IT IS SAID THAT IMITATION is the highest form of flattery. If this is true, then there are a great many multinational companies (MNCs) in China which should be feeling almost dizzy with praise. Whilst Chinese creativity and innovation, which produced among other things, gunpowder, the compass (and possibly football) has been rather dormant in recent centuries, the ability for local entrepreneurs to ‘recreate’ Western products has gone from strength to strength.
This ‘innovative flattery’ has created a cat and mouse game of hide and seek between the MNCs on one side and the ‘industrial bootleggers’ on the other. In a country where intellectual property laws and copyright are yet to really take hold, the MNCs are fighting a losing battle. Prosecuting the ‘covert copiers’ can often be a tricky business as many have built strong relationships with local authorities. Even when a successful prosecution happens, like a hydra, cutting off one head soon leads to the sprouting of two more.
A lawyer friend of mine who works for a large Japanese company, spends much of his year flying around China attempting to close down rogue counterfeiting operations. This is frustrating work as it is endless. More interestingly, contrary to the general idea that counterfeiters produce cheap and inferior goods, he is regularly surprised at the improvements that these ‘backstreet forgers’ are able to make to his companies designs.
Make no mistake, I am not excusing the behaviour of the forgers and counterfeiters. However, as the attempts of the MNCs to stamp out their operations are failing, you have to wonder if there is a better approach.
Sun Tzu states that battle should not be joined unless a clear victory is guaranteed. With no unified enemy to fight against, the MNCs, much like an occupying force, can defeat hundreds of individual groups without ever achieving a decisive victory. Until the time when breach of copyright cases are dealt with according to the word of law and not influenced by other ‘relationship based’ factors, this situation will not change. Sun Tzu’s advice on dealing with captured spies is well worth some attention. Rather than simply executing a spy and then having to hunt for his replacement, he recommends persuading the spy to change sides. This way you gain an ally with key knowledge of your adversary.
A recent conversation with the VP of a large agricultural seed producer highlighted a more conciliatory and constructive approach. This VP stated that while his company enjoyed a huge official market share, their unofficial market share, that is, companies selling fake products with his company’s logo attached, is upwards of 80%.
Rather than limiting his anti-counterfeiting armory to aggressive legal measures, he carries a carrot in one hand and a stick in the other. Manufacturers of fake products are identified and a visit is paid to their place of work. They are then offered a choice. They can continue to operate in the knowledge that their operation has been uncovered and that the full weight of an MNCs legal team and the Public Security Bureau (PSB) may be brought to bare, or, they can work with the MNC and enjoy the benefit of all the resources and support that that brings.
Only the most foolhardy of forgers turn down the offer. Those who accept the deal then police their region and use their existing relationships to limit the operations of other forgers. The VP’s company increases their official market share and gains an ally in the fight against copyright infringement.
Sun Tzu knew how to deal with espionage, albeit military rather than industrial. It is refreshing to see an American VP taking a leaf out of this book and choosing engagement over the more aggressive knee jerk reaction of Westerners to initiate conflict. Sun Tzu called it ‘gaining an ally’; my VP friend calls his policy ‘turning copy cats into hunting dogs’.