According to World Intellectual Property Organization, IP is defined as“creations of the mind: inventions, literary and artistic works and symbols, names, images and designs used in commerce” or “very broadly, means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields”.It constitutes a subset of intellectual capital that is protected by commercial rights, such as patents, copyrights and trademarks and has been chosen as the focus of this study. Intellectual capital refers to a firmrsquo;s overall intangible assets including organizational processes, technologies, patents, employeersquo;s skills, information and knowledge – ranging from internal functions to external organizations and stakeholders. The IP strategy is defined as“the use of IP, either alone or in combination with other resources of the firm, to achieve the firmrsquo;s strategic objectives”.IP can be protected both formally and informally, depending on the nature of inventions and the extent to which property rights can be appropriated. Formal methods include patents, trademarks and industrial design, which requires formal registration and copyrights. Informal methods include trade secrets, confidentiality agreements, lead times, complexity of design, complementary sales and service and complementary manufacturing/operations. Combining different IP methods maximizes the protection and the potential competitiveness of a firmrsquo;s business. For example, the use of a trademark is “as sign which serves to distinguish the product of one enterprise from the products of other enterprises”. It is a valuable marketing tool that allows the public to identify a certain quality and image with goods and services protected by the trademark. This can help establish an image of a new product or service in the market.
A patent is recognized as the most important IP for most business firms. It is a document issued by a government organization to grant an inventor – or other persons deriving their rights from the inventor – to exclude for a fixed period of years other persons from manufacturing, using or selling a patented product or from utilizing a patented method or process. An invention is patentable if it is an invention that is practically useful, original and non-obvious. A standard patent gives long-term protection and control over an invention for up to 20 years. After that, the knowledge embodied in the invention will revert to the public domain.
A license is the grant by an owner of IP rights, or the proprietor of know-how, of permission to make or use all or some of those rights and information. Cross-licensing for the purpose of exchanging technologies of equal value is quite common in drugs and electronics. Copyright protects the original expression of ideas, not the ideas themselves. Copyright is granted free of charge and automatically safeguards original works of art and literature, such as music, films, sound recording, broadcasts and computer programs. Industrial design is “the ornamental or aesthetic aspect of a useful article”. These are registered as a design patent or certificate of registration and have to be novel and repeatable in commercial quantities. A trade secret constitutes both a type of IP and a strategy for protecting a firmrsquo;s IP. It provides effective protection for some technologies, proprietary knowledge (know-how), or confidential information. A confidentiality agreement is often used to prevent a firmrsquo;s employees from revealing the firmrsquo;s secret or proprietary knowledge during and after their employment.
In recent years, the Chinese Government has emphasized the development of Chinarsquo;s innovation capabilities as a top national priority and has raised the level of investments in Ramp;D activities substantially. Therefore, Chinese IP rights reform and the patent law system are officially recognized as essential elements of national innovation development and a cornerstone in the substantial increase in foreign direct investment, technology transfer and collaboration between foreign and domestic entities in China. China joined the World Intellectual Property Organization in 1980 and initiated its legislation on IP with the adoption of The Trademark Law in 1982 and The Patent Law in 1984. Subsequently, China officially entered the Paris Convention for the Protection of Industrial Property (1985), the Madrid Agreement on the Registration of Marks (1989) and the Berne Convention for the Protection of Literary and Artistic Works (1989). In early 1990, China published Copyright Law and joined the Universal Copyright Convention, Patent Cooperation Treaty and the Berne Convention for the Protection of Literary and Artistic Works.
The Chinese Government has amended the trademark and patent laws several times. The patent law was amended most recently in 2008, with the purpose of promoting patent applications(i.e. both utility model and regular patent applications can be applied at the same time); encouraging patent exploitation according to contract requirements; toughening the requirements for patentability to improve patent quality; augmenting patent protection with increased monetary damages, civil liability of violating the law and enhanced investigation powers to the authorities; and introducing compulsory licensing where a patented technology will be forcibly licensed out if the patentee failed to utilize it within a reasonable period of time. Similar measures have been introduced with the copyright law. These amendments tries to bring the Chinese IP protection in line with the latest WTO Agreement with improved legal enforcement, in order to encourage indigenous innovation and technology transfers from foreign countries and local public research institutes.
However, studies indicate that the lax enforcement of the patent protection may have rendered the legislation ineffectual. For example, OECD noted that the challenges to IPR enf
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