Safeguarding Your Intellectual Property in China

Of all the challenges multinational corporations face in China, perhaps the single biggest pertains to safeguarding the company's intellectual property (IP). The country is notorious for its counterfeiters, pirates, and IP scofflaws, yet withdrawing from the world's second-largest economy is not an option for most multinationals. On the contrary, given the never-ending travails of developed economies, corporate leaders need to redouble their efforts at going after the rapidly growing opportunities in big emerging markets such as China and India.

Having conducted in-depth discussions with senior executives at several American and European companies regarding how they manage the risk of involuntary IP leakage while remaining deeply engaged with China, we believe corporate leaders must accept the reality that they can never make their company 100 percent leak-proof on the IP front. Movement of people and exchange of knowledge across organizations is a defining feature of every vibrant ecosystem—be it Boston, Bangalore, or Beijing. If you want to play in these ecosystems, you must accept the inevitability of some IP leakage. The key, therefore, is to figure out how to slow down involuntary leakage so you are able to accumulate new IP at a faster pace than the loss. Companies accomplish this objective by focusing on three goals: curbing the motivation for IP theft, reducing others' ability to steal IP, and minimizing the residual damage from the IP leakage that does occur.