Redefining intellectual property value: The case of China

October 2005
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Redefining intellectual property value

At a glance

The PwC whitepaper Redefining intellectual property value: The case of China, is an in-depth report addressing the issue of growing intellectual property vulnerabilities that are of concern to many companies, including those in the pharmaceutical, software, electronics, consumer goods, and entertainment media industries.

How companies evolve their strategies to preserve and maintain IP value is the subject of Redefining intellectual property value: The case of China, an in-depth report addressing the issue of growing IP vulnerabilities that are of concern to many companies, including those in the pharmaceutical, software, electronics, consumer goods, and entertainment media industries.

China's unique relationship with countless multinational companies (MNCs)—as both a global manufacturing partner and an emerging competitor—is altering established conventions about the definition, role, and protection of intellectual property (IP). The rapidly growing capabilities of Chinese manufacturers, combined with their rapid appropriation of IP (through both legal and illegal means) are having an unprecedented impact. The effect is transforming the structure of supply chains, the segmentation of value chains, and the relative value of the hard and soft constituents of products and services.

Though the country's influence on IP protection practices is undeniable, other factors have also played a role, including the converging forces of the PC marketplace, distributed processing, new research and engineering technologies, and even the ability to raise vast amounts of capital on equity markets for relatively immature companies. Regulators, trade negotiators, and courts continue to struggle to define what can be protected and how protection is to be measured and enforced across a wide range of categories.

The result is a turbulent, high-risk IP environment that may persist for the foreseeable future. And it is not confined to only China; the country's own global expansion initiative has forced the issue to become one of global importance. Thus, regardless of whether a company is doing business in China, it must adapt to these significant changes.

Many people assume that China will eventually conform its IP regime to international standards and begin to protect individually held IP with the help of an improving legal system. The evidence gathered for this report supports the view that IP may actually become more vulnerable to exploitation as China's power and influence grows. As a result, the report recommends that MNCs focus on IP value management strategies, which are ways to preserve IP value that go beyond legal means to involve the core operations of the enterprise.