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41 Geo. J. Int'l L. 749 (2009-2010)
Anti-Counterfeiting Strategies of Multi-National Companies in China: How a Flawed Approach is Making Counterfeiting Worse

handle is hein.journals/geojintl41 and id is 757 raw text is: ARTICLES ANTI-COUNTERFEITING STRATEGIES OF MULTI-NATIONAL COMPANIES IN CHINA: HOW A FLAWED APPROACH IS MAKING COUNTERFEITING WORSE DANIEL CHOW* Multinational companies (MNCs) are attacking the counterfeiting problem in China through a short-term approach that emphasizes enforcement: raids of countefeiters, seizures of products, and destruction on machinery and equip- ment. This enforcement-based approach seeks to use physical force and intimida- tion to coerce counterfeiters into submission. The basic flaw of this approach is that it ignores the role of local protectionism in supporting the trade in counterfeit goods. Local governments protect counterfeiting because it brings economic benefits to the local economy by generating revenue and creating jobs. One result of local protectionism is that the consequences of being caught for counterfeiters are minor. Fines are so low as to be just the cost of doing business, and imprisonment is rare. Many counterfeiters are back in business only afew days or weeks after being caught. In China today, there is plenty of enforcement but little or no deterrence. In such a system, MNCs are finding that the more enforcement they undertake, the more counterfeiting results. MNCs need to be patient and adopt a long-term approach measured in years or even decades in order to make any meaningful progress against counterfeiting. While institutional incentives and pressures within MNCs might make a long-term approach difficult or impossible to accept, it is clear that the short-term enforcement-based approach is not working. Enforcement without deterrence has the unintended, even opposite, effect of provoking and inciting counterfiting to new heights in China. TABLE OF CONTErTS I. BACKGROUND OF THE COUNTERFEITING PROBLEM IN CHINA .... 752 A. Local Protectionism and Government Corruption ........ 754 B. Current Strategies and Approaches by MNCs............ 760 1. Brand Protection Units ..................... 760 * BA,J.D., Yale University; Joseph S. Platt-Porter Wright Morris & Arthur Professor of Law, The Ohio State University Michael E. Moritz College of Law. Thanks toJudyY. Kim, Moritz Class of 2011, for her research assistance. The author was an in-house counsel at a multi-national company in China with substantial business operations and was able to observe first-hand the rise of counterfeiting as the problem emerged in dramatic fashion a decade ago. @ 2010, Daniel Chow. 749

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