Chinaโs counterfeit culture has earned the country the reputation of being a place where execution trumps innovation and no design is sacred.
That doesnโt mean that Chinaโs intellectual property (IP) industry is a total free-for-all. In fact, the countryโs State Administration for Industry and Commerce (SAIC) has started cracking down on counterfeit goods, particularly those found on e-commerce sites such as JD.com and Taobao. Last year, the SAIC ran a campaign from July to November to purge counterfeit goods from online platforms, holding platform operators responsible.
Itโs an important direction for Chinaโs e-commerce giants to move towards, especially as more Chinese companies eye overseas markets, which are less tolerant of fake goods and copyright infringements. An increasing number of Chinese companies are also looking at IP monetization opportunities in film, gaming, and other content. In addition, more and more Chinese companies are leveraging patents to take down and challenge global competitors, such as Apple and Samsung.
Protecting IP rights (IPR) is a good business for companies like The Intellectual Property Group, which works with IP owners, such as international brands, and ISPs (Internet Service Providers) to resolve IPR violations that happen online. Most of the work is technical, and the company is even investing in its own SaaS platform to standardize and automate more of the IP takedown and mediation process. However, The Intellectual Property Group will also visit factories and physically track down violators. In Chinaโs developing IP industry, offline negotiations are sometimes unavoidable.
TechNode sat down with Dean Arnold, the co-founder and director of The Intellectual Property Group, to glean insights on the challenges and dynamics of Chinaโs IP industry.
1. What is one of the major pain points of the IP industry?
The fact that there are 600,000 web hosts in the world, [and] 1,500 domain name registrars. We estimate thereโs [โฆ] more than 1,800 [General Merchandise Value] platforms globally.
This industry doesnโt have standard behaviors or [a] platform. [โฆ] You have to reach out to every one of them individually. You have to track them individually. They all have different policies and formatting requests. Most of them have none. Most of them have no IP policies or procedures in place. For a lot of them youโre lucky if you can even find their ID and email address to contact them.
2. How is The Intellectual Property Group able to physically track down IPR violators in China?
The guanxi and the relationships. I used to think that was so cliche but time and time again, Iโve seen it. It makes a big difference.
Even though [โฆ] thereโs a lot of fraud in this industry, and even though [โฆ] part of our appeal is weโre an international company and we share the same ideals, [โฆ] even when youโre acting with all the best intentions, [โฆ] you still canโt achieve legitimate results [โฆ] without being able to call someone and have contacts, or police being cooperative. Itโs about relationships.
[Also], we have a team. Itโs a seriously hard-nosed job. The guy that runs that department for us [was] an ex-police[men] for nine years.
3. Taobao gets a lot of flack for counterfeit goods, but what about WeChat stores (ๅพฎๅ) on WeChat?
Anyone can sell whatever they want on WeChat. [โฆ] Itโs literally as easy as getting on, buying a SIM card anonymously, creating an account on a phone, and getting to know people, getting involved in groups.
You canโt really hack that process โ itโs a bit of a slow uptake โ but then you can list photos everyday in your moments, and [โฆ] youโre reaching people regularly. Youโre completely anonymous and you can take a payment right there, or you can move to another platform like Weibo.
Letโs say you find a potential supplier you want to work with on Taobao. You ask for their WeChat, they give you their WeChat, [and] you deal with them directly. You canโt trace them back. Thereโs no cooperation [from ISPs] to trace them back to an actual person. [It] would have to be a pretty grievous, something really concerning safety like pharmaceuticals or something sensitive, and then you could probably expect the cooperation of the ISPs then but for [everything] else, no chance.
4. Why is now a good time to build a platform to help protect IPR?
Thereโs going to be be billions more people coming online and theyโre going to come from developing countries. Theyโre less sophisticated consumers when they get online, and they donโt have money. When they get online theyโre going to buy fakes, theyโre going to steal content. Itโs as simple as that.
In the new economy, e-commerce is going to surpass physical retail. [โฆ] If you can stop people from trading online, they canโt reach new business. And as a global economy, they definitely canโt reach international. If theyโre only reaching local communities through physical outlets, theyโre not serious players and theyโre not a big headache for the IP owners.
5. Whatโs something youโve learned from working in this industry?
Hereโs the big secret in the business: Chinese buyers are not stupid. Theyโre extremely smart. Theyโre extremely skeptical. Their whole life theyโve been dealing with fakes [โฆ] and theyโre very, very savvy. Everyone knows that you donโt go to Taobao to buy a [โฆ] genuine luxury handbag. If youโre going there to buy luxury handbag, you probably want a fake one.
I think in foreign countries, people get duped into buying counterfeits a lot more. [โฆ] Theyโre kind of protected from that [..] over there. For example, [โฆ] perhaps they [โฆ] come across a Chinese website. They donโt even know itโs from China, but they just think, โhey this is like $100 cheaper.โ
I think that Westerners not being exposed to fakes and fraud as much as Chinese [are] just so much more easily duped into buying stuff.
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