China Stalls IP Reform at Its Own Peril

Sir James Dyson: China Stalls IP Reform at Its Own Peril
BY JAMES DYSON
The Financial Times
September 4, 2012

China’s rise as an industrial powerhouse is sweeping aside tired stereotypes. It has long been considered the home of cheap, mass-assembled goods. But now the country no longer wants to be seen as the workshop of the world. It wants to become the world leader in invention, patents and ideas. Unfortunately, China’s failure to keep its intellectual property law up to speed threatens to undermine its genuine progress, at home and abroad.

China can and will be an invaluable trading partner to both the U.S. and the U.K. But it cannot afford to fail to protect the ideas that we’ve spent years developing. It’s time to stop tiptoeing around the issue. Regardless of the offender, patent infringement is theft, pure and simple. And without punitive or regulatory action it undermines invention globally. China has promised reform. But that reform needs to be delivered.

Theft of intellectual property isn’t just confined to Rolex watches and Louis Vuitton bags. It includes everything from iPads to entire IKEA stores. Technology and ideas that are stripped apart, mimicked and mass produced. Many people know what they’re buying into when they purchase cheap knock-offs. But with a cocktail of fake branding and photo-shopped packaging, an increasing number won’t — not until a motor cuts out, a dial falls off or something worse.

It’s a growing problem. According to the Alliance for Gray Market and Counterfeit Abatement, as much as 8% of Chinese GDP comes from the sale of counterfeit goods. And up to 10% of all high-tech products sold worldwide are counterfeit. Those are staggering numbers.

Understandably, international companies are applying pressure to prevent knock-offs from flooding the market. For high tech companies China is an increasingly important trading partner. But it becomes an uphill battle if unscrupulous companies can undercut the millions required to invest in technology. The U.S. International Trade Commission reported that U.S. IP-intensive firms operating in China reported losses of approximately $48.2 billion in sales, royalties, or license fees due to IP infringement in China in 2009. And China is not impervious to domestic copycats, either.

Dyson invests heavily in research and development. We have growing team of 1,300 engineers whose job it is to develop new ideas. R&D is not only expensive, it is inherently risky. And it becomes doubly so if you can’t depend on patents to protect your idea. We’ve seen 100 different infringements of our fan appear in 20 countries. And we have to pursue each copycat separately. Evidence can be impossible to track down. Sometimes it can be hard to even find the manufacturer. One recent copycat used a public subway station as its trading address.

I’ve fought court battles over my inventions before. And many of the recent cases we’ve fought have been against Chinese owned and run brands, often in Western guises. We’ve had some victories of late — but it’s an expensive process. Aggressively protecting patents is essential to conserve an edge over competitors and to protect our investment in research and development. It’s frustrating and costly though; we’ve spent over $1.5 million in China alone battling rip-offs. For young inventors and start-ups, having your patents plagiarized is a potentially ruinous state of affairs.

It is of global interest to dam the infringement floodgates. Last week British companies including Dyson and members of the British government met with Chinese representatives. In the summit, the commissioner of China’s State Intellectual Property Office acknowledged that IP infringements in the country are of concern but insisted that they’ve made fantastic progress over recent years.

They’re right — but that progress lags well behind the country’s meteoric growth. Dyson has been waiting three years for our patents to be approved as Chinese companies seemingly jump the queue. The country benefits from strict intellectual property rules abroad, but fails to sufficiently police its own offenders at home. Chinese representatives have insisted there are ways to fast track a patent when an infringement occurs. Our experience is to the contrary but we look forward to resolving these issues. This dialogue is encouraging, but it must be backed by action. Western countries and the World Trade Organisation have pushed China to institute reforms and insist on a level playing field. Continued discussions with world leaders and members of industry will help plot a course to an open and fair patent system in China.

The Chinese government knows that the real profit is in developing world class technology. And its commitment to doing so dwarfs efforts elsewhere. Chinese leaders are looking to increase the amount of GDP they spend on R&D to 2.5% and double the number of patents they grant by 2015. Home grown invention is a good thing. And Chinese companies expect patents to be enforced around the world. The problem is that the protection isn’t reciprocated.

China can and will be an invaluable trading partner to both the U.S. and the U.K. But it cannot afford to fail to protect the ideas that we’ve spent years developing. Bilateral trade depends upon it. If we don’t work toward real reform, we will jeopardise the value of research and development globally. And along with it the jobs, wealth and exports they create.