Chinese Intellectual Property Violations

Chinese Intellectual Property Violations

Date: January 04, 2008

If you are looking to manufacture your product in China, beware. It seems that no matter where you turn, opportunistic Chinese companies are flat-out stealing intellectual property from American companies, be it in the form of designs, processes, algorithms, and even entire products. In this article we will share several examples of well known products being blatantly copied and explore the rising tide of intellectual property violations being made by Chinese companies.

One prime example of Chinese intellectual property theft is a device called the miniOne. To the naked eye, the miniOne looks identical to the popular new iPhone from Apple, right down to the smooth button-less interface. However, the miniOne offers some things the iPhone does not. It runs popular mobile software that the iPhone will not support, in addition to being compatible with every worldwide wireless provider and not just AT&T. As if that were not enough, the miniOne promises to cost half as much as the iPhone and be available to 10 times as many customers.

Now, the troubling aspect of all this is not the additional capabilities this Chinese company is seeking to add. On the contrary, these are all welcome additions to the sphere of wireless technology. The problematic element is simply the wholesale theft of the iPhone\’s design and aesthetic properties, the “grifting” of its style, and applying it to a separate product as though it were their own.

But the intellectual property violations do not stop at iPhone clones. Vehicles are another prime target for cloning and cheap resale by Chinese entrepreneurs. Take the Laibao, for example. It’s a small SUV that would pass to any casual observer for a Honda CR-V. Indeed, many in the automotive industry speculate that the engineers at Laibao simply copied the CR-V, virtually part for part, in creating their own car. Or take the Geely Meerie, a carbon copy of a Mercedes C-Class. All the style and sophistication of Mercedes for a fraction of the price: 120,000 yuan, or $15,000 US dollars to be exact.

However, the problem of cloned vehicles is made most clear by the “sweet spot” of the Chinese market; vehicles that sell for around $5,000, which is just a bit shy of the typical middle class Chinese family\’s income. When it comes to this segment of the market, the Chery QQ is top, front, and center.

The QQ is a part-for-part clone of a car known either as the Daewoo Matiz or the Chevy Spark. (The actual car is a joint venture between General Motors and the Korean company Daewoo.) In fact, Sparks are sold worldwide. In the United States, an upgraded $10,500 version called the Aveo is cheaper than any other car available. This helps explain the astonishment of American officials when the rock-bottom priced $5,000 QQ first surfaced on the marketplace in 2003. The shock and awe of Congressman James Sensenbrenner (Wisconsin) after a 2004 jaunt to China sums it up:

“If you didn’t have name tags on the cars, you couldn\’t tell them apart. It’s such a good knockoff that you can pull the door off the Spark and it fits on the QQ, so close that the doors match right up.”

Clearly, the complete and shameless cloning of other companies’ products for cheap resale is an alarming problem in the IP community. To understand all the developments that led up to the present state, it helps to analyze the history of IP theft in China. In fact, the problem evolved through several distinct stages on its path to today’s frightening condition.

Chinese industry did not become capable of piece-by-piece cloning overnight. Far from it. A report from consulting firm A.T. Kearney segments the growth of China\’s clowning prowess into five separate periods. The first period was the 1980\’s, marked by primitive, fragmented efforts to produce cheap textile knockoffs like t-shirts. Few were alarmed at this point because the violations in question were trivial. The second period ocured during the 1990\’s. Clothing and accessories were the primary focus of this period as well, but with a twist: high-quality merchandise fakes from Reebok and Nike began to flood the market and gain acceptance by budget-minded westerners. By the mid-90’s, Chinese copycats had moved from simple trademark infringement to low-end tech wares: things like Duracell batteries and DVDs.

From this springboard, says the study, an era of “advanced technology piracy” was launched. Difficult-to-detect knockoffs of Callaway golf clubs, counterfeit auto safety class, and other products appeared beginning in 1998. And by the new millennium, Chinese piracy had become so adept at cloning that they successfully duplicated Intel computer chips, Viagra sex tablets and Bosch power tools.

One practical way that Chinese cloners go about their actions is using “ghost shifts.” That is, a factory contracted out to make authentic goods moves to a 24 hour operation, during which it pumps out copies. Some may be made with inferior materials, others are made properly, but all are destined for sale on the black market: from midnight until morning. The only problem with ghost shifts was that they could not run full time. To solve this problem, developers began in the mid 90’s to build shadow factories – entire plants identical in composition and function to the original, often created from the very same blueprints that actual manufacturers used to launch. Using these and other tactics, the Chinese are literally siphoning American brainpower and innovation into their own pockets by way of making cheap knockoffs.

Clearly, this is a serious problem that anyone involved in intellectual property would do well to be mindful of. Chinese IP violations could create a whole host of adverse incentives for inventors if the problem is not addressed.

Luckily, there are still reliable Chinese Manufacturer representatives out there that can help inventors and companies take advantage of the pricing benefits that Chinese manufacturing can offer. However, be sure to conduct due dilligence to protect yourself from predatory manufacturers. Request references from their current clients and ensure that all of your proper documentation is in place. Ideally, try to find an American manufacturing representative (US Citizenship) that is on site in China. This typically reduces much of the friction in doing business overseas.

Eric Corl is the President of Idea Buyer LLC, a new product development company that operates, marketplace for new technology and products that gives inventors the opportunity to showcase their intellectual property to consumer product companies, entrepreneurs, retailers, investors, and manufacturers. You can email him You can visit the site by clicking here >New Technology and Products, Patents for Sale