The law includes an unusual provision
prohibiting “abuse of intellectual property right.”
Lawyers say that runs counter to the spirit of
patents and copyrights, which are meant to
encourage technology creation by giving the
owner a temporary monopoly and the right to
charge others for using it.
Lawyers said Chinese regulators sometimes
intervene in contract negotiations and push foreign
companies to accept lower fees by threatening to
launch an anti-monopoly investigation.
REGULATORY PRESSURE
Authorities also use “window guidance,”
or verbal orders given in secret, to compel
companies to support Chinese technology
development in ways the government doesn’t
publicly acknowledge.
A decade ago, for example, global automakers
agreed to help Chinese partners create new
local brands.
That injected foreign expertise into fledgling
brands the Communist Party hoped eventually
will compete in global markets in a way joint
venture vehicles made under foreign brand
names cannot.
It made life harder for automakers by spreading
their resources more thinly and adding to
competition in a glutted market. Despite that,
global automakers said they had commercial
motivations and regulators denied they applied
any pressure.
The real reason? Industry researchers say
regulators told automakers in private they
had to cooperate if they wanted permission to
expand production of their own brands.