BEIJING – China wants Western technology. It also wants to export its own technology to the West. The key question is whether the rest of the world will be willing to go along given the widely held belief that China is the "knockoff capital of the universe."
When Zhongguancun Haidian Science Park, China’s foremost high-tech cluster located in Beijing's Haidian district, held its annual conference here this week, organizers boldly put “technology transfer” at the top of their agenda. More than 2,000 attendees showed up, including Chinese government officials and academics along with executives from the U.S., Europe and elsewhere in Asia.
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For China, technology transfer is essential to narrowing the innovation gap. It’s critical to Beijing's global strategy, according to both international and Chinese representatives at the forum.
Beijing, on one hand, demands active development of indigenous technologies by setting a lofty national goal for Chinese scientists and engineers to file 2 million patents annually by 2015. Still, China is keenly aware of its chronic technology gap with the West, and knows that it can’t catch up by going it alone.
IP rights were a hot topic at the Zhongguancun Haidian Science Park conference.
Caught between what seems like two contradictory approaches to IP protection (internal development vs. technology transfer), one Chinese attendee asked the panel (above): “To what extent should we rely on foreign countries for innovations?”
I don't buy the bit about three different ypes of innovation, frankly. In my view, innovation is always more like the last ietm listed. You're always building on something that came before. I'll bet even the wheel was invented when some clever guy got tired of moving round logs constantly, and decided to try to keep that round thing attached to the heavy object.
But there are limits to how much one can copy verbatim with impunity, and clearly China has yet to internalize that limit. Reputations, both good and bad, are built for very good reasons, almost always.
Bert, you've got a good point here.
The issue is how one defines the "borrowed/digested/reinvented" model.
When I asked the panel, "what can China do to convince the world it’s serious about IPR protection," here's what
Pekin Univ.’s Chen said: “I am not a lawyer. So I am not sure how much of Chinese law should be changed.” But he quickly added, “I think the penalty for IPR infringement is too low in China. It has to be higher. I predict that IP litigation will increase in China.”
More lawyers filing more lawsuits is not anyone’s ideal scenario, but in China it might be a necessary growing pain, if only to test the fairness of China’s evolving legal system, Prof. Chen explained.
A contact of mine is an IP lawyer, and her feel is the same as mine: the Chinese divide the world into Chinese and "Everybody else", and a different set of rules apply if you *aren't* Chinese.
If I were an American tech outfit interested in working in China, I'd be at pains to carefully select my Chinese partner *and* to make sure my partner had the appropriate contacts in the Chinese government. My partner would need to see the tech I was supplying and it's relationship with me as critical to its own success, and the government would need to view the relationship as important to China's success.
If those were both true, I might have a hope of success, and some actual protection for my IP. Otherwise, you get the comment made by an American executive re IP in China, who said "Bring suit against a Chinese company in a Chinese court for IP violation, and tell me what you get."
And forging that relationship would not be a quick process, as it would require personal contact between my top people and theirs over a period of time. I recall a story elsewhere about an American working on a deal with a Chinese company, where a prolonged amount of informal social contact, drinking tea, and admiring pictures of each other's kids was needed before getting down to business, because the first question the Chinese CEO had was "Can I work with this guy? Do we get along well enough as people to be able to work together as partners?" (It's a question I think most US executives don't consider till a failure of personal realtionships bites the business.)
I'd assume the same trying to work with China now.
China doesn't yet have the rule of law, let alone the rule of IP law. They have good laws but everyone ignore them. They are too free, they can do whatever they want. The government doesn't want to spend time enforcing the law as long as the law breakers are not against the government.
The West can afford to advocate democracy and freedom because the people obey traffic lights. Traffic-light obeying people are considered to be fools over there.
Very good point, and very good analogy with the traffic lights. I actually came to a similar conclusion, when all the baby formula scandal and lead in children's toys stories were in the news.
With capitalism there has to be an associated measure of responsibility, which comes with penalties for violations of the law. It's not as simple as grab grab grab.
To me, it's almost like saying that to compensate for the reduced government control of everything comes an increase in self control, with penalties when this self control is not exerted.
"To me, it's almost like saying that to compensate for the reduced government control of everything comes an increase in self control, with penalties when this self control is not exerted."
Whenever people live together in groups, there must be agreement on what behavior is acceptable, or the group does not survive. And there will be controls in place to enforce behavior. In some cases the controls will be internal - people will do or not do things voluntarily, because of their beliefs about what is right and wrong. In other cases, the controls will be external, like laws prohibiting or regulating some kinds of behavior, with punishment by your society if you break them. (Or both, with laws specifying punishments for those expected to know what is right and wrong who go ahead and do wrong anyway.)
Part of the issue for China is that the social agreement on acceptable behavior that worked when China was still largely isolated from the world does not work in a global economy that has different expectations. They are still learning the rules the rest of the world plays by in activities like this, and the process will be slow with bumps in the road. You don't change ingrained cultural patterns quickly.
It is interesting, this phrase: "the social agreement on acceptable behavior". I think that we'd all benefit from quantifying that.
I'll start with this question: What kind of respect for Intellectual Property (by default a very personal thing) can we expect from a people who have been tought by 62 years of communism that there is no such thing as personal property?
That's the interesting question. But fundamentally, this is not about personal property, it's about *institutional* property. Even under Communism, there was personal property, but more important, the means of production were owned and controlled by the state.
The underlying issue is one I mentioned earlier. For most if its history, China was largely isolated from the rest of the world. Trade occurred, but at nowhere near the current volume. Chinese saw themselves as the oldest and most advanced civilization on the planet. The world was Chinese and "everybody else", and if you weren't Chinese, different rules applied to you. (This is not unique to China: look at any human culture in history, and I think you'll find notions of Us and Them, where *we* expect certain behavior from each other, but *they* are fair game.)
Chinese will think first and foremost of the betterment of China. A Chinese may not understand why there is anything wrong with taking IP provided by a Western firm and redistributing it internally. The providers are not Chinese. The rules governing such things in China among Chinese simply may not apply.
Integration into the global economy requires fundamental changes in the underlying patterns of Chinese society, like understanding and respect for the concept of IP and the idea that taking it and redistributing it without formal permission is theft. The note from the previous poster about DVDs for sale with pirated copies of commercial software, and the notion that the physical DVD had value but what was on it did not is an example of the hurdles to be run. There are folks in the *West* who will feel that only material goods are "property", and IP is a legal fiction to be ignored if there is a benefit from doing so.
The fundamental problem is that change of underlying patterns like that does not and *cannot* happen quickly. Full integration of China with the global community will be a long and often painful process.
I think transfer is a euphemism for "theft". China if they want technology, need to put the big bucks where their party mouth is. No one will hand you over their IP. China needs to spend the money and resources necessary to develop their own IP. Otherwise, China will be stuck in their "cheap manufacturer" of the world paradigm. Just like the US has spent the time and money to develop technology that the market wants, China needs to follow suit, otherwise the Chinese strategy has plateaued and isn't going to get the wantabees any further towards owning key patents and know how that other countries will want and use. Communist party edicts don't work outside the chinese sphere of influence.
Over the last 20 years I've spent a great deal of time in and done business with "China". I will agree that it is very important to "get to know" who you are working with (I in fact know the wives and children of the people I do business with and agree on this point entirely). I trust the people I work very much; however, again, this is after working with them for many years. I have associates that have been "bitten" by the "borrowed IP" and have paid dearly for it. People in the USA do not realize the extent to which "they think differently"; the traffic light example is a good one (I once watched a driver drive down the wrong side of the road because of congestion on the "right" side of the road and did so with impunity). I was once at a "CD" store looking for a particular piece of music (an all-girl group playing traditional Chinese instruments performing Western music) when I saw an entire display for "software". One DVD contained Solidworks, Pro/E, Photoshop, etc. The DVD cost US$5.00. When I asked my friend how they got away with it he said "They only consider the actual DVD to be of value, not what's on it". I had a very frank talk with him (he was also a vendor of mine) about piracy and how I felt about it (I make my living from IP). This talk escalated to the level to which we ferreted out any pirated software that was being used in his company and they bought licenses for everything, while I was there. It was a matter of making them understand a different point of view. I'm not going to say they are (were) "angels" and for all I know they may have let their licenses lapse. -CONTINUED-
My point is if we are going to "do" anything about this problem we have to change the way people think. Many USA companies would never dream of asking "Are all your software licenses in order and can you prove it? Can we do an audit?". They simply want to know that the work will be performed and and cost as little as possible; regardless of "how" it gets there. Another example (and then I'm done); after 15 years I finally got up the nerve to ask my friend why the bathrooms are so absolutely disgusting (if you've ever been there you know what I mean). He said "They think the bathrooms are clean"...
I have to comment on one other thing; materials and testing. I know this from experience working in the "toy" business. There is a great deal of testing done on toys, more than the "average consumer" can begin to realize. If you want a surprise call Bureau Veritas and ask them to send you the list of potential tests for "toys" (there is category after category). Before a toy can be sold every aspect of it must be tested. On top of this, most "big" (think top three) companies require you to submit the results of independent testing as well as have their own internal tests facilities where they supposedly "test" incoming product. In my experience, there is no way (wish we had italics), NO WAY someone in the USA didn't know that there was lead in those toys. I'm not a "conspiracy" person but it is so much easier to blame someone on the other side of the world and claim "We didn't know" then to a.)have a recall and b.) find out an "American" let this stuff "slip" through and now (s)he loses their job, sets the company up for lawsuits, and maybe criminally at fault, etc. Better to just point the finger and claim stupidity.
China got spoiled by open access to Western technology & business methodology for the last 2 decades since Tian An Men massacre. This happened because Western Corp.s were misled by Consultants ( like Henry Kissinger who has been on China's payroll perhaps since 1971 ) into walkin into the trap. Thanks to active goading from Wall St. that is motivated by the high margins possible with China's still regimented low - cost labor, US Corp.s like Motorola, GM & GE gave away the store and are on the verge of collapse. This is very much like how China pilfered Defense technology from the Soviet Union and then in 1970 attacked them. China is a nuclear armed continental power with neo-Imperialist ambitions - it is not a vassal state like Japan. By following the same outourcing model with China as with the tiny Asian Tigers, Wall St. and US traders have clearly overplayed their hands . The Chinese like to skin animals alive and eat their twitching flesh. The US had better pay heed before its too late.
I just don't get it? Why is anyone afraid their IP will be stolen; you can rest assured that it will be stolen. Sad but true. The West has grown fat feed by cheap labour and natural resources (causing enormous environmental impact) in China. Short term it was cheaper to rely on China than to develop sustainable manufacturing at home. Now it's payback time.
I've been warning about the Chinese manufacturing trap for years.
But...I just want to give remind people that it was the West that invaded the Eastern countries like China and India and looted their wealth and IP. Indians made the best steel in the world and had the monopoly on cotton export. I don't have to mention the Opium wars that ruined China.
Americans think that history began when they were born. Old countries like China have memories that go back for centuries. The feeling of humiliation from the European and Japanese invasions is still fresh in their minds. So they think little of our needs for IP protection -- it's nothing compared to poisoning of millions with Opium. Until the Chinese achieve a sense of comfort with their new status, they will continue to "get even with the West (and Japan)"
One other thing, if you go back in history you'll find that America was considered a big IP thief. We didn't uphold copyrights until the late 1800s, and we blatantly stole technology for industrial machinery from the Europeans (who themselves stole from each other).
"But...I just want to give remind people that it was the West that invaded the Eastern countries like China and India and looted their wealth and IP. Indians made the best steel in the world and had the monopoly on cotton export."
It's a little more complicated than that.
Britain imposed high tariffs on Indian cotton to protect the domestic wool trade. But with the industrial revolution, they started applying capital to manufacturing. The spinning jenny and the powered loom were notable examples, which vastly increased productivity. British cotton became *cheaper* than Indian cotton, which was still a mostly manual industry, and effectively destroyed the Indian cotton trade. Something very similar happened to Indian steel.
The West industrialized. India and China did not. The results were quite predictable.
Interestingly, even though the topic might sound like a technical one, the issue is actually more social rather then technical. There's one fundamental difference between Chinese and Western philosophies: in China nation and country are everything and individual is nothing. This was always the traditional mentality that got strengthened by decades of communist ruling. In the West it's almost the other way around with governments always struggling to find a balance. This difference creates and will continue to create enormous compatibility issues. Just like some of the Natives in America do not accept lend ownership, Chinese do not understand how it can be your "property" only because you came up with it. You live in a society that demands sharing and so all your ideas belong to the society, not to you.
Interesting analogy with traffic lights. So many times I was in a situation when I approach an intersection facing red. I can clearly see at least 300 meters in each direction and there's none anywhere on the roads. And yet I stop and wait for the green because there may be hidden camera or police car in hideout. Now, in all honesty who can tell me this is not stupid? In China you may cross on red and if all goes well - good for you, but if you screw up - none will be there to defend you and you will have to face full consequence of your act. That's why Chinese are more prepared to make their own decisions without counting on the big brother and they will always decide on the spot if it is for their benefit to use "your" IP. They will not wait for a permission! Then again, because it's the big thing and long perspective that matters most there, they will keep pushing and building their own "civilized and advanced" environment and IP will be a part of it. It will certainly take a long time, fortunately or not none of us will live to see them catch up with the West. But in the end it's only a matter of time as long as they keep pushing for it.
Question for the board: What happens when the Chinese get caught, red-handed, stealing IP. Like in the case of AMSC? That is not borrowed IP, that was stolen and they had a "good" relationship with partners in China, knew their kids, wives....that didn't stop them from the royal screw job AMSC suffered, hundreds of employees now losing their homes and out of jobs forced to relocate for work? What will happen when they get caught? What price will Sinovel pay, if any?
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