IP Protection in China the Hon Hai Way

Sunday, July 20, 2008 5:30

In terms of general business discussion, there are fewer topic discussed more than the protection of IP in China.  Government leaders press the issue when they visit China, chambers of commerce arrange events to impart knowledge, law firms have specialize around this issue, and every once in a while we see a news piece on a raid.

This week the news piece is about the problems that Hon Hai, a major investor in China, has run into with one of their mainland competitor BYD, and this is a story that I would recommend everyone read as there are some very important things to take away.

First is that the problem of IP theft is not just a problem for western firms who are contract manufacturing in China.  It is a problem for even China’s largest investors.

Second – IP is not just a matter of creating a culture of secrecy where you keep employees in the dark, it is closely tied to corporate HR.  It is about making sure that your employees are happy, paid well, and will not be poached.

Third – this really isn’t a China issue at all.  while I was at Thunderbird I took a class called Business Intelligence, a course in corporate espionage, where we learned the various ways of collecting information.. and the various ways for protection information.  to drive these concepts home, my professor often drew on the fact that Unilever and P&G were constantly suing each other over IP theft.

Fourth – If you want to remain competitive, you need to keep running.  Developing new products is the only way, and this is not just because an employee takes a product design to a competitor.. it is the world we live in where product reviews, tradeshows, blogs, and global distribution give every product the ability to crisscross the world freely… and that means that more people can take their shot.

No doubt, this problem is one that has an impact on business i China, and it is an issue that needs to be addressed.  We are seeing cases of Chinese firms suing Chinese firms on a higher level now, and many will say that is a good step. The key for companies here is to register patents, monitor markets, and continue to push the legal system to produce results.

Pepsi once sued a distributor simply to set the precedent.  They knew they would not recoup the lose, but they set the stage for others to follow… and Hon Hai is doing that here

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One Response to “IP Protection in China the Hon Hai Way”

  1. FOARP says:

    July 30th, 2008 at 10:27 am

    As a former employee of the in-house IP office at the Foxconn (Hon Hai’s oversea trading name) plant in Shenzhen, I can tell you that I was on more than one occasion approached by ‘researchers’ offering money for documents. Now, I was not dumb enough to accept, but none of the card-entry/document-control/security guard systems in place at the plant would have stopped me had I been so inclined.