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.

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