In what has to be one of the most absurd cases of intellectual property rights infringements, China has blocked IPAD sales in certain areas of China due to a “trademark” infringement issue.
Shenzhen Proview has sued Apple, and is demanding an immediate halt on all imports and exports of the IPAD.
Shezhen Proview claims that it owns the rights to the trademark IPAD, and a Chinese court has agreed. As China produces all of their IPADs in China, blocking the flow of this good could be problematic for Apple, and disastrous for her sales in China.
At issue is the ownership of the name ‘IPAD’. Apple alleges they purchased the rights to the name from Taiwan Proview. Shenzhen Proview disagrees, stating that Apple never purchased the naming rights in China.
Proview sued and won in China, meaning Apple is now in dire straights.
While many argue the legitimacy – or lack thereof – of the Proview claim, this particular story shows the minefield that is typical of doing business in China.
Whether or not Apple is the legitimate owner of the IPAD trademark, this scenario is merely one symptom of a far greater set of problems when a company decides to start doing business in China.
China Picks and Chooses Which Laws to Obey
The absurdity of the case stems from the fact that China is the worst offender of intellectual property rights on the planet (1). Over 80% of all pirated goods in the world come from China, and billions of dollars and an untold number of jobs are lost each year due to China's disdain for enforcing patents, trademarks and copyrights.
For a country like China to aggressively follow the law in one case, while ignoring the myriad of other violations that occur on a daily basis in the country is troublesome.
A good example of China's IPR infringement can be found not two miles from the center of China's own governing body.
Beijing's silk market is a mega market of pirated products. It is a multi-stored haven of small shops, which are lined ceiling to floor with fake Iphones, Ipads, Gucci, Taylor Made golf clubs, Polo shirts and a host of other goods.
The stores in the silk market are open seven days a week without fail. And even though they openly sell pirated goods in the very backyard of the leaders of the communist party, it has never been shut down.
Taobao.com is a nearly identical mirror image of Ebay.com
Other Trademark Infringement Cases that China Ignores
Another example is China's taobao.com, an ebay clone. Taobao is a site where everything from fake Rolex's to knock-off Gucci purses can be had.
If China were really interested in protecting IPR laws, then Taobao would be a good place to start. In order to sell on taobao.com, one has to register with their real name and proof of ID.
Thus, bringing a lawbreaker to justice should be a simple thing.
This is not the case, however, as a quick search on taobao.com reveals. As you can see (2), the price range for a fake 'Rolex' is from 1400 RMB to 200, or U$200-30. In addition, a search turns up 'original XBOX versions' of Madden NFL 2012 for as little as two US dollars. Gucci knockoffs range from $40-200 depending on quality.
The names and numbers of the owners are available, should the police take notice, but of course they do not.
As for music, surf over to www.xiami.com and listen to the latest by Rhianna, Justin Beiber or Chris Brown. The site is in China so the songs are free.
If movies are what you are after, then your fingers need search no farther than xunlei.com. Consider Xunlei your video store with benefits. For at Xunlei, one need not bother with pesky membership or payments, all of the movies on the site are absolutely free.
Whether or not the website owners are following the letter of the law in terms of copyright protection is uncertain, but what is certain is that from my house in Beijing, I can watch copyright-protected movies for free, twenty four hours a day, seven days a week.
Deep from within the heart of communist China, the world of 'borrowed goods' is available to all.
And if this are not proof enough, you can call (86) 8404 3132 and ask about their Wii specials. This company is part of the ecosystem of DVD and video game fraud that litters the 'Gulou' area of Beijing.
It is just one of many such companies that dot the landscape and offer 'real' gaming systems and pirated games for pennies on the dollar. The company in question will sell the original Wii gaming unit for U$181 and to sweeten the deal, they will hack your system and give you more than 300 official Wii games, all for an additional U$50.
Although they operate in plain sight, they operate outside of the law.
It has been said that buying a legal DVD in China is much more difficult than purchasing its illegal cousins, and to the current author this seems true. The question then becomes, what is up with the IPAD lawsuit?
What is Driving the IPAD Lawsuit?
So what is the true motive behind the IPAD lawsuit? One answer is that Chinese courts are as corrupt as they are inept.
When less than half of the judges have a college degree and less than half of them have even studied law, how does one expect to get a fair shake in the People's Republic of China (3)?
Thus, while Proview Shenzhen may have a valid complaint, one has to wonder. Shenzhen Proview is bleeding cash and is now desperate. In a country as corrupt as China, where court decisions are bought and sold (4), one has to consider all the angles.
I have written before about the dismal state of "justice" in China (5), and the fact that the communist party decides the cases before they are even held (6).
Couple this with the potential payoff (bribes) for awarding a Chinese company the verdict, and one can see how this case could easily go against Apple.
Another problem is that, as the world economy slows down, China's exports decrease, causing unemployment and dissatisfaction. As China is brutally cracking down on dissent and fearful of an Arab spring, they will do anything to maintain peace among the populace.
Thus, a foreign company that is hyper successful in the Chinese market means lost revenue for local firms.
Aside from this, there is the issue of face. China has implemented a push for indigenous innovation and billions in funding to that end, but as of yet there has been little to no payback.
Companies like Apple are a thorn in the side to China, as Apple products are all the rage. This, to the communists is somewhat of an embarrassment, as they have yet to design a product with such international appeal.
To see young women offering up their virginity for an iPhone (7), or a week of sex for an Iphone 4S (8), the entire scenario is a source of embarrassment for the communist party, who is grappling with decadent foreign influence, whatever they define that term.
To make matters worse, China's entrants into IPAD territory have the backing of the communist party, but have gotten little traction. A good example would be the overpriced (9) Eben Eren (10)(11), which has deep ties to the communist party but little appeal both inside and outside of China.
(People in the know have told me that sales to communist party officials are buoying up the product at this
point.)
The Reality of Chinese Business
The fact is that this case typifies what it really means to do business in China.
You plan, you reallocate funds, you come here and then you are held hostage. This concept was artfully articulated by Paul Midler in the book Poorly Made in China.
Mr. Midler addresses the issue of quality fade, and being held hostage to one's suppliers in China.
As American firms outsource jobs and know-how to communist China, they enter into a minefield of deceit that they often times do not understand. The Chinese will do whatever it takes to get your business, and seduce you into listlessness.
You then become over-reliant on them, just as in the case with Apple. Suddenly, and when you least expect it, they jerk the rug out from under your feet, leaving your supply chain exposed.
Many would claim that this is Apple's punishment for outsourcing work from the home front, and perhaps there is a bit of karma to it all. However, the more pressing issue right now is that as China becomes bigger, they are resorting to even more heavy-handed measures to ensure their own growth.
What Mr. Midler exposed in his book, and many of us have seen here, is that the Chinese are mercenary in the pursuit of their goals. Be it a land grab or stealing intelligence, they will stop at nothing.
All of those American firms that see China as the end all, be all, should take note of the Apple case. Eventually it will be settled, and Apple may win, but that is Apple.
What chance would a small company have if it were put in a position such as this?
All that glitters is not gold....
References & Image Credits:
(1) Untruth #3 - Top Secret Writers
(2) Taobao
(3)(4)(5) Untruth #4 - Top Secret Writers
(6) IBID
(7) IntoMobile.com
(8) SinaporeSeen
(9) WtDevFlnt
(10) WtDevFlnt #2
(11) Want China Times
(12) IBTimes
WC is an American citizen living and working in China. He brings TSW readers a wealth of knowledge and experience in international affairs, culture and business. WC has 57 post(s) at Top Secret Writers
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