Overcoming Piracy in China

The growing threat from counterfeiters in the Chinese mainland was the subject of discussions at a licensing workshop held on the second day (July 7) of the Hong Kong Licensing Show 2004.

Mr. Stephen Vickers, President & Chief Executive Officer of International Risk Limited

Speaking at the workshop "Protecting Intellectual Property and Overcoming the Effects of Piracy on Sales of Licensed Goods", Stephen Vickers, President & Chief Executive Officer with International Risk Limited, said counterfeit goods now accounted for a significant market share of many brands. A percentage of revenues of foreign firms are lost to counterfeiting and well-known Chinese brands are also victims. Supported with statistics, he pointed out that 46% by value of all counterfeits seized by US Customs reportedly originated from China in 2001, and the percentage had increased to 70% in 2003.

"The problem of piracy is getting worse, and at an increasing rate. Brand protection and the strategic management of intellectual property rights (IPR) problems remain some of the biggest issues, despite recent moves by China to beef up IPR protection," Mr. Vickers said.

In his presentation, Mr. Vickers told the audience that it was of vital concern for companies to take a strategic approach towards piracy. To achieve risk mitigation, a balance between preventive and reactive measures that could deal with piracy quickly is the key, he continued. "When you have to go to the lawyers, it's already a bit late as the problem (piracy) has happened," he said.

Mr. Vickers went further to explain an integrated plan, which involved defining the counterfeiting problem, objectives and resources to achieve the goals, as well as establishing a program coordination team to combat piracy. He also advised companies to communicate the success of the brand protection and anti-counterfeiting programme through publicising successful raids and other actions. "This move can effectively help demonstrate to the fakers that your company is not an easy target," he said.

Ms. Rebecca Lo, Chairman of the Licensing Executive Society of China, Hong Kong Charter

Meanwhile, Rebecca Lo, Chairman of the Licensing Executive Society of China, Hong Kong Chapter and a partner of law firm Rebecca Lo & Co, pointed out a few steps to protect IPR in China. "Register IP rights wherever possible," she said, "and put in place measures to protect unregistered rights including stating IP terms in employment contracts and taking on assignment of rights back to company."

Dispute resolution is the common issue that foreign companies operating in the mainland often faced, she continued. "Go for litigation or arbitration. Both methods can be used to resolve commercial disputes but only one of them can be chosen. However, arbitration is available only if there is a valid arbitration clause in the license agreement," she said.

Ms. Lo explained that companies concerned about confidentiality issue would tend to choose arbitration, which allowed the parties to have more control over the proceeding. Her recipe for a successful licensing operation in the mainland includes choosing the right licensee, writing a good contract and seeking help from good advisers.

Mr. Danny Simon, President and Chief Executive Officer of The Licensing Group Limited

Another reputed speaker at the workshop was Mr. Danny Simon, President and Chief Executive Officer with The Licensing Group Ltd, a licensing agency representing on a global basis. The core role of a licensing agent is to create synergy between licensors and licensees, said Mr. Simon, who has more than 25 years of experience in licensing.

"In today's market licensing agent services may also include introduction of the property to retailers, negotiation for prime retail exposure, development of promotions, and creation of cross marketing opportunities. Licensing is a marketing tool; a successful license provides the licensee with built-in marketing values, which should help create both product awareness and sales," Mr. Simon said.