Six hundred and sixty eight million people currently use the Internet in China. That’s one out of every fifteen Chinese people. Out of this number, three hundred and sixty million Chinese citizens do their shopping online, spending roughly 2.8 billion dollars in the past year alone. These are staggering numbers, and Joe Simone, Director of Simone IP Services and a Penn alum (C’84), presented them to make his point: with the scale at which China has adopted the Internet, it is easy to see why it suffers from major copyright and intellectual property issues that are only growing with each day. Although Mr. Simone is experienced in several areas of intellectual property rights, he chose to focus his talk at the Penn Law School on trademarks, which is mainly about counterfeiting in the Chinese context. China’s copyright laws were carried over since the Cultural Revolution, which provide pirates with a lot of flexibility in navigating the legal system. That flexibility is compounded with the emergence of the Internet, where the laws that govern physical goods become complicated by the e-commerce.
Additionally, China deals with pirates and copyright violators based on pre-established threshold standards; only if an individual or a company has violated copyright on a certain volume of goods does the state take criminal action against them. That policy is tied to the ideology of “kill the chicken, scare the monkey”, which means that by hurting a small subset of the population – those who cross the thresholds and make the most noise – the state can scare off the masses from violating copyright. China also has issues of civil enforcement with regard to copyright violations: Mr. Simone highlighted the fact that China does not have a “John Doe” rule i.e. one needs identification of a copyright violator to launch a case against that company or individual, and the fact that past legal decisions do not have precedential value in dealing with future cases.
Mr. Simone then moved on to discuss the Alibaba platform in specific because of the notorious number of copyright violators it has harbored on its platform. Foreign retailers have seen their brands introduced in the Chinese market rapidly through Alibaba, and even when they bring their goods to the Chinese market, they suffer from cannibalization from fake products that already exist. While this doesn’t harm large multinational corporations (MNCs), this heavily affects small and medium enterprises (SMEs) that do not have the resources to crack down on copyright violators, nor the security to protect them against the revenue that disappears from lost sales. Alibaba has faced intense pressure from its shareholders, the Chinese government, and MNCs to change its way of doing business, but it hasn’t budged much towards changing its policies.
The reality on the ground is that take down programs instituted by the state against known copyright violators are a superficial way of dealing with the issue of trademarks. There are several ways to avoid these take down programs and platforms like Alibaba and Taobao know it. They have taken steps to remove copyright violators from their platforms, but they have also avoided allowing such removals to become systematic so that they don’t end up as standard practice in the country. They have also coopted MNCs into unwittingly supporting them instead of allowing businesses to group together and lobby against them; Mr. Simone didn’t mention specific names, but he said that this common practice among e-commerce platforms, although MNCs were wising up to this deflective strategy.
As it stands, there is no clear roadmap to reform in resolving copyright violations and counterfeiting in China. Mr. Simone said that reform is only possible when the agents involved in the issue change their behavior and align themselves toward change. That applies to MNCs, the Chinese government, and e-commerce platforms like Alibaba. Even if MNCs wanted to group together, it is difficult to see what they could do under the current Chinese legal infrastructure; as mentioned before, it is extremely archaic and in need of radical changes. The Chinese government has already taken some steps in this direction, such as their recent white paper against Alibaba and their increased cooperation with the US in cross-border cases, but those measures are not significant enough. The international community and legal advocacy groups must apply pressure on China to revamp its copyright laws, a trend that Mr. Simone hopes will take place in the near future. Otherwise, the copyright issue stands to spread outside of China and into markets around the world.