Intellectual Property Rights in China: Evolving Business and Legal Frameworks
NBR Analysis vol. 10, no. 2

Intellectual Property Rights in China
Evolving Business and Legal Frameworks

by Donald Clarke and Barry Naughton
April 1, 1999

Protection of intellectual property remains extremely important to foreign companies contemplating business in China and to China’s own efforts to promote the rule of law as a means to spur economic development. China’s accession to the World Trade Organization (WTO) on commercially viable terms requires, inter alia, compliance with WTO standards for protecting IPR. In the mid-1990s the Chinese government launched a major effort to expand its administrative capabilities to protect intellectual property. Legal and economic institutions (e.g., courts and markets), however, could be more sustainable sources for the development of a sound IPR regime in China. The articles in this issue of the NBR Analysis explore these underlying forces.

In the first essay, Professor Barry Naughton of the University of California, San Diego illustrates how transnational production networks¾ in which mainland Chinese firms are important participants¾ both require and promote enhanced protection of patents, copyrights, and associated forms of intellectual property. Professor Naughton points out that the “critical technologies” model of technology absorption, in which a developing country identifies and transfers technologies pioneered in the developed world, and then attempts to emulate production processes, has not been successful in China. He argues that China would benefit by an approach based on its role in transnational production networks, in which firms can become domestically and internationally competitive by successfully developing skills at the most appropriate stages on the value chain.

The second essay, by Professor Donald Clarke of the University of Washington School of Law, addresses the need in China to strengthen private and decentralized IPR enforcement. Such measures provide companies and other nongovernmental parties with the incentive and the ability to protect intellectual property through courts and other private remedies. Professor Clarke recognizes that there will be significant challenges to private enforcement of IPR, including the weakness of the courts themselves. Nevertheless, in the long run private mechanisms would be far more effective because they would give courts power to resolve disputes directly, avoiding bureaucratic channels of policymaking and implementation. He urges international trade negotiators, as well as the Chinese, to focus more attention on courts and private enforcement mechanisms, instead of on political and administrative methods of IPR protection.