China Shows Again That Stronger IP Protection Comes After There's Content To Protect, Not Before

from the funny-how-that-works dept

Copyright and patent law is supposed to act as incentives for the creation of new content or inventions. Yet, as we’ve pointed out recently, there’s little economic evidence that it does so. Instead, the evidence suggests that stronger intellectual property laws seem to come after the fact. In other words, when there is little IP protection, there is often quite a bit of creation and invention — and then those that did that creation and invention decide that they want to protect it retrospectively. That’s not the purpose of IP law, but it’s what seems to happen. And, look no further than China to see it happening again. China, of course, is notorious as a haven for intellectual property infringement, which (not surprisingly) has resulted in business model innovation. However, now that China is hosting the Olympics, it’s suddenly worried about making sure the video of the games will not be copied in an unauthorized manner (found via Against Monopoly). Note the obvious irony. You can walk around malls in parts of China and buy any kind of unauthorized software, music and movies for next to nothing… but when it comes to China’s own content, suddenly copyright is a big deal. And, of course, it wasn’t copyright that acted as the incentive for China to host and show the Olympics — but now the country is using it to protect the content. Copyright is being used for protectionism, not as an incentive.

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Comments on “China Shows Again That Stronger IP Protection Comes After There's Content To Protect, Not Before”

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Anonymous Coward says:

Business Model

You love to always call this a business model issue. Since you correctly point out the intellectual property infringement in China, why not do some research on what creators in China make? Surely, if it’s a business model issue, and Chinese companies are forced to come up with new business models to compete, then the movie and music industries in China must be much more profitable then in the US? How about which county creates more original products like software, medicine, etc… Is it China, or he US, where we try to protect intellectual property?

Kiba (user link) says:

Re: Business Model

It is not about business models, but rather what is the best economic policy for a nation. Business models would implies economic strategy at a firm level.

China is not in the same economic state that the US is. It would be misleading to compare the current economic level. Rather, it would be more accurate to look back at the economic history and see how patents and copyrights affect the rate of growth.

Also it is misleading to think the profitability of an industry would be an indicator to economic health. Rather, it is the economic productivity that we should be measuring.

I guess you did not read about the economic history of intellectual monopoly in the United States. Because what Mike talked about is the same pattern that played itself in many industries, including the software industry.

Intellectual monopolies are actually an unwelcome consequences of an industry maturing. Basically older, more established firms decided monopolies are a way to fend off new competitors. They actually come after the fact that massive innovations happened.

Industries in their early stage of development are especially explosive in growth and they often innovate in the absence of intellectual monopolies. Firms are motivated to innovate because if they do not do so, they will perish.

Industries in later stage of development are often stagnant because the rent seeking effort of older established firms allowed them to have monopolies. Thus this shut down or slow down the incentive to innovate because those with monopolies can rest a little easier, and sometime a lot.

Of course, I do not mean that mature industries are all stagnant. What I meant is that many industries falls victim to the unwelcome later stage of monopolization.

Charming Charlie says:

I just want to emphasize the point made by #1. There are restricted industries in China that by law require no more than a 50% investment by foriegn firms, also known as a joint venture (JV).

However there are many non-restricted industries with Wholly Foreign Owned Enterprises (WFOEs). In 2006 only about 25% of new firms entering Chinese markets were JVs, down from over 50% in 2001. If the subject of JVs is facinating here’s a good Chinese business blog whose post sparked a lot of interest from other China business bloggers:

Blazingnoob says:

Why make a law if there is no problem

I am going to skip over for now China having a double standard on IP law (after all they have that for so many things why should IP law be exempt).

The argument you make does not make sense to me. Laws do not get passed to solve problems that don’t exist. The reason IP strengthening occurs after lots of innovation is because the problems do not exist beforehand.

I will grant that there may be a question as to the effectiveness of the laws in promoting innovation – but your argument does not address that question.

Richard Ogin says:

Re: Why make a law if there is no problem

“Laws do not get passed to solve problems that don’t exist.”

Where the hell do you live?! The “think of the children” mantra comes to mind pretty quick.

“The reason IP strengthening occurs after lots of innovation is because the problems do not exist beforehand.”

The ‘problem’ you seem to refer to is mainly expressed by larger businesses that have been in their industry for a while and want to rest on their prior work by not having to keep up with competitors, new or old.

“I will grant that there may be a question as to the effectiveness of the laws in promoting innovation – but your argument does not address that question.”

I think his point was pretty hard to miss. The article is saying that China doesn’t care about other people’s IP, but when they’re in control of something (video feeds of the Olympics), they come out saying they want rules on what can be done with it. Notice the disregard on one side, supposed care on the other.

On a side note, I’d really question the authenticity of China’s supposed caring of any of this. Do a little public verbage, yada-yada for the folks in DC and their European brethren, back to business as usual by Monday.

Nasch says:

Re: Why make a law if there is no problem

The reason IP strengthening occurs after lots of innovation is because the problems do not exist beforehand.

It depends on who is defining the problem. If you go with the original purpose of IP laws in the US, the (potential) problem is a lack of innovation. That is, the laws were put in place to make sure people had an incentive to create. If the innovation has already occurred, then clearly that problem doesn’t exist, so there must be a different problem. Namely, protecting the profit interest of established firms (or governments).

What may not have been addressed is where all this innovation comes from. Is it all copying of content that’s imported from markets with strong IP laws and enforcement? If so, that’s not much of a case against IP laws, and would tend to indicate that they are important in spurring production and innovation. On the other hand, if China has lots of local content, inventions, etc, then we can see that these laws are not necessary for innovation.

I’m not saying nobody has said anything on this topic, there’s the oft-cited fashion industry for example, but I haven’t heard anything specifically about China.

Steve R. (profile) says:

Evolution at Wortk

Sorry about the “empty” post. Anyway, China is pointing to the normal evolution of an upstart into an established “company”. When you don’t have anything, the “law” is irrelevant and to a degree flaunted. Once a country or a company becomes established, companies begin to want to create “property rights” to create a toll-both for the use of their products. Coincidently, these firms now perceive of the law as something to be “honored” rather than flaunted. In fact, companies begin to take an active role in manipulating the political process to create favorable legislation.

Abraham Harold Maslow formulated the concept of “hierarchy of human needs”. While this may not seem to be tech orientated, it helps us to understand why companies morph as they evolve from an upstart into an established company.

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