Tackling China’s Intellectual Property Industry: Q&A With The Director of The Intellectual Property Group

China’s counterfeit culture has earned the country the reputation of being a place where execution trumps innovation and no design is sacred.

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Dean Arnold, the co-founder and director of The Intellectual Property Group

That doesn’t mean that China’s intellectual property (IP) industry is a total free-for-all. In fact, the country’s State Administration for Industry and Commerce (SAIC) has started cracking down on counterfeit goods, particularly those found on e-commerce sites such as JD.com and Taobao. Last year, the SAIC ran a campaign from July to November to purge counterfeit goods from online platforms, holding platform operators responsible.

It’s an important direction for China’s e-commerce giants to move towards, especially as more Chinese companies eye overseas markets, which are less tolerant of fake goods and copyright infringements. An increasing number of Chinese companies are also looking at IP monetization opportunities in film, gaming, and other content. In addition, more and more Chinese companies are leveraging patents to take down and challenge global competitors, such as Apple and Samsung.

Protecting IP rights (IPR) is a good business for companies like The Intellectual Property Group, which works with IP owners, such as international brands, and ISPs (Internet Service Providers) to resolve IPR violations that happen online. Most of the work is technical, and the company is even investing in its own SaaS platform to standardize and automate more of the IP takedown and mediation process. However, The Intellectual Property Group will also visit factories and physically track down violators. In China’s developing IP industry, offline negotiations are sometimes unavoidable.

TechNode sat down with Dean Arnold, the co-founder and director of The Intellectual Property Group, to glean insights on the challenges and dynamics of China’s IP industry.

1. What is one of the major pain points of the IP industry?

The fact that there are 600,000 web hosts in the world, [and] 1,500 domain name registrars. We estimate there’s […] more than 1,800 [General Merchandise Value] platforms globally.

This industry doesn’t have standard behaviors or [a] platform. […] You have to reach out to every one of them individually. You have to track them individually. They all have different policies and formatting requests. Most of them have none. Most of them have no IP policies or procedures in place. For a lot of them you’re lucky if you can even find their ID and email address to contact them.

2. How is The Intellectual Property Group able to physically track down IPR violators in China?

The guanxi and the relationships. I used to think that was so cliche but time and time again, I’ve seen it. It makes a big difference.

Even though […] there’s a lot of fraud in this industry, and even though […] part of our appeal is we’re an international company and we share the same ideals, […] even when you’re acting with all the best intentions, […] you still can’t achieve legitimate results […] without being able to call someone and have contacts, or police being cooperative. It’s about relationships.

[Also], we have a team. It’s a seriously hard-nosed job. The guy that runs that department for us [was] an ex-police[men] for nine years.

3. Taobao gets a lot of flack for counterfeit goods, but what about WeChat stores (微商) on WeChat?

Anyone can sell whatever they want on WeChat. […] It’s literally as easy as getting on, buying a SIM card anonymously, creating an account on a phone, and getting to know people, getting involved in groups.

You can’t really hack that process – it’s a bit of a slow uptake – but then you can list photos everyday in your moments, and […] you’re reaching people regularly. You’re completely anonymous and you can take a payment right there, or you can move to another platform like Weibo.

Let’s say you find a potential supplier you want to work with on Taobao. You ask for their WeChat, they give you their WeChat, [and] you deal with them directly. You can’t trace them back. There’s no cooperation [from ISPs] to trace them back to an actual person. [It] would have to be a pretty grievous, something really concerning safety like pharmaceuticals or something sensitive, and then you could probably expect the cooperation of the ISPs then but for [everything] else, no chance.

4. Why is now a good time to build a platform to help protect IPR?

There’s going to be be billions more people coming online and they’re going to come from developing countries. They’re less sophisticated consumers when they get online, and they don’t have money. When they get online they’re going to buy fakes, they’re going to steal content. It’s as simple as that.

In the new economy, e-commerce is going to surpass physical retail. […] If you can stop people from trading online, they can’t reach new business. And as a global economy, they definitely can’t reach international. If they’re only reaching local communities through physical outlets, they’re not serious players and they’re not a big headache for the IP owners.

5. What’s something you’ve learned from working in this industry?

Here’s the big secret in the business: Chinese buyers are not stupid. They’re extremely smart. They’re extremely skeptical. Their whole life they’ve been dealing with fakes […] and they’re very, very savvy. Everyone knows that you don’t go to Taobao to buy a […] genuine luxury handbag. If you’re going there to buy luxury handbag, you probably want a fake one.

I think in foreign countries, people get duped into buying counterfeits a lot more. […] They’re kind of protected from that [..] over there. For example, […] perhaps they […] come across a Chinese website. They don’t even know it’s from China, but they just think, ‘hey this is like $100 cheaper.’

I think that Westerners not being exposed to fakes and fraud as much as Chinese [are] just so much more easily duped into buying stuff.

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