China cracks down on counterfeit culture

Senior reporter

Apple stores have the same distinctive design style as the company’s products, all clean lines, dazzling white surfaces and polished metal and glass. They’ve become almost as important a part of the technology giant’s image as their shiny gadgets or Steve Jobs’ polo neck jumpers.

So perhaps it isn’t surprising to hear that someone in China has taken counterfeiting to its ultimate conclusion and reportedly opened several fake Apple stores in the city of Kunming.

According to the American blogger who first drew attention to the stores, the branding was so convincing that even the shops’ employees believed they worked for the electronics firm. Crucially though, Apple doesn’t label its actual outlets as ‘Apple Stores’ like the counterfeit operation has, preferring to let its big fruity logo speak for itself.

China has long been regarded as a haven for intellectual property pirates and a danger zone for any company wishing to securely produce or market its products there. Infringing patents and copyrights is ingrained in the economic culture.

I remember visiting Shanghai a few years ago and finding counterfeit goods everywhere. In an upmarket and reputable-looking store on the main shopping street, I was shown through a secret door into an area that was decorated just as expensively as the front showroom but filled with illegally copied DVDs (I didn’t purchase any, I should add).

Despite all this, the reality for firms hoping to operate in China changing. According to Richard Worthington, a patent attorney at Withers & Rogers LLP specialising in engineering and aerospace, the last 10 years have seen the country bring its intellectual property legislation in line with the rest of the world. The challenge now is to get people to use the laws and to make sure they are properly enforced.

But rapid progress is being made in this area too. Last year, China filed the fourth largest number of patents on the planet, while patents taken out by Chinese people around the world has grown by 900 per cent over the last decade to represent five per cent of the global total.

‘Regardless of what the rest of the world thinks, there’s been a big domestic drive by the Chinese to get them to protect their own intellectual property, which has been quite a sea change,’ said Worthington.

‘For a nation that’s built itself on counterfeiting to start thinking about intellectual property and start protecting their own, in terms of a change of mindset I think that’s been quite fundamental.’

A real Apple store in Beijing: companies in China may not be able to get away with blatant counterfeits for much longer

To deal with all this, the Chinese government has had to invest much more in expanding their patent office. Perhaps even more importantly, the government recently initiated a special action programme to crack down on violations, drafting in enforcement officers to work the equivalent of three million office days in the last six months.

‘The scale of counterfeiting that they found was a surprise even to the Chinese so any suggestion that counterfeiting has gone away has been blown out the water,’ said Worthington.

‘But the government is taking it very seriously and has brought prosecutions in 150,000 cases in the last six months, to a value of RMB3bn (£285m).

Given China’s reputation, the existence of fake Apple stores probably won’t shock anyone even if it is remarkable to see the lengths to which someone will go to cash in on a famous brand.

It wasn’t surprising, either, to hear reports that the new Harry Potter film was available as a pirated DVD within days of its release, despite being delayed in Chinese cinemas to make way for a government propaganda film.

But the scale of patent and trademark infringements could be about to drop dramatically. ‘This is the first time the government has taken real positive action,’ said Worthington. ‘You’re now much more likely to succeed in a legal action as a foreign plaintiff against a Chinese domestic citizen.’

Which is great news for British firms eyeing up the Chinese market. But not so good for the company that may be about to get sued into oblivion by Apple.