New-Tech Society: Advance in leaps and boundaries

February 22, 2002

In a six-page special, The THES looks at the impact of new technology on our society and the degree to which we control it or it has come to control us.

China's dream of access to world markets has come true - but first it must overhaul its intellectual property laws, says Sandy Thomas.

Late in 2001, China took something of a great leap forward by joining the World Trade Organisation. In exchange for amending its legal framework for intellectual property, it hopes to have greater access to world markets.

China is in an interesting transitional position. It has introduced tougher laws that recognise patents and copyright for a wide range of inventions, including software, biological materials and chemical compounds. But illegal copying is still rife. Over the past decade, China, along with several other Asian countries, has acquired a formidable reputation as a major pirate of other country's inventions through either absent or weak laws on patents and copyright. Worldwide, China ranked second after Vietnam for software piracy in 2000. Losses in China due to piracy were estimated at $1 billion (£700 million), double those for 1999. How quickly China will move to enforce its own and foreign investors'

patents remains to be seen. Meanwhile, many Chinese enjoy pirated Windows XP for just a few pounds. However, while they enjoy access to the latest software at remarkably cheap prices, the authorities are working hard to try to control access to the internet.

So what amendments has China introduced as a result of its accession to the WTO? The State Intellectual Property Office started revising the Chinese patent law in 1996. The revision was approved in August 2000 to achieve conformity with Trips (Trade-Related aspects of Intellectual Property Rights), part of the WTO. Amendments to the copyright laws have also been passed by the State Council. There are new judicial and administrative protections, improved application procedures and simplified enforcement procedures. It should be easier for foreign patent organisations to file patents in China as well as for domestic applicants to file international applications. There was remarkable growth in the number of patent applications in 2000. Some 170,000 patent applications were received, representing an annual increase of more than 25 per cent. Significantly, more than 80 per cent were filed by Chinese nationals.

The Chinese government seems to be committed to providing a high standard of IP protection for nationals and for foreigners. But enforcement of IPR is a major problem, and pirating and counterfeit are big issues for investors and companies.

The government is trying to increase awareness in this area with the introduction of dedicated IP tribunals, but the administrative system of enforcement is regarded as weak by most foreign investors. Companies such as Microsoft bemoan the fact that their software is often available as pirated versions for about one-tenth of the legitimate price before the product is launched. Microsoft has been criticised for charging high prices although it takes the view that, even if prices were lowered, piracy would not be significantly reduced. The 90 per cent of people in the market who use illicit software are unlikely to switch to copyright-protected software unless prices drop close to those of the pirated versions.

This is not just a problem for foreign companies. Chinese software is as much a target for the pirate. What position does the government take on this? Microsoft and other companies sell widely at a discounted price to Chinese government offices. Because the copying industries are large and effective, enforcement is expected to take a very long time. Effective enforcement is also a problem in political terms. The copying industry represents thousands of jobs and large amounts of tax revenue. The closing of these industries in the short-term would arguably set back China's development. India, too, is committed to introducing patent reforms that will bring it in line with Trips and oblige its large-scale copying industries, particularly in pharmaceuticals, to change course.

Membership of the WTO could herald a new era for the country's trade relations and development, but the government continues to tighten controls on use of the internet. Since 1995, at least 60 sets of regulations have been aimed at controlling internet content. The goal of the broadly worded regulations is to limit the right to freedom of expression, and the government is devoting considerable resources to try to implement them. Since January 2001, sending "secret" or "reactionary" materials over the internet has become a capital crime, although those convicted have received sentences of between only two and four years.

The government's determination to control online content has grown with the use of the internet. The seriousness of the possible repercussions of inappropriate use have led internet service and content providers, as well as internet cafes, which also risk legal action if they are found to have participated in spreading illicit material, to set up their own monitors. In cafes, managers have appointed individuals who check the monitors to see what material is downloaded.

In 2001, between April and July, more than 2,000 cafes were closed. Police in Liaoning Province installed software in more than 13,000 computers in the province's 5,000 cafes to filter pornographic, illicit and other disallowed information. Despite these restrictions, use of the internet is increasingly popular in China. The number of users quadrupled to 9 million last year and is still growing. What is clear is that with potential markets of more than 1.25 billion increasingly computer-literate consumers, many foreign investors are prepared, despite weak enforcement, to take a long-term view.

Sandy Thomas is a member of the UK Commission on Intellectual Property Rights. She is also a member of the DFID Commission on Intellectual Property Rights and director of the Nuffield Council on Bioethics. The views expressed are her own.

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