Litigation is No Substitute for Strategy

In the rush to enter the Chinese 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 large market opportunity and wanted first mover advantage. 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 rules. However, companies still need to protect themselves by establishing an IP Strategy before entering the Chinese Market. Firms that have a well executed plan which includes thorough due diligence have been most successful in protecting their products from piracy.