While China continues to develop its intellectual property (IP) rights governance rules, its historical problems in protecting these rights mean significant numbers of international observers still consider China untrustworthy.

The fact China is having trouble shaking off its poor image was demonstrated in a recent survey that polled 1,000 companies with more than 500 employees each. More than one-third of respondents said they were not confident they could protect their IP in China.

Benjamin Bai, of the law firm Allen & Overy, which conducted the survey, explained in an announcement that the findings showed that China was still struggling to shake off its "long-held (dismal) reputation," despite making an effort to improve protection.

Ironically, the sentiment of untrustworthiness is somewhat challenged by recent history, including the fact that China registered the highest number of IP-based lawsuits in the world last year. There were 42,000 lawsuits filed, and the success rate for the multinationals that filed was between 60 and 90 per cent. In the United States and Europe, the usual success rate is below 60 per cent.

"There are many risks (with the mainland market), but the biggest risk of all is the failure to understand and embrace the system," Bai said of China's intellectual property regime. "Another important lesson is (companies must) tailor their expectations."

Elizabeth Thomson, President of ICS TRUST, echoes these sentiments. “The lack of confidence in China’s IP rights rules tends to result from people failing to understand and effectively use the IP regime in China,” she says. Thomson noted there are significant benefits to working with ICS TRUST to take advantage of the company’s expertise with the rules and regulations involving IP rights in both Hong Kong and China. As part of its IP services, ICS TRUST assists companies to register their trademarks in both Hong Kong and the P.R.C.

Also weighing in recently on the issue of IP protection was the U.S.-China Business Council, which pushed China to expand enforcement of IP rights and to adopt international standards on criminal penalties for violators. China has indicated it would soon make announcements on stronger protection measures for foreign companies.

According to a research report by the Hong Kong Trade Development Council, in 2010 more than 750,000 patent applications were filed in China, up dramatically from about 289,800 in 2008.

By Herb Shoveller