It is a well-known issue that some Chinese companies do not acknowledge or respect intellectual property laws. In the United States there are four different types of Intellectual Property Laws:
Intellectual property laws are only valid within the United States, but worldwide there are Intellectual Property Rights.
Intellectual Property Rights (IPR’s) have been and will continue to be an issue for foreign companies operating with Chinese borders, despite the fact that China joined the World Trade Organization and upon joining, pledged to recognize, enforce, and respect all IPR’s. The Chinese government is working hard to enforce all IPR’s; however there are a high amount of black markets where pirated software and counterfeit goods are sold. Another type of intellectual property theft that has been on the rise in China is occurring when Chinese companies hire licensee employees working in China for American companies to expose and share an American company’s trade secrets. This can be very damaging to American products and needs to be watched out for.
Microsoft recently filed a lawsuit based on piracy against Shanghai Gome and Beijing Choayang Buynow. Microsoft discovered pre-installed versions of Microsoft Office and Microsoft Windows on computers sold in both stores. This will be the first time Microsoft is filing a lawsuit against retailers based on piracy, but it will not be the first time Microsoft has filed or won lawsuits against software pirates. When shopping in China, consumers also need to beware and watch out for counterfeit goods. There was a fake Apple store discovered in Kunming, did you buy an Apple product there? It might be a fake.
Intellectual property rights violations can affect your supply chain immensely because you may never know if a Chinese company you are working with respects IPR’s, and if they don’t respect other IPR’s, why would they respect yours? If a company in China is found to not be respecting IPR’s there is the risk they will be shut down, and your product will no longer be produced there. If this happens, you will have to conduct negotiations with a new Chinese manufacturer, and this can be very time consuming leading to lost revenue. Before going into business with a Chinese manufacturer you need to be sure that they respect all IPR’s.