Ties That Bind - Bay Area Council Economic Institute

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Ties That Bind
ties. Another common practice is IP mining—obtaining another
company’s IP illegally in one country and then using it without
penalty in other countries where legal systems are poor and IP
rights enforcement is non-existent.
China’s challenge to global IP practices began primarily in
China’s domestic market and has migrated to foreign
emerging markets where IP protection is weak or nonexistent.
Emerging markets are often of limited commercial
interest to MNCs, which might not bother to register trademarks,
copyrights and patents in them. There may also be
countries where commercial involvement is difficult or illegal.
China’s development strategy includes the idea of “eating
global giants from the feet up”; that is, becoming engaged in
and gaining significant shares in emerging markets where
global corporations are not yet interested. Chinese companies
with IP liabilities—primary commodity refiners or automotive
and IT equipment manufacturers, as well as media and pharmaceutical
counterfeiters, are actively selling products and
building plants in these locations.
Recommendations
The following is a summary of key IP value management recommendations
contained in this report:
� Assume that the IP challenges in China and other
emerging low-cost countries will not be significantly
mitigated for many years.
� Reduce dependence on conventional IP protection
mechanisms.
� Create and preserve IP using a value management
approach that attunes core operations to the task.
� Defend global markets by anticipating and responding
to changes in emerging markets.
� Maximize manufacturing flexibility to preserve the
value of innovation.
� Tailor pricing and marketing to fit accelerated versioning
capabilities.
� Increase service capabilities to preserve product value.
� Consider merger and acquisition (M&A) and partnering
activities that can take IP infringing capability out
of the market.