Zhenqing Zhang argues that China does respect international intellectual property rights, but only in certain cases. In Intellectual Property Rights in China, he addresses the variation in the effectiveness of China's IPR policy and explains the mechanisms for the uneven compliance with global IPR norms.
2019 | 312 pages | Cloth $69.95
Law / Business / Asian Studies
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Table of Contents
Chapter 1. The Political Economy of Chinese Patent Legislation
Chapter 2. The Implementation of Chinese Patent Policy
Chapter 3. The Political Economy of Chinese Copyright Legislation
Chapter 4. The Implementation of Copyright Policy in China
Chapter 5. Chinese Trademark Legislation
Chapter 6. The Implementation of Trademark Policy in China
Appendix. Interviews Cited
A Tale of Two Intellectual Property Rights Enforcement Cases
Intellectual property rights (IPR) are highly controversial in China's rapidly expanding foreign economic relations. As such, I encountered enormous difficulty when requesting interviews from IPR professionals in China. Nevertheless, I also encountered some pleasant surprises. In early March 2008, my interview request received a warm response from Mr. Wu, a legal adviser with the IPR office of the branch office of The China No. 1 Pencil Company in Bilin City in East China's N Province. When I entered Mr. Wu's office, I was immediately attracted to a plaque bearing the title of "Model Unit of IPR Work" (zhishichanquan gongzuo xianjin danwei) hanging on the wall. Mr. Wu proudly told me, "We won this plaque with our hard work." He further added, "Maybe some good luck, too."
As one of the leading pencil producers in the country, Mr. Wu's company has survived and thrived on the enormous market need for double black pencils used for China's standardized tests. Standardized tests are important components of China's talent selection system. Indeed, the tradition can be dated back centuries. It has been estimated that the annual sale of pencils in China can reach as many as 100 million a year. The huge business opportunity has been very tempting for legal pencil producers and counterfeiters.
In May 2005, The China No. 1 Pencil Company identified a large amount of counterfeit double black pencils on the market in Bilin City. This discovery came only forty days before June 7, the day on which the Chinese National College Entrance Exam would take place. This was a very important day for millions of Chinese high school students and their families. If the knockoff counterfeit pencils were used in the exam, there was a very good chance that the scanner would not be able to read the answer sheet because the pencil lead would not be black enough, and thereby, the exam results of millions of high school students would be compromised. Mr. Wu and his colleagues reported this to the Economic Case Investigation Team of the Bilin Public Security Bureau immediately. He told the police, "It is not only our company's business interests that are at stake. That was absolutely unacceptable for the families of those affected high school students, either." The police had no reason to delay in taking action on this case. After a thorough investigation, the police identified an important suspect for the counterfeit activities: Shi Jiatao, a former employee of one of the branch factories of The China No. 1 Pencil Company.
With enough evidence to make a case, the police arrested Shi and his accomplices. According to the interrogation record, after resigning from his previous job, Shi, his wife, and their three friends discovered that producing and selling counterfeit pencils could be a highly lucrative business. Starting in February 2004, Shi purchased semi-finished pencils from East China's Shandong Province and produced a fake trademark. In only one year, Shi and his "team" had produced as many as nine million counterfeit pencils. With a factory based in N Province, the marketing network reached Shangdong, Zhejiang, Jiangxi, and Hebei. Altogether, the Bilin City police destroyed ten underground factories, confiscated three million counterfeit pencils, and arrested ten suspects during the investigation. In October 2005, the case was transferred to the Bilin City People's Court for criminal litigation. In June 2006, Shi Jiatao and his accomplices were sentenced to imprisonment ranging from three to five years.
The IPR enforcement case was one of the most important achievements in the history of the Economic Case Investigation team in Bilin City. The case was rated as one of the "top ten representative IPR enforcement cases" of the year, and the head of the team won a national-level prize. The case also left the Bilin police with a very positive reputation among the public, particularly the high school students and their families. Of course, Mr. Wu and his team won praise from the headquarters of The China No. 1 Pencil Company for their swift action to protect the company's business interests.
Although it has been several years since the successful enforcement, Mr. Wu is still very proud of the case. Toward the end of the interview, he told me, "This case was so successful because it was enforced under the right circumstances. It happened at the initiation of the right complainant, against the right counterfeiter, and, most importantly, at the right time. What do I mean by saying 'the right counterfeiter'? Think about it. If those stupid counterfeiters had infringed on a trivial company rather than ours, would our complaint have been so compelling? Moreover, if the case was not enforced before the National College Entrance Exam, would our company have won so much sympathy from the public?"
I did not ask Mr. Wu if he had reported any unsuccessful cases, although I was pretty sure that he did not have good outcomes every time. Another real-world example I encountered earlier indicated that the successful IPR enforcement case that Mr. Wu took pride in was an exception, rather than the norm, in China.
The beginning of the story is similar to the previous one. In spring 2007, Company C, an architecture material company also located in East China's N Province, detected counterfeit goods on the market in Tiqian City and reported this to the city's IPR enforcement agency. Through an investigation, the IPR enforcement officer discovered that the counterfeit goods were being produced by Company X, a smaller company located in the city's jurisdiction. The IPR agency immediately confiscated the counterfeit goods, which were altogether worth over 1 million RMB (about $160,000). Because the total value of the counterfeit goods far exceeded the minimum amount needed for criminal prosecution, the IPR enforcement agency was ready to bring the case to the city court for criminal prosecution. However, the Party Secretary of the small town where Company X was located lobbied the IPR enforcement team not to sue Company X because it was one of the major contributors to the township's tax revenue. With the help of one of the officials affiliated with the city IPR enforcement squad, I participated in several meetings among the township officials and the squad. The most cited reason by the township Party Secretary to protect Company X from legal punishment was that punishing Company X would reduce Q County's tax revenue and would eliminate job opportunities. These reasons did not convince the Tiqian City IPR enforcement team in the beginning. However, when township officials told the IPR enforcement officers that many workers with Company X were previously laid-off employees of several other local, state-owned enterprises and that economic punishment of Company X would drive those workers to lose their jobs again and thus endanger social stability, the IPR enforcement officers started to soften their position. The township officials' lobbying efforts received reinforcement from several female workers of Company X. When we stepped out of the meeting room after a lengthy round of bargaining that afternoon, several female workers of Company X approached us, grabbed the arms of the IPR enforcement officers, and appealed on behalf of the factory owner. The reason they cited was similar to that of the township Party Secretary: punishing the counterfeit factory would deprive them of their jobs and jeopardize their families' well-being.
The lobbying efforts seemed to be effective because afterward, the legal procedures slowed greatly. Before I left Tiqian City in mid-August, some "insiders" were already predicting that Company X was unlikely to face criminal prosecution and that there would be only slight financial punishment. In November 2007, as expected, Company C and Company X reached an "outside court reconciliation." According to this decision, Company X paid 50,000 RMB ($9,000) to Company C, a result that barely punished the trademark infringer.
Unlike the first case, which had received wide media coverage, the second case was never reported in the media. One can only estimate how many IPR enforcement cases in China are successful and unsuccessful due to the illegal nature of IPR infringement activities. Indeed, the Chinese government would not report accurate statistical data about the number of unsuccessful enforcement cases. However, even the Chinese top leadership does not deny the seriousness of the problem. During a national-level conference held by the Chinese State Council in November 2011, for example, then Chinese premier Wen Jiabao told the participants that "counterfeit activities remain rampant in some regions. IPR protection remains a difficult task."
Research Question and Book Argument
The contrast between the two aforementioned IPR enforcement cases indicates that China respects international intellectual property rights but only in certain circumstances. This invites the primary question that drives this book: why do effective IPR enforcement cases occur under only some cases instead of others, even though China's World Trade Organization (WTO) entry in 2001 was supposed to protect all intellectual property rights? To answer the question, we need to examine not only the Chinese state but also the Chinese society, particularly how it interacts with the Chinese state.
This book is about the ways in which the collaboration and competition among various state and society actors in China have shaped the evolution of the Chinese IPR policy. This, in turn, constitutes an important part of the enormous social and political change that China has gone through since the late 1970s. I argue that, aside from Chinese state actors, societal actors, such as domestic and foreign firms operating in China, domestic and foreign business associations, and Chinese consumers, play a significant role in shaping the country's IPR policy. Instead of passively following the state's direction, they vie for more influence in the making of IPR policies. They also try to affect the Chinese state to adopt policies in their favor.
I also argue that the degree of China's (non)compliance with IPR norms should be understood as the result of balancing two factors: the need for short-term economic gains by violating others' IPR and the aspiration for long-term, sustained growth by respecting IPR norms. Chinese IPR policy has emerged within the context of the legacy of the planned economy and an immature market mechanism. In this environment, only a small handful of elite Chinese domestic business actors are actively engaged in innovative activities, such as technological innovation, literary and artistic creation, and brand building. Most firms continue to rely on the input of natural resources and cheap labor to survive market competition. Although most foreign business investors in China hold IPR as a vital component of their competitiveness, Chinese economic nationalists interpret their business activities as exploiting Chinese wealth. As such, under some circumstances, the advocates of IPR norms—those few cutting-edge Chinese companies (such as The China No. 1 Pencil Company in the first case), along with foreign IPR holders—are strong enough to persuade Chinese government officials to comply with the IPR norms and achieve the country's long-term economic development goals. However, in many other circumstances, Chinese local governments (such as the township officials in the second case) protect IPR infringers and ignore IPR norms—even though they possess the enforcement capacity—because of the short-term political interests in raising tax revenue and creating jobs.
The story does not end with IPR enforcement per se. My book also situates the study of Chinese IPR policy against the greater backdrop of China's political and economic reforms. Not only do I study IPR enforcement across different issue areas, but I also trace the development of the Chinese IPR regime over time. I demonstrate that the struggle over IPR enforcement is not only merely an economic or legal issue but also a key manifestation of the gradual political reform in China. The IPR norms rest on protecting intellectual creation as private property, and private property constitutes one of the foundations of the Western concepts of civil society and the rule of law. However, in a country such as China that has been dominated for decades by socialist public ownership, the notion of private property has been nonexistent. Until recently, neither private entrepreneurs nor literary or artistic creators have existed as an independent social group in Chinese society. Protecting intellectual property rights also requires protecting important aspects of civil liberty, such as individual autonomy and the free flow of ideas, which, in turn, demands a thorough reform of the political and economic underpinnings of China's communist system. Therefore, in an important way, the evolution of the Chinese IPR regime provides a useful angle to study the evolution of China's political and economic reforms. China's partial compliance with IPR norms reflects the coexistence between an emerging capitalist market economy and one of the world's last remaining communist political systems. The uneven compliance level with IPR norms also reflects the differing thoroughness with which institutional reform has taken place in China.
Existing Explanations for Chinese IPR Policy
The rampancy of IPR infringement in China has attracted a lot of scholarly and political attention since the mid-1990s. Specifically, three dominant categories of theoretical attempts in international relations and comparative politics literature exist to address the adoption and compliance of international IPR norms: an external pressure argument, a culturalist argument, and a bureaucratic politics argument. I will evaluate these three strands of argument in this section. I argue that each of the existing explanations contains a grain of truth and provides a solid foundation for scholars' academic exploration. However, each of those theories falls short at some stage of the analysis. Instead of rejecting the explanations as wrong, I argue that they should be improved so that more attention should be paid to address the role of Chinese societal actors and their interaction with the Chinese state.
External Pressure Argument
The most straightforward and popular explanation of China's IPR policy has dwelled on the role of external pressure. Applying a realist perspective to the analysis of IPR, the external pressure argument holds that, in power-oriented trade diplomacy, the cost of noncompliance with the IPR norm is great; the global trade hegemon will impose punitive tariffs on countries considered serious violators. On the issue of IPR, the United States is the global hegemon in the world trade system and the largest producer of IPR-related products. Therefore, it has stronger bargaining power in IPR negotiations to push China onto the track it designs. Apart from bilateral pressure, multilateral pressure from international organizations such as the WTO also has pressed countries aspiring to join the WTO to revise their IPR legislation to meet the minimum standard of IPR protection required by WTO membership.
Like any popular theory, the external pressure argument certainly captures an important aspect of the making of Chinese IPR policy: the "push-behind" role of the developed countries, mainly the United States, to accelerate China's IPR legislation. However, the external pressure argument deserves improvement on the following fronts: first, while the external pressure argument offers a convincing explanation for the adoption of the IPR norm, it has little to say about the implementation of IPR norms. Indeed, while the Chinese government constitutes a major defensive line at the negotiation table, external pressure can hardly reach the local government and societal actors behind the Chinese border. It is through those actors that formal IPR agreements are translated into real policy outcomes. Second, and possibly more important, the external pressure argument cannot explain why the Chinese government has taken IPR protection measures under some circumstances even without pressure from foreign governments. In the two aforementioned fieldwork examples, the pressure confronting the Chinese state came from within the country. Moreover, even if foreign pressure works under some circumstances, it cannot maintain its presence all the time. On many occasions, foreign pressure influences Chinese decision making in the form of newly emerging foreign policy actors and newly developed ideas, values, and orientations. Therefore, researchers cannot treat China as a unitary state; they must open the black box of the Chinese state to examine the operation of Chinese IPR policy on the domestic arena.
Bureaucratic Politics Argument
In the early twenty-first century, scholarly attempts to open the black box of the Chinese state yielded significant progress. Most prominent among those works are those by Andrew Mertha and Martin Dimitrov. Instead of treating Chinese bureaucracy as a monolithic setup, this strand of argument posits that China's IPR policy implementation is handicapped by administrative and legal decentralization, which creates barriers to the central disciplining of local officials and creates opportunities for local protectionism for IPR infringement.
In his 2005 book, Mertha highlights the role of foreign businesses and private investigation firms operating in China, which he terms "lateral exogenous pressure." He argues that exogenous pressure creates interbureaucratic competition between different enforcement agencies, which, in turn, brings about higher volumes of enforcement in certain issue areas in IPR, such as a trademark. Building upon Mertha's work, Dimitrov expands his analysis from foreign-owned IPR to Chinese-owned IPR, from the volume of IPR enforcement to the quality of IPR enforcement, and from administrative enforcement organs to other enforcement organs, such as courts, customs, and the police, in his book published in 2009. For him, the quality of IPR enforcement should be measured by consistency, transparency, and fairness. He finds a low volume of high-quality enforcement in issue areas such as patents. However, the very high volume of copyright and trademark enforcement is unfortunately of low quality.
The bureaucratic politics argument is an important stride forward toward a deeper understanding of Chinese IPR policy. When checked with the real-world example above, however, one may find that further analysis should be made to make the bureaucratic politics argument a more complete explanation of the causes for the rampancy of IPR infringement in China.
First, while the bureaucratic politics argument analyzes the relationship between different IPR enforcement organs in China, more emphasis is needed to address the role of societal actors in the implementation of Chinese IPR policy. In the two real-world cases introduced in the beginning, for example, although the IPR bureaucracy conducted the raid, it had to rely on the IPR holder (The China No. 1 Pencil Company in the first case and Company C in the second case) whose business interests were being damaged by the counterfeit goods to obtain clues for enforcement. In fact, the enforcement squad of the Economic Investigation Team of the Bilin City Public Security Bureau consisted of only fifty-two members while the population of Bilin City was over one million in 2008. In the second case, the IPR enforcement squad of Tiqian City had forty-seven members while the population of Tiqian City was 750,000 in 2007. Nationwide, China employs 330,000 enforcement professionals in the country's IPR bureaucracy, the highest number in the world, but these enforcement professionals account for only a tiny portion of the 1.3 billion Chinese. It, therefore, would be impossible for enforcement officers to keep an eye on the consumption behavior of the Chinese populace even if they worked seven days a week, twenty-four hours a day. Since the business community's interests are most directly affected by counterfeits, the IPR enforcement bureaucracy mainly relies on them to provide information that will help them organize anticounterfeit raids. According to an IPR official, without the clues provided by the business actors, the IPR enforcement bureaucracy is both "deaf and blind." Therefore, while the bureaucratic politics argument is right in stating that politics at the local level determines the eventual policy outcome, it should go further to examine how the local societal actors interact with the local bureaucratic institutions.
Second, although part of the bureaucratic politics argument acknowledges the impact of societal actors—namely, IPR holders and IPR infringers—it has not sufficiently considered the power ratio between the IPR holders and IPR infringers. While it is true that the local protectionism forged between the local government and counterfeiters hinders the implementation of IPR policy, is it possible that under some circumstances (such as the first case), IPR holders have the upper hand over the IPR infringers and thus press the local government to take IPR protection measures? While short-term benefits, such as tax revenue and job opportunities from IPR infringers, help local government officials maintain or strengthen their power, what if the benefits come from the innovators or IPR holders? Is it possible that the benefits from the IPR holders are higher than the benefits from having IPR infringers and, therefore, the IPR holders have a stronger voice than the IPR infringers? If yes, what is the mechanism for this to happen? In order to answer these questions, it is not sufficient to explain how local protectionism is forged between the Chinese local government and IPR infringers. It is equally important, if not more, to examine the power relationship between IPR holders and IPR infringers and their relationship with the Chinese state. A clearer picture of that relationship can help to clarify when local protectionism of IPR infringement prevails and when it can be overcome by IPR holders.
Finally, the authors of the bureaucratic politics argument made innovative attempts to study the variation in the quality of IPR enforcement across different issue areas and different enforcement organs. However, in the above two real-world examples, both the successful and unsuccessful cases happened in the same issue area (trademark) and the same geographic region (N Province). A natural question arises: while it is true that effective enforcement is more likely to arise in issue areas where the state capacity is stronger (such as the issue of patent), what explains the variation between effective and ineffective enforcement in the same issue area, where state capacity stays constant? Is it possible that at least under some circumstances, the state willingly enforces IPR? Since 2002, the Chinese State Council Intellectual Property Rights Working Group has nominated the top ten representative IPR enforcement cases of the year. Out of the 100 cases from 2002 to 2012, 80 percent were trademark and copyright cases. According to an IPR official, "[During the selection of those representative cases], I understand that people may criticize us as picking up the showcases. They may even criticize us as 'acting' (zuoxiu). However, even though it is really acting, I think that it is good acting. We want to demonstrate to the public that even in those difficult issue areas, the situation is not that dismal. There is still hope." I find that even in those issue areas where state capacity is widely regarded as weaker (such as trademark), effective IPR enforcement is still likely to happen when the interests of the Chinese state, business actors, and the public are better aligned with one another. Societal actors do not just exert pressure on the Chinese state to enforce IPR. They also manage to persuade the state that enforcing IPR is to its benefit. While the bureaucratic politics argument deserves credit for offering a more thorough study of the variation of IPR enforcement in China, the analysis could be even more thorough if the variation across different Chinese societal actors was also incorporated.
As one of the pioneering researchers of Chinese IPR policy, William Alford stresses the importance of the historical and cultural contexts in which IPR laws operate in China. This culturalist argument attributes the ineffective enforcement of IPR policy in China to the prevalent ideologies in the country. Specifically, three historical-cultural factors are particularly responsible: the first is the legacy of Confucian culture, which regards copying others' work as a necessary and justified means to disseminate knowledge; the second is China's resentment of the developed countries' forcing China to adopt IPR laws in both the pre-1949 era and the 1980s and 1990s; and the third is the legacy of the planned economy era, when the results of any innovative activities were regarded as collective benefits for the public.
In the early twenty-first century, scholars further developed the aforementioned argument by investigating the role of Chinese consumer culture. Although not supported by sufficient empirical data, Gordon Cheung promisingly pointed out that the Chinese IPR issue should be understood as a "side effect of the general modernization and social changes of China." He argued that the rampancy of IPR infringement in China should be explained as a "culmination of consumer culture with rapid market development and poor administrative implementation of IPR protections." Fan Yang offered a more nuanced analysis of Chinese consumer culture by tracing the interactions between the country's efforts in indigenous innovation (zizhu chuangxin) and counterfeit culture. Putting the Chinese IPR issue under the scenario of globalization, Yang argued that IPR infringement in China should be understood as resulting from the unequal relationship between capitalism's global expansion and the Chinese local forces' endeavor to advance their economic gains. As part of the defiance against the global IPR regime, the "copycat brand" phenomenon, also known as Shanzhai, in China contains certain elements of creativity although disparaged by the mainstream IPR holders as counterfeiting.
It is true that political and consumer culture exerts an important influence on the formulation of Chinese IPR policy in the contemporary era, but the following significant facts should not be neglected when considering the culturalist argument: culture is constantly changing and is inevitably affected by the political and economic environment from which it originates. One can hardly argue that there have been no significant changes in Chinese political culture from before the late 1970s, when the reform and opening policy was adopted, to the beginning of the twenty-first century. Therefore, a simplistic understanding of culture cannot capture the complexity of culture as a multidimensional phenomenon.
Specifically, both Chinese IPR holders and Chinese IPR infringers share the same Confucian cultural tradition and operate their business in the same market environment, but why do they differ in terms of real IPR actions? If Confucian cultural tradition and market-driven consumer culture in China work against IPR in a uniform way, why do some business actors have a strong inclination to protect IPR while many others do not? Is it possible for Confucian culture to take on new meaning with the introduction of a market mechanism? Is it possible that different actors take different attitudes toward IPR protection because of their different positions in the market environment? The above two real-world examples demonstrate that attitudes vary among the different business actors: the response of IPR holders (The China No. 1 Pencil Company in the first case and Company C in the second case) was serious, but the IPR infringers (such as Company X in the second case) put profit making at the top of their agenda. The IPR holders certainly wanted to protect their intellectual property, but their complaints yielded different results. In that light, Confucian tradition and market-driven consumer culture alone are not sufficient to explain the different actors' attitudes toward IPR. A more sophisticated explanation is desired.
Likewise, many common Chinese people with strong nationalistic sentiments interpret IPR as a means of Western countries' economic invasion. However, the two real-world examples show that the common people's attitude toward IPR is more sophisticated than assumed. While the female workers of Company X in the second case believed that protecting IPR hurt their interests, the high school students and their families in the first case believed that IPR protection was vital to safeguard their interests. The contrast indicates that common Chinese people may interpret IPR in different ways due to their personal relationship with IPR. Researchers will thus invite the following questions: Is it possible that at least some Chinese people are less hostile to IPR because they benefit from observing the IPR norms? Perhaps more important, is it possible that the IPR norms are better observed under some circumstances because the market reform is more thorough and market order sounder? It is, therefore, important to unravel the mechanism that creates the different attitudes.
Culturalist scholars such as William Alford are also right in emphasizing the ideological legacy from the Mao era that works against the diffusion of IPR norms in China. However, China has engaged in market reform since the late 1970s. Although Communist hardliners never ceased to critique the market reform scheme harshly, it is unlikely that China will reverse the trend of economic reform. Therefore, the ideological legacy from the Mao era is not the only ideology that matters in the implementation of Chinese IPR policy. Other scholars such as Fan Yang enriched the culturalist argument by analyzing how various ideas interact with one another over Chinese IPR issue. Following that analysis, some other questions may arise: If the result of IPR enforcement is dependent on the competition among different ideologies in China, under what circumstances would one ideology take the upper hand over others? Which political and social groups in China are more likely to follow what kind of ideology? What is the power ratio among those groups when it comes to protecting IPR from being infringed? While the culturalist argument rightly brings ideational factors into perspective, further efforts are needed to study the much more pluralistic real situation on the ground.
Hence, my study advocates for an evolutionary perspective over time. For example, during my interview with a prominent IPR scholar with the Chinese Academy of Social Sciences (CASS), the scholar recalled the experience of his mentor, the late Professor Zheng Chengsi (1944-2006), who was respected as a forerunner of IPR studies in contemporary China. According to the scholar, "When Professor Zheng started to study IPR law in the 1980s, there was no meaningful IPR to infringe upon. The notion of IPR was literally nonexistent for most people in China. It was a hard time for him. When I started to study IPR law in the 1990s and educate the younger generation of IPR professionals in the early twenty-first century, my students and I met a lot of difficulty as well because IPR infringement became so rampant. The level of people's respect for IPR is certainly not as high as we desire. But at least the notion of IPR has been growing, which is very different from the situation in the early 1980s." During a follow-up interview with that scholar, he further added, "When we started to advocate IPR protection in the early 1980s, many people thought that we were crazy. They did not even bother to consult us on IPR affairs. Now nobody ridicules us as crazy, but I am obsessed with dealing with IPR complaints every day. The IPR cases that we deal with now are much more complex than before, with the stakes much higher. Different generations of IPR professionals, my adviser, myself, and my students, are encountered with difficult challenges during different phases, except that the challenges are of different nature." In the chapters to follow, I further examine how the evolution of China's political and economic reforms shapes the interaction among different ideas held by different state and societal actors, which, in turn, shapes the outcome of the implementation of IPR norms.
Rationale for Case Selection
Before delving into the empirical chapters, I would like to justify the case selection of this book. Two aspects of the "so what" question are addressed in the following section: Why is China chosen as the specific country under examination? Why is IPR chosen as the specific issue area?
According to John Gerring, a case study is "an intensive study of a single unit for the purpose of understanding a larger class of (similar) units." China is chosen as the subject of this study because of its uniqueness and its generalizability.
What comes first is China's uniqueness: with the world's largest population and one of the world's fastest growing economies, China is gaining increasingly more weight in the international political economy. The study of social and political phenomena in China, whose complexity is due a great deal to the country's cultural, historical, and demographic diversity, is able to enrich our understanding of the social world. Here it is also important to note that, with some exceptions, the implementation of IPR laws in China remains underexplored. To the best of my knowledge, in recent years, there have been only a few scholarly attempts to incorporate elements of the Chinese state, society, and foreign pressure to analyze China's IPR policy making and implementation in the past two decades.
Recognizing the uniqueness of the Chinese political economy, researchers should also notice the similarity between China and many other developing and postcommunist countries in the world. Like many other developing countries, in most cases, China regards the unauthorized diffusion of intellectual property as the most efficient way to disseminate knowledge that will eventually lead to economic development and power. As a latecomer to the stage of world economy, China's foreign economic relationship is often plagued by the country's disputes with its trading partners over IPR issues. The debates over IPR that China is engaged with have deeper implications for the study of the political economy of the developing world: whether the IPR notion is really helpful to build the developing countries' innovative capacity and beneficial for their economic development; whether the developing country should comply with the IPR norm in a wholesale manner, as advocated by the developed countries, or should selectively comply with parts of the norm according to its own concrete conditions; and how the interests of foreign investors, domestic companies, and the public should be balanced. Those questions are not unique to China. Recognizing the diversity of the developing world, the conclusions from the study of Chinese IPR policy can help us to achieve better knowledge of other developing countries that are also striving for a higher place in the global political economic setup.
As a postsocialist country, the traditional Chinese approach to IPR is the opposite of the Western capitalist assumption that property rights are the very cornerstone of the establishment of a market economy. Although China has embarked on economic reform since the late 1970s, the notion of protecting intellectual creation as private property remains a hot topic for debate. Although starting from the realm of IPR, those debates have significant implications for the deeper issue underlying the country's political and economic reforms: whether China should further establish private property as the cornerstone of its market reform, whether private entrepreneurs and literary and artistic creators should have a bigger voice in the formulation of the country's policy, whether an authoritarian political system can coexist with the call for individual innovation in a sustainable manner, and whether the encouragement of individual innovation can bring about further social and political liberalization in China. Therefore, the theoretical conclusions generated by the study of China's adoption and compliance with the IPR norms will also deepen our understanding of the political economy in postcommunist polities, many of which are confronted with similar tasks in their political and economic development.
Since the 1980s, there has been fruitful scholarship on the state-society relationship and its impact on the formulation and implementation of public policy in contemporary China. However, the scholarly community has not studied Chinese IPR policy through the lens of state-society interaction until recently. In international relations literature, much scholarly attention is devoted to the study of de jure compliance. The issue of de facto compliance remains the tricky part, but it is also what makes it the interesting part. Moreover, conventional wisdom holds that the study of IPR is strictly legal and therefore unrelated to the broader study of the political economy. However, I argue that the study of Chinese IPR policy goes beyond the IPR field and has significant theoretical and policy implications.
First, the study of Chinese IPR policy makes substantive contributions to the study of a developing country's compliance with international norms. As Cortell and Davis argued, two shortcomings in the extant literature on a domestic approach to international norm compliance should be redressed. First, insufficient attention has been devoted to the measurement of a norm's strength, legitimacy, or salience in a country's domestic political arena. Second, the mechanisms and processes by which international norms can or cannot attain domestic legitimacy remain underdeveloped. Risse et al. also pointed out that "[a promising avenue for future research will be] to study those cases in which formal organizational structure and political culture do not simply reinforce each other, but where tensions between the two appear." Instead of treating IPR as a monolithic set of norms, I demonstrate that they consist of multiple facets and therefore have multiple meanings to different actors. Instead of merely focusing on state actors, I demonstrate that the impact of societal actors is significant although not necessarily so obvious. My study also demonstrates that, instead of existing in a vacuum, the norm of IPR has to be welded with other types of existing ideologies to be internalized in the Chinese scenario. Those ideologies not only reverberate with the IPR norm but also compete with it under many circumstances. My fieldwork with ordinary citizens in China also illuminates the role of the public in a developing country's compliance with international norms. All of the above not only is relevant to IPR or China specifically but also adds to the general body of compliance literature.
Second, as an interdisciplinary study situated at the intersection of international relations and comparative politics, my project also adds to the comparative politics literature, particularly contemporary Chinese studies, by bringing into perspective an understudied policy area. As one of a small handful of political science studies of the Chinese IPR issue, my research demonstrates that Chinese IPR policy is more than just an economic or legal issue. Neither is it only a foreign policy issue. Instead, so many forces are at play during the making and implementation of IPR policy in China, both because of the complex nature of the Chinese political economy and because of the complex nature of the IPR norm itself. The study of Chinese IPR policy contributes to our understanding of some basic themes in comparative politics, such as the interaction between international and domestic politics, political and economic development, and the state-society relationship. Indeed, throughout my fieldwork, a significant number of findings were gathered from my conversations with people on the ground. My interviewees kept urging me to bear in mind the following important questions while studying the Chinese IPR issue: (1) Through the window of Chinese intellectual property rights policy, what can we infer about the achievements and limitations of China's reform and opening scheme starting from the late 1970s? (2) While domestic reform (gaige) and opening China to the outside (kaifang) are always juxtaposed with each other in Chinese official policy discourse, what is the relationship between the two? (3) How does opening to the outside affect China's domestic reform and vice versa? Moreover, during my interviews, a considerable number of Chinese professional elites pointed to the nonobvious link between the issue of IPR and the seemingly unrelated issue of China's political liberalization. In that sense, IPR provide an excellent window to view important themes in the study of international relations and comparative politics as the influence of international norms on domestic politics, the central-local relationship, the growth of civil society and its interaction with the authoritarian state in a transitional economy, and the establishment of rule of law in China, a country that does not have that kind of tradition historically. As far as I know, it is not until recent years that researchers started to explore that orientation, so my study adds a venue for new scholarship to grow.
The policy significance of the Chinese IPR issue is fairly straightforward: innovation constitutes the key aspect of a country's economic competitiveness. With an annual growth rate of 20 percent since 2001, China's total trade volume reached $4.17 trillion in 2013, becoming the world's largest trading power in goods and the second largest trading power in service (only next to the United States). At the same time, however, China has continuously involved itself in trade disputes with the existing powers in the world trade system, mainly the United States. Both China and the United States agree that the issue of intellectual property rights is among the top three most controversial points in the bilateral trade relationship, with the other two being the exchange rate of Chinese currency and the excessive volume of the U.S. trade deficit with China. It is also agreed that the issue of the trade deficit is closely related to intellectual property rights. In all the strategic and economic dialogues between China and the United States from 2006 to the present, the IPR issue has never missed a place on the negotiation agenda. As well, it can be safely predicted that this issue will continue to affect the fast-expanding U.S.-China bilateral trade in the foreseeable future. Therefore, the policy relevance of IPR policy in China goes beyond the legal realm and extends well into other important areas, such as politics, trade, and economic development.
A comment by a Beijing-based IPR scholar aptly summarizes the implications of the IPR issues under study:
U.S.-China IPR disputes should not only be understood as happening between a group of people debating with each other across the negotiation table. Instead, that is part of the ongoing bilateral interaction between the world's biggest developed country and the world's biggest developing country, between the world's biggest democracy and one of the world's few remaining communist countries, and probably between the world's incumbent superpower and its ambitious possible successor. A thorough knowledge of that issue can deepen our understanding not only of Chinese and probably American political economy, but also the bilateral relationship between the two countries, which is bound to profoundly influence each other and, quite likely, the entire world.Chapter Layout
This book aims to unravel the complexities of how various state and societal actors in China compete and collaborate in shaping China's IPR policy. My introduction lays the theoretical foundation for this book with the comparative literature on IPR enforcement and presents the book's main theoretical claim. The six empirical chapters following the introduction are grouped into three parts, respectively addressing China's difficult journey to adopt and implement global patent, copyright, and trademark norms. It is noteworthy that, at least during the early stage of adoption, the Chinese government was a "strategic ratifier" rather than a "sincere ratifier." That is, the Chinese government adopted IPR norms into its domestic legislation not for the sake of enhancing IPR protection but more because it wanted to avoid direct trade conflict with the United States in the early 1990s and to ameliorate its bid for WTO membership in the late 1990s. Thus, although Chinese IPR legislation had already reached the minimum standard set by the WTO during the country's entry in 2001, obstacles remained when it came to the implementation stage.
The first part, consisting of Chapters 1 and 2, focuses on patents, which mainly protect technological and industrial innovation. Chapter 1 examines the evolution of China's patent legislation while Chapter 2 examines the implementation of Chinese patent policy. Instead of rehashing Chinese patent law from one article to another, Chapter 1 examines how various domestic and foreign political/economic forces have led the country's patent regime to its present state. I demonstrate that there was already an incipient notion of protecting technological innovation in China even before the country started its market reform in the late 1970s. Although long suppressed by the dominance of socialist public ownership, Chinese patent legislation gained momentum in the early 1980s. The primary driving forces behind those moves were China's growing recognition of scientific invention and technological innovation as private property and the need to attract foreign investment and technological know-how. Using newly acquired empirical data, I demonstrate how China's expanding interests in foreign trade and international technological exchange helped to overcome the opposition from the antipatent camp in the Chinese government in the 1980s and the early 1990s. Marked by China's WTO entry in 2001, Chinese patent legislation came into full compliance with the global standard.
Rather than focusing on only the patent enforcement bureaucracy, Chapter 2 situates Chinese patent policy against the greater backdrop of Chinese science and technology policy. I argue that China's science and technology reform starting in the late 1970s has produced mixed results. On one hand, an incipient market mechanism was introduced to China's applied research sector; on the other hand, the legacy of the planned economy still continues to influence innovation activities in China. That contributes to different attitudes of Chinese societal actors: both foreign IPR holders investing in China and elite Chinese private companies sincerely adhere to the IPR norm since the norm upholds rewarding their innovation activities with market benefits. But state-owned companies are less enthusiastic about innovation because their profits are backed by the state. For the majority of small- and medium-sized private companies that cannot afford to invest in expensive research and development activities, IPR is nothing more than a luxury for the big business players. The small- and medium-sized enterprises constitute the majority of IPR violators. Therefore, it can be reasonably concluded that successful implementation of patent policy under some circumstances in China should be attributed not only to efficient coordination between various enforcement branches, as the existing literature argues, but also to IPR holders' active efforts to internalize IPR norms into the government's policy practice for the government to willingly enforce them.
Consisting of Chapters 3 and 4, the second part focuses on how China adopted and implemented international copyright norms. Chapter 3 argues that the Chinese copyright regime is embedded in the country's ideology and propaganda policy and is shaped by the combination of domestic demands and foreign pressure for copyright protection. After discussing the intense competition between the procopyright camp and the anticopyright camp within the Chinese government, I demonstrate how the former overcame the opposition of the latter, particularly during the 1990s, and convinced the Chinese top decision makers to integrate into the international copyright regime. I also demonstrate how external pressure hastened the steps of Chinese copyright legislation. That is, both bilateral pressure from the United States and multilateral pressure from the WTO reinforced the already existent, albeit not so powerful, domestic appeal for enhancing copyright protection. Toward the end of Chapter 4, I describe how China's gradually maturing copyright regime during the early twenty-first century witnessed the growing influence of the country's literary and artistic creators, an important part of China's burgeoning civil society.
Chapter 4 moves on to the implementation of Chinese copyright policy. As in the discussion of implementing Chinese patent policy, I do not examine the country's copyright policy in a vacuum. Instead, I put Chinese copyright policy within the greater landscape of the interaction between market reform and the evolving Chinese propaganda and ideology policy. Specifically, my findings suggest that, in making Chinese copyright policy, the Chinese government pursues multiple policy goals: the top priority is to ensure stability in the realm of ideology and cultural life in the country so as to create legitimacy for the rule of the Chinese Communist Party. The second priority is to generate economic benefits from literature and artistic creation as part of the broader scheme of building copyright industries in China. Protecting the economic and moral rights of literary and artistic creators only comes as the third priority. In practice, the first two goals, particularly the first one, often override the third goal. My findings also suggest that the development of the Chinese domestic copyright industry is constrained by the Chinese propaganda state despite three decades of market reform. Specifically, foreign and private capital are allowed only limited access to the production and distribution of copyrighted works in China; the censorship mechanism still shackles the creativity of Chinese copyright owners. Therefore, the Chinese copyright industry possesses neither sufficient financial resources nor legal experience to conduct antipiracy activities. In addition to the economic loss caused by copyright piracy and the challenges posed by the foreign copyright industry, Chinese copyright holders must work within the shackles imposed by the Chinese government. Last but not least, my findings suggest that the majority of the Chinese public does not possess a sufficient level of sympathy for the IPR norm despite the government's repeated advocacy campaigns. Except for some social elites, the majority of the Chinese mass public views the Chinese government's concession on IPR negotiations as betraying China's national interests; like some local officials, they tolerate or even praise IPR infringement as a patriotic act against what they call "foreign economic invasion." Copyright infringers in China not only benefit from an extremely high economic return from piracy but are also backed by consumers who have little sympathy for copyright laws. Only under some rare circumstances could the Chinese copyright bureaucracy win the support of the mass public and successfully enforce copyright norms.
Chapters 5 and 6 focus on the third subcategory of IPR norms—namely, trademark. Specifically, Chapter 5 unravels the close relationship between the evolution of the Chinese trademark regime and its gradual acceptance of the legitimacy of the market economy. I argue that the Chinese trademark holders can advance their agenda with the support of their sympathizers within the Chinese government even though China remains an authoritarian country. I also identify how the U.S.-China IPR negotiation in the 1990s and China's WTO entry negotiation in the late 1990s provided much-needed insights for the Chinese trademark professionals in revising the country's trademark legislation. This ideational change informed Chinese trademark legislation even though trademark was not a salient issue in the negotiation agenda with the developed countries.
Chapter 6 discusses the implementation of Chinese trademark policy. I found varying levels of sympathy for trademarks among different types of business actors in China: first, foreign companies and elite Chinese private companies strongly adhere to trademark protection as an important means of safeguarding their competitiveness. Second, although state-owned companies occupy important positions on the ranking of trademark values in China, the value of their brands lies in their state-sponsored profits rather than in market competition. Therefore, they merely pay lip service to the norm of trademark. Third, millions of small- and medium-sized private enterprises are the major contributors to China's position as the world's leading manufacturing power, known as the "world's factory," but their manufactured goods are not independent brands. They either act as the processors of the products already designed by foreign trademark owners or rely on counterfeiting to take a free ride on the good name of established brands. I also trace the mechanism that contributes to the varying levels of trademark sympathy. My findings suggest that different business actors' attitudes toward trademark should be attributed to their differing strategies in building brand recognition and applying brands in their market competition. Although China has installed a complete set of quality control policies since the late 1970s, the policies have been implemented unevenly and resulted in different outcomes among different sets of Chinese business community: foreign enterprises and elite private enterprises comply with the quality control regulations to ensure the quality of their products, but most small and medium-sized private enterprises regard profits rather than quality as their first priority. Moreover, due to the immature nature of the Chinese market mechanism, Chinese domestic enterprises, with the exception of some elite ones, mainly rely on unfair market competition practice, such as price warfare or government connections, to gain consumer recognition. The above mechanism contributes to differentiated levels of brand value among different sets of business actors, which, in turn, contributes to their different attitudes toward trademark. Finally, Chinese consumers' attitudes toward trademark play a significant role as well: my findings suggest that, in purchasing branded products, most Chinese consumers care more about commodity price and quality rather than the authenticity of brands. Chinese consumers' indifference to trademark creates a market for counterfeit goods to grow and survive rounds of government-organized anticounterfeit campaigns.
My conclusion summarizes the theoretical argument and empirical findings. I also offer a series of policy recommendations. I situate my study in the broader context of the interaction between the global political economy and China's domestic political and economic reforms. The conclusion argues that the Chinese government does not enforce IPR just for the sake of it. Their real purpose is to promote the Chinese economy from the early industrialization stage, relying on cheap labor and natural resources, to a knowledge-based, innovative economy. The IPR norm does not enter a vacuum when it enters the country. Instead of following an IPR policy formulated by the central government in a concerted manner, various state and social actors have chosen parts of the IPR norm they consider useful to advance their own political and economic agendas. It is fair to say that there are various IPR policies, rather than one monolithic IPR policy, at work. The outcome of IPR policy implementation is dependent on whether a social consensus can be built to align the interests of different actors—namely, foreign business, domestic society, and the Chinese state. The more successfully that consensus is built, the better the IPR norm is complied with; the more conflicted the relationship among the three is, the less likely it is that the IPR norm will be implemented. As an unintended consequence, the compliance with IPR norms yields deeper implications that extend beyond the realm of IPR. Typically regarded as an important means for industrial upgrades, the growth of IPR in China has also awakened various societal actors' awareness of their own economic and moral rights of their intellectual creation. While the formation of social consensus is essential for high-quality IPR enforcement in the short run, the building of a mature market economy based on more thorough political reform is the essential means to combat IPR theft in China.
Methods and Fieldwork
Since this book emphasizes understanding an interpretive project—that is, how a Western-originated international norm has taken root in China—the data collected for this book are mostly qualitative. The empirical data in this book were gathered from multiple research trips across the Pacific Ocean between May 2007 and January 2014. When I was not in China, I maintained close contact with my interviewees. As my book project proceeded along, I updated the empirical data through emails, phone and Skype conversations, and online chats. Between 2007 and 2010, my field research was conducted in seven provinces or municipalities in China: Anhui, Beijing, Jiangsu, Shanghai, Guangdong, Fujian, and Hong Kong. After 2010, I expanded my fieldwork sites to two inland provinces in China: Shaanxi and Henan.
The fieldwork sites were not randomly chosen. My fieldwork sites covered major geographical regions of China. They varied from the affluent coastal provinces and municipalities (Guangdong, Jiangsu, Shanghai, and Fujian) to the less affluent inland provinces (Anhui, Henan, and Shaanxi), from Beijing, the Chinese capital right "under the emperor's feet," to Hong Kong, the Special Administrative Region (SAR) that is still heavily influenced by its British colonial legacy. This large and heterogeneous sample enables me to develop a comprehensive general picture of the making and implementation of Chinese IPR policy that represents the national pattern. In my original research design, I planned to examine regional variation of support for piracy and counterfeiting and variation by type of products and industry. Findings from my field research, however, demonstrate a much more sophisticated situation. That is, even in the more economically affluent provinces, IPR enforcement can be rendered less effective if the enforcement bureaucracy cannot successfully cooperate with the IPR holders. Even in the less economically affluent provinces, IPR enforcement can reap an effective outcome if the local state can be persuaded that protecting IPR is in their interests.
The empirical data gathered from fieldwork consist of three major components: interviews, archival research, and participant observations. To determine the attitudes of people with different relationships with IPR, I conducted 152 in-depth interviews during my fieldwork trips, including 99 formal interviews and 53 informal ones. Covering all administrative levels of China, the formal interviews were conducted with government officials ranging from one former vice chair of the Chinese National People's Congress and three ministerial-level officials involved in the top Chinese IPR policy, circling all the way down to village-level officials, IPR lawyers and judges, domestic and foreign business professionals, and IPR scholars associated with Chinese think tanks and major universities. Ranging from thirty minutes to two hours, my formal interviews mostly took place in the offices of my interviewees. Some of them were conducted at the dinner table, a place where many Chinese people discuss business matters. I interviewed people with a variety of occupations, including twenty-six interviews with IPR officials at different levels, twenty-nine with domestic and foreign business professionals, nineteen with IPR lawyers and judges, and twenty-five with IPR scholars.
During the early stage of my research, I approached my interviewees through personal connections. As I developed a deeper knowledge of Chinse IPR affairs and my research progressed, I managed to develop my own professional network in the Chinese IPR circle and approached my interviewees by attending academic conferences and government/business meetings. I also started to be more "picky" with my interviewees, based on the level of their expertise and the willingness to share their information. For most of the interviews, I started with a set of general questions, but many interviewees ended up leading the conversation toward the directions that interested them most. That often resulted in unexpected findings that helped me to overcome the selection biases that I originally had. As my research moved on, those interviews with unexpected findings often proved to be most helpful and thus are more frequently quoted in the book chapters to follow. Not all my interviewees welcomed me. Some bluntly asked me, "Are you going to be pro-China or pro-U.S. in your book?" when they encountered what they considered to be thorny questions. Some rejected my interview requests rudely on the phone. Some even questioned the necessity to conduct research on Chinese IPR policy. While not all my interviews succeeded in producing ideal outcomes, the negative interview experiences helped me to get a more complete picture of Chinese IPR policy at the grassroots level and supported my theoretical argument from a different angle.
While formal interviews are important sources for this study, informal interviews play an indispensable role in supplying necessary information. I conducted informal interviews with sellers and buyers of counterfeit/pirated goods, most of whom occupy much lower social positions than the IPR professionals mentioned above. While most of the informal interviews happened in urban areas such as Beijing, Shanghai, and Nanjing, most of the interviewees were migrant workers from inland provinces such as Anhui and Henan. Unlike my formal interviews, the informal interviews were conducted on the street, in stores selling counterfeit and pirated goods, and in basement apartments rented by peasant workers. As a native of East China's Anhui Province, I conducted informal interviews in the local dialect. This proved to be an effective tool to shorten the distance between the interviewees and me as the interviewer. That is, I detected a higher level of trust from street peddlers who were from the same home province but met in a distant urban area such as Beijing and Shanghai. This made them more candid in relating to me their experiences in selling pirated and counterfeit goods. Under those informal circumstances, I could get information that my interviewees would otherwise not divulge on formal occasions.
My fieldwork did not isolate interviews from archival research and participant observations. Instead, they were often combined for the purpose of making better sense of the data acquired. During my fieldwork, I accumulated over 1,000 IPR-related journalistic reports, yearbook articles, leadership speeches, and Chinese government newsletters, some of which were for internal circulation only. Most of those documents were published between 1990 and 2014, with some published in the 1980s or even the 1950s. Admittedly, the Chinese media are still controlled by the government, so many of the reports are filled with bureaucratic jargon, and in many cases, the information is purposefully distorted. I mainly employed the following cross-examination methods to excavate useful information from the bureaucratic jargon. First, at the end of many interviews, my interviewees helped me "read between the lines" to cross-examine the archival documents that I had collected. On the other hand, the archival data also helped me verify the validity, or the lack thereof, of the information gathered from my interviews. Second, consciously aware of the sources of the journalistic reports, I compared and contrasted the information published by different media outlets. For example, the IPR reports from People's Daily, the mouthpiece of the Chinese Communist Party (CCP) Central Committee, represents the stance of the Chinese Central Government and State Council. Checking that newspaper with the publications of the various ministries in Beijing, the various provinces, cities, or even counties at the local level and the various domestic and foreign business organizations operating in China, I was able to identify important differences in the attitudes toward IPR held by the Chinese central government and the local government branches. That process of cross-examination was very exhausting, time-consuming, and often frustrating, but it turned out to be an extremely rewarding learning experience.
In August 2007, I participated in several meetings between IPR enforcement officials and several patrons of counterfeiters in a town in N Province during the postraid period. In July 2008, I participated in an anticounterfeit raid conducted in Jiangsu Province. These opportunities made me aware of the political and economic dynamics hindering the implementation of IPR policy at the local government level. Moreover, in the fall of 2007, I had the opportunity to share a basement apartment in Beijing with several street peddlers. During the three weeks of living with them, I observed the workings of a significant portion of the underground pirated/counterfeit goods market: the buying and selling of pirated/counterfeit goods, the cat-and-mouse game between street peddlers and law enforcement officials, and part of the distribution network of pirated/counterfeit goods. After that, I maintained contact with them and visited them for further interviews during the follow-up research trips. As far as I know, this level of access for researchers on Chinese IPR issues, from China's top-level officials to street peddlers selling pirated and counterfeit goods, is very rare.