Litigation is No Substitute for Strategy

In the rush to enter the China market in the late 1980's and early 1990's, many western organizations made very poor business decisions. Some of these decisions were made because reliable information about the market was unavailable, but many decisions were made by overly aggressive organizations that did not perform the proper due diligence on the established laws, their local partners or employees. These organizations simply saw a huge market and the potential it could bring if they were first movers. Common sense, prudence, and patience would have saved these firms huge amounts of money. Today the market is better understood and a legal framework for protecting IP has been established.

The Chinese government recognizes the importance of protecting foreign investments in intellectual property and has signed the Agreement of Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement). IP courts have been established in Beijing, Shanghai and Guangzhou. These courts are administered by American trained legal personnel, and have made verdicts in favor of foreign companies who have sued Chinese firms over IP infringements.

On December 18th 2003, The Office of the U.S. Trade Representative (USTR) released a report titled "2003 Report to Congress on China's WTO Compliance". In Intellectual Property Rights (IPR) protection, the report finds that China's compliance with the Agreement on TRIPs has been "largely satisfactory" to the extent that China has passed laws, regulations and rules2. Above and beyond all improvements made in the Chinese judicial system is the fact that well prepared firms that establish an IP strategy before entering the market have been the most successful at protecting their products from piracy.