Copycat Nation, or Nation of Innovation?

China is quickly becoming the land of 5G, the next generation of mobile internet. This is big news for China because 5G is the next major milestone in expanding the reach of mobile networks from connecting people to interconnecting and controlling machines, objects, and practically every device out there. It will deliver new levels of performance and efficiency that will empower new user experiences and connect new industries and China is rolling it out months ahead of schedule.

Major cities like Shanghai and Beijing are already accessing the network with 50 additional cities well on there way. In order to enable the technology, China is setting up approximately 130,000 base stations in this initial phase. In comparison, the United States, who is also committed to developing its 5G tech, is rolling out about 10,000 base stations in its initial launch. [1]

China is on track to have the world’s largest commercial 5G network – and by 2050, expects to be the global leader not only in the 5G market but in all key technology industries. [2]

These huge advances are even more notable considering that only a few years ago, many Chinese companies were largely known for copying market-proven products, brands and business models from the west and adapting them for the local market with only minor modifications. This has become known as shanzhai, a Chinese term that was used to describe the counterfeiting of consumer goods, specifically with trademark imitations and electronics in China.[3] It’s this phenomenon of Shanzhai that has earned China the reputation of “copycat nation” in recent decades.

However, innovative trends are clearly reversing.  Now, western tech companies and their inventions are being challenged by those from China, and the industry is beginning to realize that China is taking a leading role in IP development. 

Already in 2016, Uber’s founder and CEO Travis Kalanick predicted that in “the next five years, there will be more innovation, more invention, more entrepreneurship happening in China – as we will see more of this innovation in Beijing than we do in Silicon Valley.” [4]

It seems Travis was correct. According to WIPO, in 2018, China’s IP office received the highest number of patent applications, a record 1.54 million applications, 46.4% of the global total; only to be followed by the offices of the U.S., Japan, the Republic of Korea, and the EPO (European Patent Office). Combined, these 5 regions accounted for 85.3% of the world total for patent filings. 

 

Does this mean that the era of “copycat nation” is coming to an end?

 

For generations, China’s strategy seemed to be about playing catch-up and piggybacking on other inventors’ technological advances with an emphasis on underpricing the competition.  Many western countries around the globe and specifically The United States, have seen these Chinese copycat knockoff products flooding consumer markets.

However, it is clear that the tides are turning with a new strategy that builds off previous inventions rather than imitating them. In its own IP legislation, China has referred to its desire to shrug off the reputation of “copycat nation” and take active steps to improve both their role in innovation and their image on the world stage. Taking these steps demands economic reform and new legal frameworks to protect property rights and attract foreign investment, but the results of this new and improved, modern IP system is something the world cannot fail to notice.

China has made remarkable progress on this front and secured historic achievements in various areas including legislation, enforcement, international exchanges and cooperation.

China’s top leadership began implementing new laws to strengthen its economic performance back in the 1980s by introducing the Trademark Law in 1982, the Patent Law in 1984. These were followed by the Copyright Law in 1990, and trade secrets protection under the 1993 Anti-Unfair Competition Law.

Today, strengthening the protection of IP rights is widely recognized in China and is a fundamental incentive for enhancing the country’s economic competitiveness.

In a recent interview with the China Global Television Network (CGTN), WIPO Director General Francis Gurry, said, “There is a strategic vision and leadership from the top in China. This concerns building scientific capacity and innovation, which means new products, services or technology entering the economy and intellectual property, whose role is to protect the competitive advantage that is given by that innovation.” [5]

In China’s Outline of the National Intellectual Property Strategy issued in June 2008, “strengthening the judicial protection system” and “ensuring the leading role of judicial protection of IP rights” were identified as priorities in implementing the national IP strategy. [6]

In February 2018, another milestone was reached when the Chinese government issued its Opinions on several issues concerning strengthening reform and innovation in the field of Intellectual Property adjudication. This was the first document on reform and innovation in the field of IP rights adjudication in China’s history! The Opinions represent an important step in reforming and modernizing IP adjudication in China. They are a blueprint for the foundation of a modern, authoritative, optimally resourced and highly efficient IP judicial system that will ensure that China’s IP judicial team is able to address emerging IP challenges in the new era.

China is on a mission; not just to become the leading region for 5G networks, but to become the world’s largest innovation hub. Therefore, they are racing to obtain patents protecting advances in everything from artificial intelligence (AI) to blockchain. This is a clear declaration of China’s intention to lead the world in artificial intelligence (AI) by 2030.  China intends to accomplish this by creating a $150 billion AI industry that will fuel and accelerate the advancement of machine learning.[7]

The Chinese government is spearheading this IP overhaul and the young, enthusiastic talent behind the innovations is also stepping up to impact change.

China is now home to a new generation of entrepreneurs who are developing their own technologies, business models and world-class products. In her books “Silicon Dragon” and “Start-up Asia,” Rebecca Fannin describes the shift that has occurred over the past decade around the expanding power, influence, and impact of China’s Silicon Valley (According to CB Insights, more than 50 Chinese companies now have valuations worth more than $1 billion USD).

Unknown to many, China actually has a rich history in innovation that goes back many centuries. It was renowned as the home of many great inventions, such as paper, gunpowder, printing, the compass, the mechanical clock, and even alcohol and paper money. Chinese military forces first used kites to signal warnings and umbrellas were invented for protection from the sun as well as the rain. These innovations wound down and all but stopped sometime in the middle of the 15th century.

Fortunately for China, a new generation of innovation-obsessed entrepreneurs are at it again with the full support of the Chinese government.  Huawei Technologies founder Ren Zhengfei, whose company filed more patent applications last year than any other company in the world, is at the forefront of this shift. Huawei is now the third-largest smartphone maker, behind Apple and Samsung. Xiaomi has quietly emerged as China’s largest smartphone company and is now aggressively targeting India and Malaysia.

The country’s two largest internet companies, Alibaba and Tencent (which developed the popular messaging app WeChat), now lead the world in e-commerce, mobile payments, social media, and online gaming. China has become the focus of global investment, as the GAAFA Big Five (Google, Apple, Amazon, Facebook, Alibaba) continue their quest to become universal portals for all services.

Alibaba founder Jack Ma is now as much of a household name as Jeff Bezos, Tim Cook or Mark Zuckerberg. He is the richest man in China (worth $40 billion), and Alibaba’s IPO in 2014 set a record as the world’s biggest public stock offering, raising $25 billion.

In striving to lead the world in technology, China is gradually shedding its reputation as a “copycat nation”. The shifts in legislation are a clear and positive sign of a country that is increasingly recognizing the true value of intellectual property. In an ironic twist, we may find other developing countries acting the part of the “copycat” in the coming years. As China’s success becomes ever more prevalent, it would not be surprising to see other countries mimic China’s strategy and use it as a blueprint for their own efforts to stake a claim in the global IP landscape. 

 

Footnotes: 

  1. China rolls out ‘one of the world’s largest’ 5G networks – https://www.bbc.com/news/business-50258287
  2. China’s tech ambition is ‘unstoppable’ — with or without the trade war, analyst says – https://www.cnbc.com/2019/09/30/chinas-70th-anniversary-us-technology-leadership-under-threat.html 
  3. Schmidle, Nicholas (2010-08-19). “Inside the Knockoff-Tennis-Shoe Factory”. New York Times. Retrieved 8 September 2010.
  4. Bloomberg News – Uber CEO Says China to Soon Surpass Silicon Valley in Innovation Bloomberg News, January 15, 2016
  5. China’s commitment to strengthening IP judicial protection and creating a bright future for IP rights – https://www.wipo.int/wipo_magazine/en/2019/03/article_0004.html, June 2019
  6. Ibid
  7. The Hill – Emerging technology could make China the world’s next innovation superpower – https://thehill.com/opinion/technology/358802-emerging-technology-could-make-china-the-worlds-next-innovation-superpower

 

This article was originally printed in  The Patent Lawyer Magazine (pages 22-23)

By |2020-03-17T21:15:05+00:00February 17th, 2020|Blog|0 Comments