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Guest Op-Ed

Pioneering a Fresh Approach to IP Rights in China

By Yizan He, CEO of Alfilo Brands, yzh@alfilo.com. Contact the editor at karina@plainlanguagemedia.com.

Landmark Western cultural institutions are increasing their presence in the Middle Kingdom. Following the successful launch of its e-commerce initiative this summer, The British Museum recently opened its first physical shop in China with the help of its exclusive official licensee and retail partner Alfilo Brands. Here, Alfilo Brands CEO Yizan He discusses the wave of companies pioneering a new approach to IP rights in China and rebuilding the country’s reputation of having a dubious IP infringement record overseas. Look up Alfilo Brands through TLL’s Licensing Source Book.

The Chinese IP licensing industry is still in its early stages of development. Out of the world’s top 150 IP licensors which generated $272 billion in sales of licensed products in 2016, only one was Chinese, per License Global. Furthermore, China represents only about 5% of world’s total IP market overall. [Ed. note: Chinese licensed retail sales were up 8% to reach almost $7.3 billion in 2017, or 4.2% of all worldwide sales, according to TLL’s Annual Licensing Business Survey.] Nonetheless, given its huge market size and its appetite for leading IPs, I believe China could quickly rise to become one of the largest IP licensing markets within the next three to five years—but only if it tackles the ongoing challenge of IP infringement within the country and its dubious reputation overseas.

Despite the progress China has made in protecting IP rights in recent years, there are still issues that need to be addressed. The recent backlash against e-commerce giant Pinduoduo is a case in point. The retailer was found to be a haven for counterfeit goods, passing off both Western and Chinese brands. This led to the company’s rushed announcement of tougher restrictions concerning IP infringement. The point here is that a Chinese e-commerce platform was (knowingly or not) making home-grown brands suffer, which is counterintuitive to China’s ambitions to be a leading superpower economy of tomorrow.

In our sector, working with leading cultural institutions like The British Museum, the V&A, and National Gallery, we’ve also seen a recent rise in IP abuses within China. This includes companies falsely claiming to own the rights to many of the world’s artistic masterpieces, such as the Mona Lisa, Van Gogh’s Sunflowers and works by Andy Warhol. These are then fraudulently sub-licensed to other Chinese companies, resulting in an array of products featuring defaced and adapted works of art. Not only does this damage and undermine the reputation of the original institution and its partners, it adds to the negative perception of China overseas in general. What’s more, it also infringes on the moral rights protecting the intentions of the original artist. In many countries, including China, moral rights apply even when the paintings belong to public domain. [Ed. note: The U.S. does not recognize moral rights for creators of copyrighted works; these include the right to protect the artistic integrity of a work by preventing changes to it.]

While this kind of activity can leave many companies at a loss and off-balance, we’ve decided to join the growing wave of companies in China pioneering an approach that is built wholly on integrity, trust, and absolute respect for international IP rights. For example, we proactively assist our western partners to secure trademark registrations in China. We work closely with Sino-Faith IP Service Group, the largest IP surveillance and protection company in China and also one of our shareholders, to conduct unannounced store visits to ensure that our licensees and retailers stay in compliance. We’ve also built a partnership with the Alibaba Group, China’s largest e-commerce company, to engage Chinese retailers and develop genuine products under license for the British Museum. The 2018 sales from this award-winning initiative is expected to exceed CNY-300 million ($40 million) with over 400 SKUs of licensed products—making it one of the largest museum licensing programs in the world.

Other leading cultural institutions, such as the National Gallery, London, Museum of Fine Art, Boston, Victoria & Albert Museum, and the Van Gogh Museum are also following this approach in building Chinese licensing programs with their Chinese partners. However, more needs to be done if we are to shed China’s questionable IP rights reputation once and for all. The recent announcement of a new law, taking effect January 2019, places greater accountability on e-commerce retailers to tackle the sale of counterfeit goods. It is a step in the right direction. But, ultimately, I believe it’s down to Chinese companies themselves to lead by example and start paving the way to a robust and honest approach to IP rights in China. Only then will China genuinely be able to realize its ambition of becoming a leading economic superpower.

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