Chinese President Hu Jintao is set to visit Washington next week, and the Obama administration is laying the groundwork for some bare-knuckles bargaining over longstanding trade issues. U.S. Treasury Secretary Tim Geithner set the tone in a Jan. 12 speech, during which he trotted out the complaint that the Chinese government does too little to protect intellectual property. Geithner urged leaders in Beijing to foster “a more level playing field for U.S. companies that compete with Chinese companies in China, in the United States and around the world.”
That’s a familiar refrain, and the U.S. isn’t the only one doing the kvetching.Intellectual property(IP)theft, piracy and counterfeit products have been rampant in China for years, damaging companies and brands everywhere. Progress has been hard to come by, with periodic government crackdowns doing little to produce permanent reductions in the gusher of fake goods coming from Chinese factories, which by some estimates are responsible for more than half of the world’s counterfeits.
Lately, though, there have been signs that change is possible—at least in the online world. Some of China’s major Internet companies, which gained a lot of traffic over the years by turning a blind eye toward the piracy problem, appear to be increasinglyuneasyacting as conduits for illegal copies of music, movies, software and other digital content. Steven Millward, who writes the Sinobytes blog for CNET Asia, just posted an interesting piece noting that Baidu, China’s biggest search engine, is now emphasizing the sale of licensed, legal content through its music portal. Baidu for years has run a controversial mp3 search service that connects users with illicit music downloads.
Meanwhile, China’s three biggest video streaming sites—Youku, Tudou, and Ku6—have been aggressively deleting feeds for pirated (mostly American) TV shows and movies. “After numerous false starts and hollow pledges over the years, it looks like a huge clampdown on digital piracy in China is actually happening this time,” Millward wrote.
It isn’t just pirated digital content that is under pressure. Taobao, China’s largest B2C e-commerce website, last year stepped up efforts tocurtail the amount ofcounterfeit apparel, cosmetics, consumer electronics and other products that are sold via its platform. On Jan. 13, Taobao announced that more than 14 million listings for IP-infringinggoods were removed from the site in 2010. In addition, 590,000 registered Taobao sellers were penalized for infringement last year, according to company officials. Depending upon the severity of violations, Taobao metes out a range of punishments to IP violators from temporary suspension from the website to permanent banishment.
Taobao is policing itself for fakes with the help of thousands of brand owners, among them Shisedo, Philips and Li Ning, China’s largest maker of athletic shoes. By working with Taobao, multinational companies stand a better chance of tracking down the source of counterfeit goods; online sales leave a digital trail that often leads back to the factories that make the merchandise. Shutting down those factories (with the help of Chinese police) is the ultimate goal of brand owners, because it chokes off supply.
One of the common challenges faced in combating counterfeits offline was that we didn’t know where they came from and how many of these counterfeit products were sold,” said a spokesman for Wenger, the maker of Swiss Army Knives and watches. By working with Taobao, “we are able to collect useful evidence as every transaction is recorded in the system. Moreover, we are able to use leads gathered from online transactions to help uncover the manufacturers of counterfeit goods offline, which gets at the heart of the counterfeit problem.”
Still, counterfeiting is sopervasivein China, it’s hard to make much of a dent. Periodic crackdowns have been ineffective. Taobao will have to keep up the pressure permanently if it wants to keep pirates at bay.
