companies out of the expo so that Chinese companies would lose a market opportunity," said Guo.

Chinese companies should learn from foreign competitors and form industry associations so as to enhance their negotiation power and better protect the healthy development of their industries, noted You Minjian, a reputed lawyer with the Shanghai Lawyers Association.

IPR monopoly

Many believe that a level of hegemony exists in the international IPR rules, which places developing countries in a disadvantaged position. However, China and some other developing countries have been trying to change the situation in recent years.

The DVD industry in China is a case in point. China's output of homegrown brand DVD players used to make up 80 percent of the global market. But with the market expanding, international giants like Philips have begun to charge Chinese DVD makers considerable amounts in patent royalties.

According to Zhang Ping, a professor with the School of Intellectual Property of Peking University, some international companies have used patents to monopolize their industries.

In August 2006, Zhang and four other IPR professors turned to legal procedures to quash one Philips DVD patent. Four months later, in a conciliatory statement, Philips withdrew the patent and announced that the company would not claim the patent any more in China.

Some observers are worried for the future of China's growing industrial development if businesses fail to learn their way around the patent problem.

"What China lacks is an anti-IPR monopoly mechanism," said Zhang.

Accusations do nothing

On April 9, the United States filed two WTO cases against China: first regarding deficiencies in China's legal body to protect and enforce copyrights and trademarks on various products; and the second on the country's distribution barriers to trade in books, music, videos and movies. This was the third time this year that China had been pressured by the American Government on this issue.

"By doing so, the United States has ignored the Chinese Government's immense efforts and great achievements in strengthening IPR protection and tightening enforcement of its copyright laws," said Tian Lipu, head of the State Intellectual Property Office of China.

"Many of the pirated audio and video products come from the States, therefore a bilateral dialog and cooperation is needed to combat such an international IPR violation and accusations do nothing to help," said Tian.

According to Tian, this April China released the China's Action Plan on IPR Protection 2007. Last year, the country for the first time formulated guidelines for IPR protection and established related complaint centers in 50 cities. On December 29, 2006, China acceded to two major international conventions on IPR protection.

According to Zhang Qin, Deputy Director of the State Intellectual Property Office, China's national strategy on IPR protection, which was formulated in June 2005, will undergo a transformation from theory to practice this year.

The national strategy on IPR protection is composed of 20 topics and one guideline, covering system building, law enforcement, talents training and public awareness regarding IPR protection. The major problem at present is how to curb the abuse of IPR by multinationals.

It is only 20 years ago that China began to create an IPR protection system, and there are many problems still to be solved. According to the State Intellectual Property Office, 99 percent of Chinese companies have not applied for patents and 60 percent do not have their own trademarks. Many are "manufacturing", but few are "creating".

Most of the inventions in China's hi-tech field originate from foreign countries, including mobile communications, semiconductors, Western medicine and computer technology.

Statistics show that by March this year China had technology manpower of 40 million and 1.09 million engaged in development and research, ranking first and second place in the world. In 2006, China's input in science and technology development hit a record high of 294.3 billion yuan, making up 1.41 percent of the country's gross domestic product (GDP), compared with the average ratio of 2 percent in developed countries.

Nevertheless, China's innovation ability leaves much to be desired. It takes time, a favorable environment and an integrated industry chain to construct an intellectual property system, according to experts.