China’s Reverse Robin Hood: Stealing Intellectual Property from the Poor

Many of the facts relating to the globalization of intellectual property (IP) theft over the last decade are not debatable.  For example, IP theft has decreased the market share of U.S. firms and destroyed or prevented the creation of millions of U.S. jobs.  While currently 18 million Americas are employed in IP-intensive industries, the U.S. economy loses over $20 billion annually to IP theft and in 2007 IP theft reduced global trade by 5 to 7 percent.

However once one gets beyond a simple fact-based analysis the debate over IP theft becomes more contentious.  Specifically when it comes to policy prescriptions such as the true societal cost of IP theft, enforcement strategies and stakeholders rights, there is significant disagreement.  One of the most contentious elements of IP theft is how to deal with developing countries.  As technology spreads to emerging markets, specifically in Eastern Europe and Asia, faster than legal frameworks to prosecute IP violations, theft has steadily risen.  For example, although emerging markets only account for 20 percent of the software market, they make up 45 percent of software piracy.  China is a particular conspicuous violator.  According to the EU, China remains the number one country in terms of number of seized pirated goods, both in number and volume, at EU borders.  And over 90 percent of video games consumed in China are pirated. 

Still many IP opponents like to argue that IP is a plot hatched by the North to keep the South poor.  Countries like China argue that they are poor and technology transfer (much of it forced or stolen) is an integral part of their development strategy.  If IP laws keep developing countries from getting drugs or other IP-based technologies critical to overcoming barriers to growth then an argument could be made that IP laws should change.  Indeed, IP laws are not divinely manifested, but created within a legal geography because society values the creation of knowledge and believes such knowledge ought to be protected in the marketplace.  The question becomes, is this the type of IP violation that is coming from China—a form of redistribution from rich OECD countries to China, a developing nation? 

No it is not.  China and other IP violating nations are willing to take IP wherever they can find it, not just pulling a Robin Hood of stealing from the rich to give to the poor.   They will steal from the even poorer to give to the poor.  This point was has hit home to me when I recently met an entrepreneur named Emanuael Narh while in Ghana.  Narh is the CEO of Step Technologies, a small start-up based out Accra that allows customers to monitor their home security system through mobile devices.  Step Technologies came into existence through the Ghana Multimedia Incubator Centre (GMIC), Ghana’s sole IT incubator program.  Narh designed his prototype while still an undergraduate at the University of Ghana and developed it further in his year of compulsory national service where the concept was noticed by representatives of GMIC.  Over the last several years GMIC has provided work space and helped Narh develop his idea to a commercial level, file patent work, find seed funding, and partner with distributors, and two years ago Step Technologies was finally ready to begin manufacturing.  After going through an extensive bidding process a Chinese manufacturing firm won the contract and Step Technologies transferred their technical details and information for production.  However, over the next several months GMIC noticed something peculiar; within the Chinese manufacturer’s supply network in China devices identical to that of Step Technologies’ began to appear in the market without the permission of Step and without paying a licensing fee.

When I asked Narh about what he thought happened he was cautious to not make any accusation without evidence.  He simply said, “We eventually changed manufacturers out of fears our concept was not safe.”  Others I have met with involved in developing Ghana’s IT sector who are aware of Step Technology’s situation were less cautious, telling me flat out, “of course the manufacturer stole the idea.”

Step Technologies’ story is not unique.  China has developed an explicit strategy that holds that it is acceptable to take IP from anywhere in the world, not just from the rich North.  If the victims of Chinese IP theft are from rich countries it is coincidental and if they are from poor countries, then it is collateral damage.  To emphasize the point consider the fact China’s GDP is 192 times greater than Ghana’s and China’s GDP per capita is over seven times greater.  Rampant IP theft from China (as well as other developing countries like Russia) is not some kind of Robin Hood strategy to bootstrap the poor on the backs of those who can afford it, it is a systemic national strategy to use or take whatever from whomever possible.

Leaders throughout Africa are well aware that in order to grow their economies they must move from commodities to knowledge-based enterprises.  Step Technologies is a model for doing so; an Africa entrepreneur, aided by a government-funded incubator program, is eventually competitive in the marketplace.  (By the way, Step Technologies has found another manufacturer and is now in major markets throughout Africa with plans to go global in the next several years).  This is the type of economic development that benefits Africa and the global economy.  Yet the process of creating knowledge-intensive industries is long and difficult and without any potential recourse for IP theft from market-dominating countries the route can be next to impossible.  As one Ghanaian fund manager responded to my question about IP theft from China, “It’s a struggle but what can we do?”

Africa has enough challenges to development, IP theft from WTO nations should not be yet another hurdle.