The Dynamic Process of Changing Compliance

The preceding sections summarised the most significant factors identified both by the documentary data and from respondents’ comments as influences on China’s current IP system and consequent compliance with the TRIPS Agreement. However, a list of these factors alone is not particularly illuminating as to how China’s TRIPS compliance has developed over the past 15 years since WTO accession or how it may continue to change in the future. Therefore, it is necessary to turn to these dynamic processes to understand both the existing compliance with the TRIPS Agreement and possible changes that could increase China’s compliance. The dynamic process of change in compliance over time relates to the two aspects of intention to comply and capacity to comply. These two perspectives can be changed both by internal changes in the country, such as changes in leadership, and by external pressure, for example, offers of financial or technical assistance.

In order to describe these dynamic processes of interaction between the factors affecting compliance and China’s intention and capacity to comply, it is necessary to first consider: which factors that have been identified as significant for compliance are fixed and which can most easily be manipulated? Which of these factors affect China’s intention to comply? And which affect China’s capacity to comply? It is immediately apparent that several of the factors identified above as significant for China’s compliance with TRIPS are either fixed or are not easily modified. For example, although the precision of the obligations contained within the TRIPS Agreement was identified as one of the prime characteristics of the Agreement that influenced compliance, these obligations are fixed and could not easily be changed to increase compliance. Similarly, the characteristics associated with the international environment are also fixed or difficult to manipulate. For example, the short-term economic rewards associated with intellectual property infringements are long-standing, but could not be easily minimised to discourage IP infringements.

on the other hand, of the factors identified above as significant influences on China’s compliance with the TRIPS Agreement, there are several factors which may potentially be shaped more readily. It is essential to focus on these factors if China’s compliance with the TRIPS Agreement is to be maintained and improved further, rather than waste efforts on attempting to manipulate factors which are fixed or of little consequence. Some of the factors under scrutiny influence China’s intention to comply with the TRIPS Agreement and others affect China’s capacity to comply. There are five key factors which most influence China’s intention to comply with the TRIPS Agreement. First, continuing to increase awareness of IP rights can assist in tackling the problem of a lack of awareness of the full strategic potential of intellectual property amongst domestic rights-holders, as well as increasing public understanding of how IP can support and nurture China’s future economic development. This in turn can increase intention to comply by facilitating the acceptance of the imported norms by society in general, similar to the process of internalisation as described by Koh (1996).

The second factor which can strongly influence intention to comply in China is that of pressure applied to the government. It is undeniable that external pressure from trading partners or international organisations such as the World Intellectual Property Organisation (WIPO) can encourage or maintain government commitment to fully comply with the TRIPS Agreement. However, it has also been recognised by many respondents that external pressure can create resentment in China if too heavily imposed. Therefore, although it is important to maintain pressure on the Chinese government, it is also important not to overuse this mechanism for change. Indeed, spreading the use of external pressure to include cooperative initiatives or those focused at local- or provincial-level governments should be promoted. As there is a recognised gap between central and local levels of government, pressure applied to the central leadership in Beijing can only achieve so much before creating resentment and consequently, attention should be shifted to lower levels of government which play such a crucial role in IP enforcement, as well as shifting to initiatives aimed at increasing the competency of key personnel in the IP system through targeted training.

The third crucial factor affecting China’s intention to comply involves the role of domestic Chinese enterprises in supporting sustained improvements in the IP system. Almost all respondents in both phases of the study independently raised the issue of domestic rights-holders as one which would be essential for future improvements in the current IP system. Therefore, as domestic Chinese enterprises continue to increase their innovative activity, their role as IP rights- holders in China will continue to increase in importance and may act as a tipping point for effective enforcement of existing laws and regulations. Fourthly, although NGOs in general play a minor role in the issue of intellectual property rights globally, they can have a slightly positive effect on intention to comply with the TRIPS Agreement in China. Organisations representing MNCs in China such as the Quality Brands Protection Committee (QBPC) should maintain their role of supporting IP rights and can thus help to maintain the necessary intention to comply, particularly by joining forces with organisations representing domestic companies. Finally, many respondents highlighted inadequate penalties for infringers as one of their main frustrations with the current system. Increasing the statutory levels of penalties which can be imposed and clarifying guidance on calculating damages should significantly increase intention to comply as it would act as a stronger deterrent to infringers by minimising short-term economic gains from infringements.

In addition to these five key factors which influence China’s intention to comply with the TRIPS Agreement, there are also three crucial factors which impact upon China’s capacity to comply. Firstly, most respondents highlighted the key issue of sufficient numbers of well-trained and experienced personnel in the IP system as a key concern for effective enforcement. According to respondents’ comments in 2005, the number of personnel was not so much of an issue as the quality of the personnel involved in IP enforcement. Thus, improving the standard of personnel in the IP system between 2005 and 2015 increased China’s capacity to fully implement its TRIPS commitments. Nevertheless, in 2015, the workload of key personnel such as specialist IP judges remained a concern for several respondents and there were still some fears that the administrative capacity of key agencies such as the Administration of Industry and Commerce (AIC) could be further enhanced with additional resources dedicated to tackling IP infringements.

Secondly, although some commentators had previously called for a unified IP agency to oversee the operation of the IP system in China, this notion was rejected by respondents in both 2005 and 2015 as impractical. However, it was recognised that there is a certain amount of overlap and bureaucratic competition between the relevant agencies and thus, the system could be streamlined to simplify the bureaucratic structure of IP enforcement and to encourage greater cooperation and specifically case transfer between the different IP agencies, with transfer of infringers to face criminal liability of particular interest. Finally,

Fig. 8.1 Dynamic model of China’s compliance with the TRIPS agreement and key influences on China’s intention and capacity to comply at the international level, there is some disquiet from developing country WTO members that developed country members are not living up to their promises to provide technical cooperation and technology transfers under the TRIPS Agreement. Increasing incentives such as facilitating further technology transfers and cooperation from key developed country members may also have a positive influence on China’s overall TRIPS compliance.

Overall, there are various key factors which should be the focus for future improvements in China’s TRIPS compliance as highlighted above. These factors influence China’s intention and capacity to comply, which in turn impact upon overall compliance with the TRIPS Agreement. This dynamic model of compliance for continuing and future reforms of China’s IP system is represented in Fig. 8.1 and will form the basis for the implications and policy recommendations arising from this study which will be outlined in the following section. The factors are divided into factors influencing China’s intention and capacity to comply, but these factors are interactive and this should be borne in mind when considering the operation of this model of compliance.