China’s strategy to fight piracy (think software, not high seas) has long followed a predictable script. Occasionally the government will issue an edict to “get serious” about piracy and for the next month or so state media will be blanketed with images of bulldozers crushing knockoff DVDs. China has made some headway against IPR infringement – as China Law Blog says here – but these are still small steps. Consider that 80% of all software installed in China last year was fake, though this is down from 90% in 2004. Small steps indeed.
Microsoft can be seen as a bellwether for the state of piracy and counterfeiting in China. We’ve written about the company’s changing strategy for IPR protection in the past, and it seems that Microsoft is continuing to evolve in this regard.
While the company has previously focused its efforts on lobbying and prodding the central government, Microsoft is now teaming up with the city of Hangzhou to battle piracy. Hangzhou will crack down on counterfeiting of Microsoft products in return for deep discounts on those products, and a sizable (though undisclosed) investment in the city that will include the building of new technology centers. The hope is that Hangzhou will set an example for other cities that are vying to become technology hubs – thus stemming piracy from the ground up rather than the top down.
Will it work? Who knows? There are issues of scalability in this strategy. In how many cities can Microsoft build new technology centers? And the plan does have the ring of "we will pay you to stop stealing from us." Then again, the previous strategy hasn’t exactly been gangbusters. Furthermore, as anyone in the IPR field will tell you, the problem with IPR infringement in China isn’t central government support, but rather the lack of local enforcement. Co-opting the cities to protect your brand from IPR infringement, in theory at least, is one way to incentivize IPR protection at the grassroots.