The Business Herald’s markets and banking reporter.

Kiwi companies missing out over fears about IP

New Zealand businesses are missing opportunities in China as a result of the country's pervasive image as the "Wild West" of intellectual property rights, says an IP expert.

Luke Minford, the Beijing-based chief executive of IP consultancy Rouse, said many challenges still existed, particularly around counterfeiting.

"If you're a big, fast moving consumer goods company that came in here during the 1990s ... and you're selling in tier 3, 4 and 5 markets [smaller Chinese cities], those businesses still face a huge counterfeiting problem," Minford said.

Last month, for example, nine people were arrested after over 22,000 cans of fake infant formula were found being sold under the brands of Beingmate and Abbot Laboratories - two companies that have close links with New Zealand dairy giant Fonterra.

Kiwifruit marketer Zespri, meanwhile, has had issues with fruit being falsely labelled under its branding in the Chinese market.

And local firms including Cookie Time and Ecostore have had their brands hijacked in China, a practice known as "trademark squatting". But Minford, who grew up in China and New Zealand and studied law at Otago University, said the overall situation around intellectual property rights had vastly improved in recent years.

Data compiled by Rouse showed 87 per cent of the IP cases launched by foreign plaintiffs in China were won.

"That's a significantly higher percentage than Chinese companies against Chinese companies," Minford said. "To say that the Chinese courts are biased against foreign plaintiffs is wrong."

It took about six to eight months to get a decision from a Chinese court, he added, which was about twice as fast as in New Zealand or Britain.

"And it costs about a 20th of what it costs to go to court in the UK," Minford said.

Despite this, Minford, a veteran of China's IP industry, said some New Zealand companies were still avoiding Asia's biggest economy because of IP fears.

"It's good to be afraid, but don't let that define how you approach China," he said. "I think it's good to come in with a mindset that's aware of the risks, but I suspect you should bring that same approach to any big new market."

Minford said dealing with an IP issue in China could often be fixed with a single cease and desist letter.

"The industry record for cease and desist letters is about a 70 per cent success rate," he said. "I think it's great for our business because we want to be doing the really high value activity not chasing after pathetic little companies copying stuff - that's what we did 20 years ago."

- NZ Herald

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