China : The IPR mafias

Introduction
When we say china the first thing which crosses our minds is the fact that china and its
fastest growing economy. Despite of such increasing population and various issues china
still is in the race of having an established economy . Various economist try to predict the
reasons behind the chinas success towards its growth in such a pace, few say it is the
engineering or the vast consumer market which they established globally. For the success
which china is a part of there is an very significant form of property which may not be
tangible but acts as an positive asset to the company i.e the intellectual property . Various
cases and reports from USA have showed how such an intellectual property being part of
china are mostly result of the theft which is protected under the umbrella of the local
municipal legislation of the republican of china. This research paper would highlight the
facts of the thefts of IP by relating it to the hard numbers of the IP thefts in the world and
how China is playing a mafia helping the country which also helps in empowering the
economy in many ways.
Analysis
The theft of intellectual property from the US is "unprecedented" and costing the nation
an estimated $300bn (200bn) each year. The study, led by former top-ranking officials,
said China was thought to be behind 50-80% of the theft. 1 This report was the US
commision repost which brought out some hard realties behind the theft of IP by china .
Intellectual property in todays world plays a very major role in not just the sector of
innoavtions but is directly connect to the economy of the country. The innovations of the
country leads to better business which results in better economic upliftment of the
economy of the country . IP are of various types few of them which generally get invoved
in the theft in the global businesses are
Copyright
Trademark
Patent
All the IPs which are involved in the cyberspace
The report This report was published on behalf of The Commission on the Theft of
American Intellectual Property by The National Bureau of Asian Research.Published
May 2013. by The National Bureau of Asian Research.Printed in the United States of
America. Gave a detailed checklist of IPs which are part of the theft and how the
municipal legislation of their country is protecting the people of the country for doing
such an act which increases the stocks and businesses of the companies in China but
leaving a negative impact of the economy of othe countries especially united states
.Protection of IP should surely be one of the key components of the countries legal
system . Few of the facts cited in the reports like India having very less IPR enforcement
which is leading to such a thefts internally and externally . India also has been criticized
for having laws which indirectly encourage the IP theft .

US report warns on China IP theft http://www.bbc.com/news/world-asia-china-22634685

China a country which is always recognized as a emerging economy with some of the
best strategies in the aspect of foreign relations in the matters of the businesses . The ever
growing economy is cosidered a bechmark and a inspiration to the countries who are less
developed or still developing countries . Most of the economist have various theories of
their miracle growth . t turns out that it is higher productivity that has performed this
newest economic miracle in Asia. Chinese productivity increased at an annual rate of 3.9
percent during 1979-94, compared with 1.1 percent during 1953-78. By the early 1990s,
productivity's share of output growth exceeded 50 percent, while the share contributed by
capital formation fell below 33 percent. Such explosive growth in productivity is
remarkable--the U.S. productivity growth rate averaged 0.4 percent during 1960-89--and
enviable, since productivity-led growth is more likely to be sustained. Analysis of the preand post-1978 periods indicates that the market-oriented reforms undertaken by China
were critical in creating this productivity boom. 2 when we talk about productivity it can
be complete co related to the amount of innovations in the country as better technology
helps in better and more protection . But is such an innovation actually owned by china .
In the globalising world after a very comprihensive research the fact of the china theft
have been highlighted . But what about the innovations and the and IPs which existed
before what about those IPs which lead to increase in the productivity and economic
status of china constantly and ended up giving a negative impact to other countrys
economy. Despite of having so many international convention related to intellectual
property, is the intellectual property save after it passes from the territorial jurisdiction
such problems may arose with the globalization of commerce.
When an IP theft happens in a country few of the basic looses a country suffers are as
follows:
Loss of revenue : The IP is directly related to the the wealth of the country in
todays world . The patents or know hows or any of the IPs which are actually the life
line of the company when are robbed by any other company . It would lead to a loss
of revenue as such a production of the product or IP will result to revenue to the other
company or the country which are the part of the theft as they lose their potential
consumers .In this case where US has blamed china for the theft the amout of losses
sustained by US are Hundreds of billions of dollars per year. The annual losses are likely to be
comparable to the current annual level of U.S. exports to Asiaover $300 billion. The exact
figure is unknowable, but private and governmental studies tend to understate the impacts due to
inadequacies in data or scope. The members of the Commission agree with the assessment by the
Commander of the United States Cyber Command and Director of the National Security Agency,
General Keith Alexander, that the ongoing theft of IP is the greatest transfer of wealth in
history.

Millions of jobs. If IP were to receive the same protection overseas that it does here, the American
economy would add millions of jobs.

A drag on U.S. GDP growth. Better protection of IP would encourage significantly more R&D
investment and economic growth.

http://www.imf.org/EXTERNAL/PUBS/FT/ISSUES8/INDEX.HTM Why Is China Growing So

Fast? Zuliu Hu Mohsin S. Khan

 Innovation. The incentive to innovate drives productivity growth and the advancements that
improve the quality of life. The threat of IP theft diminishes that incentive.3

The Role of China

Major mafiasAccording to the report published by the US government Between 50% and 80% of the
problem caused part of the theft are due to China which covers the major portion of the IP
theft . The major studies range in their estimates of Chinas share of international IP theft;
many are roughly 70%, but in specific industries with a broader range.
Positive impact of the chinas economy A core component of Chinas successful growth strategy is acquiring science and
technology. It does this in part by legal meansimports, foreign domestic investment,
licensing, and joint venturesbut also by means that are illegal. National industrial
policy goals in china encourage IP theft, and an extraordinary number of Chinese in
business and government entities are engaged in this practice.
Evidences
Yes china is the major mafia when it comes to the IP theft major countries should be
threatened by the chinas form of theft . The country has been an active participant in the
Theft of IP not just is US but as acted globally . For example in the case of US the report
submitted by the commission which acquitted some major facts and figures where not
concluded on the kind of growth china is enjoying die to innovation and technology but
some hard core evidences were taken into account before concluding china as the biggest
stake holder of the crime when it comes to the IP theft. Evidence were taken from
disparate sources like
The court cases-The portion of court cases in which China is the accused for the
stolen IP in the courts of USA
Reports by the U.S. Trade Representative - The people who are innolved in the
trade with china know the pros and cons of such a trade . The US trade
Representative have helped in making this detailed report which was a result of a
continuous research of years
Studies-Studies from specialized firms and industry groups studies sponsored by the
U.S. Government.
The legal system- There are also weaknesses and biases in the legal and patent
systems that lessen the protection of foreign IP. In addition, other policies weaken
IPR, from mandating technology standards that favor domestic suppliers to
leveraging access to the Chinese market for foreign companies technologies.
Real experiences - Bill Gates the CEO of microsoft corporation stated the gravity of
intellectual property theft in China, where he says Microsoft products get used 10
times as much as they actually get licensed he further quoted that "China has been a
3

IP Commission Report.

disaster if you say per unit of your product that gets used, how much do you get paid.
It's been over 10-1 versus the United States and even like 4-1 versus India. and so it
is a uniquely high piracy market.4
Media reports - China stands accused of conducting a decade-long cyber warfare
campaign against governments and companies in Southeast Asia and India.The
allegations come from security organization FireEye, which claims the attacks date
back to at least 2005, linking the perpetrators - dubbed ATP30 - to China. FireEye's
report, ATP30 and the Mechanics of a Long-running Cyber Espionage Operation,
identified targets as government and commercial entities holding "key political,
economic and military information about the region".5
Is India also a mafia ?
The IP commission report published by IP commission report conducted by USA
published in 2013 stated that the two most populous nations in the world, India and
China, suffer from inefficient judicial institutions, have weak criminal enforcement of
IPR violations, and seldom impose sentences that would rise to the level of deterrents for
IP crimes.6
Is is the reality India has not just been accused but also been warned for the misconduct
with the IP theft not just in US but in the world .
The United States Trade Representative (USTR) 2013 Special 301 Report reviews the
state of IPR protection and enforcement across the globe. In its most recent report on U.S.
trading partners, the USTR identifies 1 priority country (Ukraine), while including 10
countries on its priority watch list and 30 on its watch list. Most of these 41 countries
are the subject of a sternly worded paragraph on problems in their IPR protection and
enforcement. Beyond the special focus on Ukraine, however, 3 countries on the priority
watch list warrant more extensive comments: India, Russia, and China.
According to the USTR, the outlook for Indian protection of IP is discouraging, so much
so that there are serious questions about the future condition of the innovation climate
across multiple sectors and disciplines. Companies, for example, are challenged to
patent and defend already patented pharmaceuticals. If a recent case serves as a
precedent, companies from many sectors may be forced into compulsory licensing if they
wish to sell in the country but do not manufacture the product there.7
Such acquisition on India will not just defame India on the International platform but also
effects the business practices which have to be carried with other countries in respect to
the international trade and will also discourage foreign countries to bring in new
technologies which will directly effect the productiveness inside the country ultimately
resulting a fall in economy.
Can we actually compare such IP laws with China which are much more lenient
4

Bill Gates on CNBC: Why IP theft is greatest in China?

http://www.marlinwire.com/blog/bill-gates-on-cnbc-why-ip-theft-is-greatest-in-china
5
Were attacks across Southeast Asia sponsored by the Chinese government?
Written by Adam Shepherd http://www.itpro.co.uk/hacking/24380/china-accused-of-10-year-cybercrime-campaign
6
Commision report
7
Commision report

The IP commission report stated

India and China, suffer from inefficient judicial institutions, have weak criminal enforcement of IPR
violations, and seldom impose sentences that would rise to the level of deterrence for IP crimes
As per Indian laws the various IPs have certain penal provisions. Coupled with this are the provisions
of the IT Act and the CrPC giving teeth to the provisions of Trademarks and Copyright.The IT Act
defines cites the specific instance of such IP theft using Computer/technology and its penalties which
are both in terms of fines as well as imprisonment. The laws of the country both the Criminal
procedures and the Acts are being constantly amended to include newer definitions to contain such
illegal activities.8 Yes we have made laws for protecting the IPs internally and externally too. May be
India is lacking in the matters of enforcement but is picking up at a very fast pace .
Difference between India and China which the US should understand and draw a line i.e Chinas
development of economy is purely based on it technology. So the US can have a fair share of
suspicion as the Technological aspect with the medium of theft would have occurred in relation to
IP . But on the other hand India a country which faced an financial emergency which lead to LPG i.e
liberalization , privatization and globalization which came into picture in 1991 . FDI (foreign direct
investment) became the basis of the development where in here India can have a benefit of doubt as
most of the technologies were held by the parent company . Usage of Intellectual Property of the
human resources in the name of outsourcing or FDI have injured the potential of India .
Even if US is blaming India for the technological theft as claimed by US nearly 80% of theft is done
by china as stated by their own IP commission report . Other countries like Russia have also been
dragged down for doing an IP theft . Number of countries also are playing an part . Hence the
probability of India being a part in the Ip theft is less than 10% . This number can be said to be a by
product of the FDIs or Outsourcing and the usage of human resources i.e the human labor in India
because they are not as Costly as the human resource i.e the labor in USA .
Economy due to theft?
The Gross Domestic Product (GDP) in China was worth 9240.27 billion US dollars in 2013. The GDP
value of China represents 14.90 percent of the world economy. GDP in China averaged 1252.79 USD
Billion from 1960 until 2013, reaching an all time high of 9240.27 USD Billion in 2013 and a record
low of 46.50 USD Billion in 1962. GDP in China is reported by the World Bank Group.9
The productivity in China and the reciprocation of the economic growth have been all time high . The
production in china is solely because of the technology which is less costly than the actual
technology . There are certain products of china who have exceptional performance but are cheaper
than the similar product in the market . Ever wondered why? The reason lying behind it could be the
IP theft by china in relation to the technology . As once the said technologys IP is acquired the whole
process and the resources which are needed for the R&D processes or the licensing will not be
required . When such investments are ruled out it will directly result to a cheaper technology as the
investment which put in is much lesser than the actual profits which will be gained by such product.
Conclusion , recommendation and it global overview
Ip theft yes is grivious than the actual theft of property as actual theft can be recoverd in much a
simpler manner and trasing down such a theft becomes much easier . In the globalising world where
IP is the most imprtant factor for the economic growth . Such a protection should have a uniform law
where all the countries compel to it in the aspect of punishment . The IP commission report was
8

LexOrbis India: The Leak Points Last Updated: 27 September 2013 Article by Srinjoy Banerjee
LexOrbis http://www.mondaq.com/india/x/265580/Trademark/THE+LEAK+POINTS
9
China GDP http://www.tradingeconomics.com/china/gdp

published in 2013 by US which carried information about nearly 30 countries which were under the
scanner for the theft of IP Such a IP commission report should be submitted by all the countries to a
international authority like the WIPO . Penalization and enforcement should be taken more seriously.
Some of the valid recommendation by the commission which will reduce the risks involved IP are
Short-term measures incorporate the immediate steps that policymakers should take to stem the
tide of IP theft and include the following:
Designate the national security advisor as the principal policy coordinator for all actions on the
protection of American IP.
Provide statutory responsibility and authority to the secretary of commerce to serve as the principal
official to manage all aspects of IP protection. .
Strengthen the International Trade Commissions 337 process to sequester goods containing stolen
IP. The current 337 process is not fast enough to prevent goods containing or benefiting from stolen IP
from entering the United States. A speedier process, managed by a strong interagency group led by the
secretary of commerce, can both prevent counterfeit goods from entering the United States and serve
as a deterrent to future offenders. The speedier process would impound imports suspected of
containing or benefitting from IP theft based on probable cause. A subsequent investigation would
allow the importing company to prove
that the goods did not contain or benefit from stolen IP.
Empower the secretary of the treasury, on the recommendation of the secretary of commerce
Increase Department of Justice and Federal Bureau of Investigation resources to investigate and
prosecute cases of trade-secret theft, especially those enabled by cyber means.
Consider the degree of protection afforded to American companies IP a criterion for approving
major foreign investments in the United States under the Committee on Foreign Investment in the U.S.
(CFIUS) process. CFIUS assesses national security risk and national security implications of proposed
transactions involving U.S. companies. Adding an additional evaluative criterion to the review process
that assesses the manner in which a foreign company obtains IP would help improve IP-protection
environments.
Enforce strict supply-chain accountability for the U.S. government.
Require the Securities and Exchange Commission to judge whether companies use of stolen IP
Amend the Economic Espionage Act (EEA) to provide a federal private right of action for
tradesecret
theft.
Make the Court of Appeals for the Federal Circuit (CAFC) the appellate court for all actions under
the EEA. The CAFC is the appellate court for all International Trade Commission cases and has
accumulated the most expertise of any appellate court on IP issues. It is thus in the best position to
serve as the appellate court for all matters under the EEA. Instruct the Federal Trade Commission
(FTC) to obtain meaningful sanctions against foreign companies using stolen IP. Having demonstrated
that foreign companies have stolen IP, the FTC can take sanctions against those companies.
Strengthen American diplomatic priorities in the protection of American IP. American
Build institutions in priority countries that contribute toward a rule of law environment in ways
that protect IP.
pay long-term dividends in the protection of IP.
Develop a program that encourages technological innovation to improve the ability to detect
counterfeit goods.
Ensure that top U.S. officials from all agencies push to move China, in particular, beyond a
policy of indigenous innovation toward becoming a self-innovating economy.
Develop IP centers of excellence on a regional basis within China and other priority countries.
Establish in the private, nonprofit sector an assessment or rating system of levels of IP legal
protection, beginning in China but extending to other countries as well. One of the tools
Implement prudent vulnerability-mitigation measures.

 Reconcile necessary changes in the law with a changing technical environment. Both technology and
law must be developed to implement a range of more aggressive measures that identify and penalize
illegal intruders into proprietary networks, but do not cause damage to third
parties. Only when the danger of hacking into a companys network and filtration trade
secrets exceeds the rewards will such theft be reduced from a threat to a nuisance. 10

Yes china is the IP mafia which all the countries of the world should beware of but in one the
recommendation by the US IP commission report which stated
Greatly expand the number of green cards available to foreign students who earn
science,technology, engineering, and mathematics degrees in American universities and who have a
job offer in their field upon graduation. In too many cases, American universities train the best minds
of foreign countries, who then return home with a great deal of IP knowledge and use it to compete
with American companies. Many of these graduates have job offers and would gladly stay in the
United States if afforded the opportunity. USA uses resources of Various countries while doing trade
also uses good amount of human resources too in the form of labor .

Hypothesis:
IP theft in china is leading to havoc in the international market specially in USA . This
paper will establish the hypothesis of china being one of the leading mafia with the help
of some eye opening facts on how the laws are formulated in china which instead of
protecting the IPs encourages the people to be a mafia .
Kind of Research
The research is deductive as the said hypothesis is already established which will be
further explained in the paper.
Approaches to Research
This article is analyzed and understood in both the approaches i.e qualitative and
quantitative . This paper will analyze with the help of some relevant data collected by the
government authorities of different who are effected by such a mafia . It also has a
qualitative approach on how a law of the country and a weak regulation can make a
10

Commision report

human take advantage of property i.e the intellectual property which doesnot belong to
them for the monetary gains
Tools of Data Collection
Significance of Research: impact /outcome