IPR Protection: Beyond Law and Enforcement

In the Hutong

Sore from power-walking

1635 hrs.

In conducting my technology and intellectual property rights (IPR) panel with the Notre Dame Medoza b-school students last week, I realized in the midst of Eric Priest’s comments that the problem of IPR protection in China was too often painted as a two-dimensional issue.

Laws, cops, and jails

The first dimension is law, or the extent that China has on its books the statutes, treaties, regulations, and administrative procedures to protect patents, trademarks, and copyrights. I’m no lawyer, but I defer to the three attorneys on my panel (two of whom were Ph.Ds) who seemed to agree that the legal structure to protect intellectual property rights is in place in China.

The second dimension (and the one that gets all of the attention) is enforcement. Okay, China, the world seems to say, you have all of these wonderful laws to protect intellectual property of all kinds. So why are companies, individuals, and institutions violating these laws everywhere in China with seeming impunity?

And here we have the problem. The lawyers, organizations, and government negotiators fighting to protect intellectual property rights in China are focused on getting more cops to shut down more factories, arrest more people, jail them longer, fine them more, and prove to the rest of the population that messing with intellectual property law is a ticket to jail. They use that old logic “kill one to save a hundred.”

As much as it might enrage some of those defenders of intellectual property rights to say this, there are not enough cops, jails, or judges in China to end the problem purely by judicial means. (In fact, I’d suggest that even in the most developed societies, the tools of enforcement were only ever meant to be used in the relatively rare cases of overt, commercial violation of patent, copyright, and trademark laws.) And there never will be.

The Law is Not Enough

Eric Priest, one of my co-panelists at the Notre Dame seminar, is a trained lawyer with two law degrees, and even he is impatient with those who leave the IPR to their attorneys:


“Both domestic and international entertainment companies have tried the litigation path in China with little success. Major Chinese search engines like Baidu.com and Yahoo.cn have deep pockets and are far and away the most popular channel for accessing free music files online in China, so they were natural targets for contributory infringement suits. But murky legal issues (Baidu won on appeal because the court found it only aggregated links to content but did not in fact serve the content itself, while Yahoo.cn was found iable for infringement under similar circumstances) and notoriously low damages for infringement available under Chinese law have left copyright owners with little recourse, and emboldened internet companies to continue to conspicuously serve up free, unlicensed content.”

Eric suggests that the better approach is to create business models that ensure compensation for the artists and labels as well as the company profiting from their distribution. In the paper he lays out three potential business models that could be used in China. Without doubt, new models need to be created, tested, revised, and perfected, and therein lies a major part of the opportunity.

The problem with the model approach is that any new model hoping for adoption must deliver a experience that is superior for the consumer to the model it is replacing. A painful number of models fall short of that promise. Some of the largest companies in the world have failed to deliver a superior book-reading experience on a mobile device, and the jury is still out on Amazon’s geographically limited (and still expensive) Kindle. Conversely, home video has taken off because it offers an experience that is in many ways superior to the cinema. And iTunes turned music downloads into a mainstream experience.

In China, technologists cannot stop at creating business models that satisfy the music supply chain: they have to offer something that is so much superior to free music that people will be willing to pay for it. And then the people will need to be sold. Ask Steve Jobs: even the best experiences in the world don’t sell themselves. For all of its virtues, Apple had to market the hell out of the iTunes experience to drive uptake beyond an initial core of users. Success for any business model will require a greater effort still.

Win their hearts and minds and their wallets will follow

Which brings us to my point. As much as lawyers may wish us to believe that law and enforcement should be adequate, as much as engineers may wish us to believe that technology offers a silver bullet, as much as entrepreneurs believe that smart models are the solution, they are all ignoring one more important piece:

Compliance. Voluntary compliance.

I’ll put that in short words: people have to want to do the right thing. Then you have to give them an opportunity (business model.) Then you have to make non-compliance inconvenient (DRM, or something better that replaces it). Then you have to make breaking the law downright costly (laws/cops/courts/jails/fines). You need every element in that chain if IPR is ever to have any value. Because you can put all of the technical and legal solutions in place that you want, but until you have convinced the consumer that compliance is in his best interest, too, he or she will find ways around it.

You make it personal. You make it meaningful. You make a civic and more importantly a social virtue out of compliance. You make that individual feel like he or she is doing something important every time they lay cash down for something they could get for free. No. I will not do that. It’s not right.

Is doing that going to be easy? Absolutely not. This is what management texts refer to as “a big, hairy-assed goal.” But the industry uses the size of the task to justify not undertaking it. They tell themselves “it is too hard. You cannot change Chinese culture, and anyway it is easier and cheaper to hire more lawyers and get our industry associations to talk smack about the Chinese government in congressional hearings.”

Yes, it will be a long, difficult, and costly process, but so is the current effort to push for enforcement. The industry has spent millions pushing for better laws in China. It is spending tens of millions on enforcement and litigation. How much is it spending on getting people to want to pay for something they are used to getting for free?

It may take a generation or more to change the way people behave. But it can be done, and it must be done if artists – songwriters, composers, and performers – are ever to have a trade in China, and if the music business as a whole is ever to thrive.

And the time to get started is now, if not sooner.