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Apple Girds Itself With Chinese Patents to Knock Knockoffs

By John P. Mello Jr. MacNewsWorld ECT News Network
Sep 23, 2011 5:00 AM PT

Despite the audacious activity of product pirates in China, Apple continues to battle the buccaneers by a variety of means, including obtaining patents on its intellectual property from the Chinese government. Some 40 such patents were approved by the government earlier this month, according to a report Thursday in the China Daily.

Apple Girds Itself With Chinese Patents to Knock Knockoffs

Most of the patents deal with various aspects of the company's mobile phone, the iPhone, but there were some patents in the mix on the iPad and MacBook Air too, as well as on certain architectural aspects of the company's retail stores.

In July, Chinese authorities inspected some 300 shops in Kunming after an American blogger living in that city wrote about a knock-off Apple store that was so carefully copied that even the employees thought they were working for Apple.

"They were 95 percent like an Apple store selling at 50 percent of the price," Carl Howe, research director for the Yankee Group, told MacNewsWorld.

Apple products are some of the most coveted in China -- so coveted, in fact, that knock-off artists will introduce new products from the Cupertino firm before it does. For instance, fake iPhone 5s have been spotted in Chinese markets selling for US$30 to $125. That model of the iPhone isn't expected to be released for several weeks.

Windows for $5

Patents alone, though, probably won't make a dent in Apple's piracy problem in China, according to Howe. "Piracy is by its very nature ignoring intellectual property, so granting intellectual property doesn't prevent piracy," he said.

Enforcement of intellectual property rights in China is challenging for everyone, not just Apple, he noted. "Go into any city in China and you can buy hundreds of five-dollar copies of Windows," he observed. "It's been Microsoft's primary enforcement challenge for a long time."

One advantage Apple has over Microsoft is that Apple's operating system is tied to its hardware, he noted. "They've integrated their software with a physical product," he explained. "That makes it harder, although by no means impossible, to knock off."

Aware of complaints from foreign companies about intellectual property piracy, China recently created a website to spread the word about its efforts to crack down on counterfeiters. In addition, it recently completed a nine-month offensive against IP pirates in which law enforcement agencies filed 156,000 cases involving roughly $526 million. Criminal courts heard 2,492 cases, adjudicating 1,985 of them, in connection with the campaign.

Problematic Enforcement

Still, enforcement of intellectual property rights (IPR) remains unsettling for many businesses. In its annual survey of its members, which includes Apple, the U.S.-China Business Council (USCBC) reported that 95 percent of respondents remain somewhat or very concerned about IPR enforcement in China.

Despite considerable and sustained attention from both the U.S. and People's Republic of China governments for years, and gradual improvement in IPR protection over the many years of USCBC surveys, IPR enforcement in China remains uneven and problematic, said the USCBC.

One emerging bright spot for rights holders may be the Chinese courts, according to the council survey. Companies are testing the waters of China's courts as a way to augment what central PRC administrative agencies are doing, it explained.

"Though barely a quarter of companies have brought an IPR- infringement case to China's courts in the past three years, almost three-quarters of those companies have had a successful outcome," the report states.

"Moreover, 57 percent of respondents view the courts as a viable option to protect IPR in some or most cases," it adds.

Most Important Market

That wasn't the case, however, for James Bradley, an attorney in the Houston office of Bracewell & Giuliani. He represented a maker of an innovative way to distribute natural gas for motor vehicles. It licensed the technology to a Chinese firm. Some of its members bolted to form their own concern, and they ripped off the American outfit's technology to do it.

When Bradley challenged the pirate's activity in court, he was rebuffed, even though the buccaneers presented no evidence that the American company's patent was invalid. "They said the examiner made a mistake," he told MacNewsWorld. "And the Chinese patent office agreed, and they invalidated our patent, something that would have never happened in the U.S."

After the patent was invalidated, the original licensee stopped paying royalties to the American company and it went out of business.

As rampant as piracy may currently be in China, Apple isn't about to turn its back on a market that provided it with almost $5 billion in the first six months of this year alone. "I believe, over time, China will be Apple's most important market," predicted Yankee's Howe.

Which type of cybersecurity threat concerns you the most?
Theft of my personal assets
A serious privacy invasion affecting me or a close family member
Reputation damage affecting my business
Child pornography, drug and weapon sales, and other Dark Web crimes
Activities that might compromise free and fair elections
A life-threatening attack on the nation's infrastructure