Ties That Bind - Bay Area Council Economic Institute

Managing IP Value
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Ties That Bind
In a 2005 report, “Redefining Intellectual Property Value: The Case of
China,” PriceWaterhouseCoopers analysts Chris Cooper, Ken DeWoskin,
David Hoffman and Alan Morrison examine the state of IP in China and
offer a new perspective on retaining value and preserving competitive advantage
in a volatile emerging market. Portions of their paper are excerpted below.
China’s emergence as a manufacturing power has benefited
multinational companies (MNCs) seeking to leverage its lowcost
labor force and seemingly unlimited capacity. Outsourcing
low-value manufacturing operations to China enables corporations
to pursue value chain specialization, focusing more of
their energies on high-value activities such as marketing and
R&D. China in turn has come to dominate outsourced manufacturing,
supplying as much as 50–80% of global production in
many product categories.
The evolving U.S.-China sourcing relationship has transformed
how products are developed and, even more importantly, how
they are valued. Beyond that, it has altered the structure of
supply chains, the segmentation of value chains, and the
relative value of the hard and soft constituents of products
and services.
Certainly, low-cost manufacturing has accelerated the devaluation
of many product categories, yet this impact is only the most
obvious one. China’s unique relationship with countless MNCs,
as a global manufacturing partner and an emerging competitor,
is altering established conventions about the definition, role,
and protection of intellectual property (IP). The growing capabilities
of Chinese manufacturers, combined with their rapid appropriation
of IP (through both legal and illegal means) are
having an unprecedented impact.
Chinese manufacturers across industries have been able to
acquire IP and apply it quickly in export markets. With rapid
capacity increases in the country and non-economic practices
that are the legacy of state-owned enterprises, the resulting
market volatility can undermine the ability of companies to seek
redress when their IP rights are infringed. Even in places where
administrative and legal procedures are well established, companies
may not have the time to enlist government help quickly