This article originally appeared in the August print issue of IMPO.
In this issue’s Global Trends article, Craig Zoberis of Fusion OEM provides a list of questions to ask a potential contract manufacturer before establishing a partnership. Zoberis stresses that not all contract manufacturers are created equal and warns of the need for intellectual property (IP) protection.
“Does the contract manufacturer have processes to protect your IP?” asks Zoberis. “Your IP is an extremely valuable asset and it must be protected from possible infringers.”
This issue can be especially top-of-mind as intellectual property concerns pepper the media – most notably focused on countries like China who lack intellectual property law, and seem to relish in swiping foreign technology.
“Intellectual property is a problem for U.S. China relations, but for the Chinese this is a cultural issue,” Tom Doctoroff, CEO of the JWT ad firm in Shanghai told Forbes in July. “This is a country that considers you an entrepreneur for creating a fake Apple store.”
There are signs, however, that this may be changing. As we know, there is a shift happening in China as the country becomes more developed. Incomes are on the rise, and a clear middle class is emerging, meaning Chinese manufacturers are finding a domestic customer base they didn’t have in the past. Perhaps the days of producing only for export are behind them.
So with this, will there come a rush of innovation? A recent case between Apple and Zhizhen Network Technology Co. over the popular Siri voice assistant technology actually put Apple on the defense. The American University Intellectual Property Brief recently reported that a Beijing court sided with Shanghai-based Zhizhen Internet Technology, creator of the Little I Robot, who accused Apple of intellectual property infringement after Apple announced at its developers’ conference that Mandarin and Cantonese were being added to the list of Siri’s supported languages. Apple sued China’s Patent Review Committee and Zhizhen Network Technology Co. at the end of 2013, asking the court to determine if Zhizhen’s patent over “a type of chat robot system” was valid, but the claim was rejected.
This may feel like watershed because it’s one of the first indicators that China actually cares about IP theft. Added the report, “For decades now… foreign countries have demanded that Chinese companies refrain from illegally using their foreign property. However, due to the lack of Chinese property for foreign countries to steal, very few Chinese companies were demanding that foreigners refrain from illegally using their property. Thus, the Chinese government was not going to be serious about making sure that foreign intellectual property was not illegally used in China.”
Alberto Galasso, a professor at the University of Toronto Institute for Management and Innovation, echoed this hope when he told the Financial Post in February that “It is not unlikely that this greater use of patents will trigger legal changes that will render more effective the Chinese court system.”
So we can remain hopeful that these types of cases foreshadow a shift in China’s view of intellectual property rights – and also violations. Still, even if that’s the case it’s probably too soon to play fast and loose with your product designs. “The IP Commission Report,” issued last year by the U.S. government, estimated China is behind 50 to 80 percent of IP theft cases globally, costing the U.S. economy $300-billion every year and millions of jobs – leaving no doubt that there is a lot of ground to cover on this highly contentious issue.