China

The Benefits of Chinese Piracy

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Via Alan Vanneman comes a link to this super-interesting story in Foreign Affairs.

It's about the benefits that come from China's brazen disregard for international intellectual property laws. Some excerpts:

American anxiety and anger over Chinese piracy are misplaced. Copying is not the plague that American business leaders and politicians often make it out to be. In fact, far from always being an enemy of innovation, copying is often a critical part of creativity. Although copying has a destructive side, it also has a productive side. Nearly all creations rest on prior work, and the ability to freely copy and refine existing designs fuels fields as varied as fashion, finance, and software. Copying can also foster stronger competition, grow markets, and build brands….

In 2012, Beijing Review recently reported, Bentley Motors sold 8,510 vehicles worldwide, of which 2,253 were sold in China, making it the brand's second-largest market. Even for Apple, the land of the HiPhone is lucrative: Apple's business in China is worth nearly $25 billion annually, second only to its business in the United States. Moreover, China was the only place in the world where Apple's sales grew in the first quarter of 2013.

In this way, China's knockoff economy allows products to filter down to average Chinese people—sometimes improving along the way—and in the process helps China and Chinese firms develop and compete in the near term. In the longer term, open copying may build demand for Western innovations. As Microsoft's co-founder Bill Gates—not one known for his lenient views on intellectual property rights—famously said of Chinese software copying, "As long as they're going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade."

Read the whole thing.

And watch Reason TV's interview with UCLA's Kal Raustiala, author of The Knock-Off Economy:

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  1. That seems to be a benefit to society as a whole, which is great if you’re a communist, but I’m not seeing too much of a specific upside for the businesses whose products are being copied.

    1. Merchantilist!

    2. Bill Gates wasn’t clear enough? If a producer is going to be cheap and copy something, isn’t copying yours better than copying someone else’s?

      If there is going to be cheap product sold, you’re not getting any money from it no matter whose stuff is copied, or, indeed, even if it is A-1 original uncopied cheap product. But if cheap products make the consumer think of your products more than someone else’s products, then you are better off than if they didn’t.

    3. Wouldn’t one benefit be the branding of their product? People go to China Town in NYC knowing they can get a knock-off Rolex or Louis Vuitton, but they also aren’t kidding themselves that it’s the real thing. So Louis Vuitton and Rolex can continue to charge high prices because of the name value their product brings.

    4. Estimates are that my companies’ revenues would be about 60% higher if all our software that was used in China was actually purchased from us.

    5. so only a Communist could have reservations about IP law? nevermind all the strong libertarian cases for the abolishment of most IP statutes.

  2. I want one of those fake CRV’s.

  3. in the world of high-end audio, Chinese knockoffs are rampant.

    But buying a EL34 amplifier for less than $400 – including a gold chassis, blue LED lighting, etc – is hard to resist. I bought one and was pleasantly surprised – best amp ever? no, but it was damn good for the money.

  4. I hate to say it, but the Facebook movie is what made me come around to the idea that copyright laws are bullshit. One line from the movie: “If you guys were the inventors of Facebook, you’d have invented Facebook.”

    While I respect the idea of someone being paid for their work and contributions, that doesn’t give them a monopoly on an idea. They shouldn’t be able to produce something and then ride that out for 25 years never trying to improve the design or product based on consumer desires. Look at Sony after producing the Walkman. They should have had the iPod a decade before Apple released theirs, but they got lazy and stopped innovating because they went from the Walkman to the Discman and didn’t see the mp3 change on the horizon.

    1. The e-music Walkman actually predated the iPod if memory serves. The problem is that Sony decided to make them mp3 incompatible to avoid breaking copyright and keeping music sale profits in-house (similar to Apple, but their proprietary format obviously never caught on).

      The current Walkman MP3’s are superior to iPods in my experience. It’s a shame for Sony that that doesn’t really matter anymore. Also, they don’t have that stupid iPod wheel, which is a huge plus. God, I’ve always hated that thing.

    2. “They shouldn’t be able to produce something pick the right stock and then ride that out for 25 years never trying to improve the design or product based on consumer desires making another trade.”

      Not quite a FIFY, but submitted for discussion. What’s the difference between making the stock deal of a lifetime and patenting one incredibly valuable idea? I presume we wouldn’t support intervention to force the sale of your assets at a “fairer” price; what about IP makes it okay to allow others to take for free? Is it only the non-material nature of it?

      1. Probably the non-rivalrous nature of it, Xeno. You can make more stock, but that just dilutes the value of everyone else’s shares. Making more unauthorized copies of the same work only dilutes the value for the inventor.

        I support patent, and copyright, but think that both in the U.S. have gotten extremely out of hand. Especially copyright.

  5. i look forward to the Chinese knock-off Reeson and its provocative blog Hat & Ram

  6. If the Chinese knock-off includes alt-text, I’m in.

  7. This is why as a manufacturer/designer it’s dangerous to sell to the Chinese. When I was working as an engineer, we were under contract to develop a product for ZTE. We did the design work, developed the prototype, and sent it to them for review. They come back 1 month later with a quote from some unknown company to manufacture the same thing at half the cost. Turns out they had taken the prototype, created a company under the wife of the CEO of ZTE’s name, and copied the design.

    Moral of the story – Never provide any tech to the Chinese unless you have a contract that covers your ass. And if you’re a foreign company, forget it, because no Chinese court will uphold the contract.

    1. We refuse to do any business in China until we get paid upfront.

    2. This is the lesson that everybody who paid attention should have learned from Motorola’s example 20+ years ago.

      1. Exactly. It is no coincidence that Motorola insisted that we manufacture in China in order to retain them as a customer. They knew that our designs would get out and they would have lower cost sources to get their product from within a year. In fact, Motorola made it a habit to send competitor’s products to each other “accidentally” to make sure it happened.

    3. You don’t have to sell them anything. They’ll buy your product on the open market and copy it if they want to. I know of a Canadian exporter who was copied this way. Then started importing the Chinese copy and made even more money!

      1. In this case, it was a custom product for their cell towers. Lesson learned.

  8. I also find it funny how many people think that speaking Mandarin is a useful skill. I fell for that 30 years ago just to find that 1/4 of the human race already speaks Chinese in some form. These days they can always come up with a native Chinese speaker who speaks the target language to some degree of fluency.

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