21 Sep 2011

Intellectural property protection for U.S. cleantech entrepreneurs in China – waning hopes

Written by Jim Pierobon

From this week’s RETECH conference and expo in Washington, DC, there seem few realistic aspirations for energy, clean tech and other entrepreneurs to protect their intellectual property if manufacturing in China or selling to Chinese markets. It is the 600-pound gorilla at just about every conference gathering with an Chinese dimension to it.

ACORE is working diligently to improve collaboration between China and U.S. renewable energy companies but progress seems very slow in coming. Credit: ACORE and the TradeFair Group

While moderating discussions about China-U.S. cooperation in renewable energy at a pre-conference workshop this week, Stanley Merritt, Global Business Development Manager at DuPont, struggled to juggle the competing interests of companies from each country. And it is no wonder. The cross-currents and body language personified the risks and challenges facing technology companies. Merritt acknowledged to many attendees there is no easy answer. You can track efforts by the American Council On Renewable Energy’s U.S.-China Program in cooperation with the Chinese Renewable Energy Industries Association here.

For now, the most prudent approach is for U.S. companies to partner with a company in China. But check the fine print, in both languages, about how much protection that affords. One workshop attendee admitted a client’s “collaboration” agreement, when push came to shove, it wasn’t worth the paper it was printed on.

Since joining the World Trade Organization (WTO), China has strengthened its legal framework and amended its intellectual property rights and related laws and regulations to comply with the World Trade Organization’s Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs). Even with that in place, many experts agree that China continues to be a haven for counterfeiters and pirates.

According to one industry association, the piracy of copyrights in China remains one of the most egregious in the world (over 90 percent of products marketed there). U.S. companies lose more than $1 billion dollar in legitimate business each year to piracy. On average, 20 percent of all consumer products in the Chinese market are counterfeit. If a product sells, it is likely to be illegally duplicated.

According to some assessments, including this recent editorial by The New York Times, the situation is getting worse, not better.  “For all the new agreements, stringent protection of foreigners’ intellectual property is at odds with China’s development strategy,” the Times’ editors wrote.

“Foreign companies operating in China complain that Beijing views the appropriation of foreign innovations as part of a policy mix aimed at developing domestic technology. . . . intellectual property theft  . . .is tacitly supported by Beijing, and includes forcing foreigners to disclose their technology in order to gain contracts.”

One Maryland based entrepreneur with an interest in manufacturing — in China — smart energy controls aimed at residences is wary of accepting attractive inducements to build a factory because he cannot protect the technology. “They/us are making very little progress on this front,” the entrepreneur said. “They have bigger priorities – like jobs, economy, exchange rates, exports, imports, human rights, etc. Patent laws are the last on their priority list. They/us have ‘agreed to disagree’ and life goes on.”

“So for businesses like us,” he added, “we are in limbo.”

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