Investors looking into China have viewed the nation as a market with great potential for growth. China, in its effort to continually attract foreign direct investment, is aware of the needs and concerns of investors, especially in the area of intellectual property protection. Since China’s reform and opening of its borders to the world, significant achievement has been made in IP protection in China’s IT industry. Environment policy and regulations have been continually improving.
Over the years China has formed a national intellectual property system and operation mechanism, focusing on IP management, review, research, education, enforcement, intermediary services, and IP information services organizations. The government has nearly 10 administrative departments with direct management of intellectual property rights and more than 20 administrative agencies are closely related to the management of intellectual property.
After 30 years of development, China has built a complete and modern intellectual property rights protection system on par with international standards. Patent law, trademark law, and copyright law, as the three pillars of IP law, are continuously improving every year. And, China has been actively involved in international organizations to address the international concerns of IP protection rights.
II. IP protection of IT industry
2.1 Current laws and regulations
The Chinese government recognizes the great importance and deep significance of IP protection. Abiding by international IP protection rules and continually improving its own protection levels, China has made great progress in both IP legal system establishment and administration practices, and it has established a system for a positive cycle of intellectual property creation and application. The IP legal system ensures sustained, steady and sound development of the software industry. The coordinated, regulatory and security mechanisms of intellectual property promote and guarantee rational competition in the software industry.
2.2 Intellectual Property Protection in IT Companies
According to research by the CSIP (Ministry of Information Industry Software and Integrated Circuit Promotion), in the following graph, we can see that 91% of the interviewed corporations have IP regulations and policies; 97% have relevant provisions of intellectual property protection in employment contracts; 61% have applied for patents for innovation; 76% have applied for copyright for innovation; 84% have protected intellectual property rights through physical and technical means (such as firewalls, data encryption, etc.); and 80% provided their employees with relevant training in IP protection.
In addition, 96% of companies surveyed have established information security-related rules and regulations; 90% have established information security managers; 89% built strict authentication and access authorization systems; 94% adopted effective network management and data protection measures; 95% use complete system backup and recovery means; and 97% have regular security patches and virus database upgrading.
With confidentiality agreements, 79% surveyed sign it with all employees; 12% of the companies only sign it with official employees; and only 7% sign with important employees. Among all the enterprises interviewed in this research, only 2% did not sign any agreement with their staff.
In conclusion, there are increasing numbers of corporations in China that have realized the importance of IPR and have subsequently taken protective measures.
2.3 Indexes used to evaluate current IP climate
With the implementation of these relevant laws and regulations, and with the increase in awareness, the IT industry has experienced success in recent years in IP protection. These indexes will evaluate the current situation of IP protection of the IT industry in China by the number of patents.
According to the China Copyright Protection Center, in 2008 Chinese computer software registration and copyright registration experienced rapid growth; in particular, software registration increased dramatically from September to December, with month-to-month growth rate exceeding 100%. The number of software registrations in 2008 is almost the total volume in 2006 and 2007. The figures below show a rapid growth of software copyright registration over the past five years and indicate that the importance of software IP protection is growing year by year.
III. Awards and recognitions for China IP protection
- China IPR protection has been recognized by Global Anti-Counterfeiting Group (GACG), and four Chinese officials received the “2008 Annual Individual Special Achievement Award” for the efforts and contributions to IP criminal protection and customs protection (06/2009) 1. (for countries)
- China Customs received the “2005 Annual Global Anti-Counterfeiting for Praising and Encouraging Government Agencies Award” (06/2006) 2. (for national government agencies)
- “World Intellectual Property Organization – Copyright Creative Gold Award” 3. (for individuals and enterprises).
IV. Hangzhou’s efforts towards IP protection
4.1 Cooperation between government and enterprise4
Hangzhou Municipal Government and Microsoft China have signed a three-year strategic cooperation memorandum in May 2009; the close partnership will accelerate the promotion of IT industry development of Hangzhou. In order to build Hangzhou into a model city of innovation and IP protection, bilateral cooperation will focus on
2 Luo lan, People’s Daily Overseas Edition, 14/06/2006
enhancing innovation capability of local software enterprises and improving the IP protection environment. The two sides will strive to improve the rate of software legalization and to legitimize retail outlets selling computer hardware and software. In addition, the two sides will establish a joint system and special group to promote IP protection domestically.
4.2 IP protection of service outsourcing5
Service outsourcing industry becomes an important accelerator of economic development in Zhejiang. At the first national service outsourcing forum (12/05/2008), the Ministry of Commerce, Ministry of Science and Technology, and the Ministry of Industry and Information Technology, Zhejiang Province, city of Hangzhou have all signed an agreement to together build a service outsourcing base. As a result, Hangzhou has become the first of many national service outsourcing base cities and has signed the “ministry-province-city-park-enterprise” agreement. It means that service outsourcing in Hangzhou will be well supported with capital, personnel training, IP protection, government procurement, etc. throughout future development.
4.3 The first city issued provisions of IPR protection of service outsourcing6
As one of China’s Service Outsourcing Demonstration Cities, Hangzhou is the first to break through the “bottleneck” in intellectual property protection. It has recently adopted the “Certain provisions of intellectual property protection of service outsourcing in Hangzhou” on 4th Sept. 2009. This provision will strengthen IP protection work and optimize the investment and development environment for the service outsourcing industry.
From the discussion above, we can see that significant achievements have been made in intellectual property protection of IT industry in China, and that the government is dedicated to protecting IP for both foreign investors and domestic businessmen. The environment of policy and regulatory of Chinese IT industry has been continually improving. The government realizes the value of IP protection both domestically and abroad, and the issue will remain an area of focus for years to come.
5 Feng Jie, Towards Depth of Service Outsourcing, Zhejiang Economic , 2008 (10): 13