China has a reputation for counterfeit goods but now its most inventive fraudsters have a new target - consultants’ intellectual property
The phone rings, you answer and it’s a Chinese client following up a tender you’ve submitted. Except you didn’t submit the tender and you’ve never heard of the project. Further conversations reveal the that another firm has submitted tenders in your name. What’s going on?
What is not only going on but is apparently on the rise in China is intellectual property theft. Broadway Malyan first encountered the problem last month, when Chinese impostors cloned its website and submitted a fake project pitch under its name. It’s not alone. Aedas found that a company had registered in the UK under its name, and had bid for work on several projects with the Chinese government. Other international consultants working in China, including Atkins, have experienced similar problems.
For UK architects and engineers, the speed of development in China makes it an extremely attractive destination. But legislation is struggling to keep pace. The country was singled out as the world leader in intellectual property infringement in an EU report published in October 2009, producing 54% of counterfeit goods seized at EU borders. But professional services firms are discovering that they are, if anything, even more vulnerable to fraud, particularly as their intellectual property is their only commodity.
They didn’t go for anything we would go for. it was like they were trying to stay under the radar
David Roberts, Aedas
“It’s cropping up more and more, whether it’s setting up clone websites or reproducing trademarks,” says Steve James, an intellectual property lawyer at Pinsent Masons. “It’s so easy, quick and cheap to create your own website. I have had about 12 different queries on this in the past year.”
A particular problem with IP fraud, especially online, is the difficulty in tracing the culprit. Aedas closed down its clone through the Beijing courts, but was never able to track down the Chinese fraudsters. David Roberts, its chief executive in Asia, said the fake Aedas approached Chinese government clients in second-tier cities, possibly to avoid more savvy operators based in Shanghai or Beijing. “They didn’t go for anything we would have gone for,” he said. “It was like they were trying to stay under the radar.”
Finding out the impostors’ intentions is just as difficult. They may simply have been trying to extort money from clients, planning to continue the deception only until they received a first payment, and then disappear. A more audacious possibility is that they were trying to win work for a genuine architectural practice on the back of a much better known brand. “The Chinese are impressed by the quality of UK architects, which is why this kind of thing is going to happen,” says Chris Hill, a construction partner at Norton Rose. “But I don’t think it will deter UK architects in the long run.”
Imitation may be the highest form of flattery, but could Chinese impostors really convince a client that they were from Broadway Malyan, Aedas, or anyone else? Graham Cartledge, chairman of Benoy, is doubtful. “You would have to demonstrate your knowledge, meet in person and make a submission. This would be extremely difficult to do if you were not the designer.”
Roberts doesn’t believe Aedas’ experience should discourage UK architects from setting up in China. “It didn’t damage us, because we caught it very early on. China is getting very tough on intellectual property rights. The market is maturing, and this is the exception to the rule. The days of bootlegging are over.”
So what can UK firms do if they fall victim to this kind of identity theft? Shutting down a scam website is relatively simple. Hill suggests sending the hosting company a cease-and-desist letter, which may work within a few hours if the operator is based in the US. There is nothing, however, to stop the scammers moving on to a different host. Neither it is an easy matter to bring them to justice for infringing your copyright.
There continues to be a heated legal debate over which jurisdiction crimes committed on the internet should fall under. But if the fraudsters are in China and submit fraudulent information only to organisations within China, UK companies will almost certainly have to seek redress under Chinese laws, which is notoriously difficult. Hill says: “If you try to extend UK property rights into China it won’t work - they are not recognised. There’s very little you can do to enforce against the perpetrators.” As a precaution, firms should register their name and logo as a trademark before they enter the market.
Guidance from UK Trade & Investment (UKTI), which works for the UK government to promote companies abroad, warns that the concept of intellectual property may not sit as comfortably in Chinese culture as it does in the more individualistic UK. Still, UKTI recommends that victims of this fraud report it to the local and national authorities as soon as it is discovered and seek local professional legal advice. “Some companies have issued notices informing their existing clients, to ensure they are not caught by the fraudsters,” says Alastair Morgan, director of trade and investment for China. “Pursuing it through the courts can be a lengthy process, but there are precedents where the fraudulent party has been successfully prosecuted.”
But what is the Chinese government doing?
According to Morag Macdonald, co-head of the International intellectual property group at law firm Bird & Bird, UK companies already enjoy the same legal protections in China as they do at home. The country is a member of the UN’s World Intellectual Property Organisation and has so far signed 16 treaties which bind it to copyright and trademark protection, as well as enshrining an equivalent to the UK concept of “passing off” which protects trademarks even if they are not registered. So if a company is already registered in your name and you can prove an intent to defraud potential customers, you can get it back - in theory.
The problem is there is a gulf between what is codified in law and what is enacted on a local level. However, the Chinese government has made efforts to tackle it in recent years. In October it launched a six-month public awareness campaign. And in a meeting with WIPO last month, vice-premier Wang Qishan pledged to “unswervingly” protect companies’ intellectual property rights.
Over the past six or seven years, Macdonald says China has embarked on a programme to train judges to enforce the laws. “They have been working quite hard, largely because they can see that their own industries are starting to become creative and innovative. There is just as much IP enforcement by Chinese companies as by companies going into China. It is steadily getting better. I’m not saying it’s perfect, but I have yet to come across a system in any country that is.”
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