The Next IP Frontier(s)

China has been at the forefront of discussions on IP rights protection for a while now given its reputation as a hotbed of intellectual property piracy and counterfeiting.

However, as recently discussed in this blog, the level of protection afforded, and enforcement of intellectual property rights in China is improving.

It is predicted that China will become the world’s largest economy within a decade. Continued growth, however, will depend on innovation as domestic wages and the population of the well-off middle class increase. The Chinese government has therefore implemented policy measures in an effort to build an economy based on innovation rather than imitation. These policy measures include

  • increased investment in R&D and education, and
  • financial incentives for its people to file patent applications both locally and abroad.

New frontiers in global IP rights protection was a brief point of discussion at a recent day conference attended by Watermark at the Melbourne Business School, and presented by The Intellectual Property Research Institute of Australia (IPRIA). The title of the conference was “The Rise of Innovative China: Implications for the Region”, and headlining speakers included former Premier of Victoria John Brumby, now a member of the board of directors at Huawei Australia, and Professor Ross Garnaut, economist and independent advisor to the Australian Government.

The overall focus of the conference was on the consequences of China becoming an economic superpower, what the Chinese government needs to do maintain a strong economic position, and how Australian Government and businesses should position themselves into the future.

Australia will need to implement policy measures quickly to adapt to China’s growth by, for example, removing or reducing barriers to Chinese foreign investment and collaboration. The point was made that, as a result of barriers faced, China already has in place investment alternatives in Brazil and some African countries with respect to natural resources. Australian businesses too should look to the time when China is no longer the low cost manufacturing bowl of the world.

So where will the global community turn when it becomes cost prohibitive to manufacture goods in China? More importantly, what will be the level of IP rights protection afforded to the global community in countries where manufacturing costs are low?

Businesses now using China as a manufacturing base will probably need to look to Vietnam, Cambodia, South American and African countries, particularly South Africa. China itself has foreseen a decline in its dominance as the manufacturer of world’s products and has taken active steps to increase its market access to emerging manufacturing locations including Brazil and some African countries via multilateral agreements.

If there is one lesson to be taken from the Chinese IP experience, it is that IP rights holders will need to pre-emptively apply to register rights, and have manufacturing and distribution agreements in place, before they choose to manufacture products in new off shore, low cost locations.

Choosing where to file applications pre-emptively will likely be the first of many hurdles in countries where IP protection regimes are underdeveloped. Future IP strategies must consider the following issues:

  • The obvious language barriers which will add additional cost where documents are required to be translated into multiple languages – a problem which has taken over 30 years to resolve in Europe. This will particularly be relevant in countries not signatory to the Patent Cooperation Treaty (PCT) – several of which remain in South America.
  • Prosecution of applications in some countries can be extremely slow and less than thorough. For example, while Brazil has a high patent application rate, it has one of the lowest patent grant rates in the world. It can take from 8 to 10 years for a patent application to proceed to grant in Brazil. The South African patent system remains one based on examination of formalities only.
  • Enforceability of IP rights will likely be as difficult as it has been in China where there are economic and political factors that act as disincentives to enforcement. As has been the case in China, where local economies benefit from piracy and local officials are remunerated by counterfeiters, it may be difficult to enforce IP rights at a local level.

It may be necessary to tailor IP rights protection strategies in specific regions outside of China to take into account local market factors, and IP laws and practice, in order to obtain strong IP rights protection. The most advanced businesses are future proofing their businesses now. More information about IP in Africa can be found here.