China: Technology Thieves Again

China’s tech pirates are at it again. Merchants in the People’s Republic are selling knock-of versions of the Apple (NASDAQ: AAPL) iPad, Reuters reports. They look a bit different from the original but will certainly cut somewhat into sales for the device when Apple officially launches it in China. And, government officials don’t seem to care about the thievery. If there has been an arrest of a merchant selling iPads, it is not known outside China. And, the nation has made a great show recently on how hard it can be on IP pirates.

It was only last week that Microsoft (NASDAQ: MSFT) won a case against Chinese firm Dazhong Insurance for stealing its IP. The damages assessed by a local court were only $318,000. Data from China still indicates that 80% of the copies of Windows sold there bring Microsoft no revenue.

Research firm Ovum has estimated that more than one million knock-off iPhones have been sold in China which will make it more difficult for Apple and its local partner China Unicom (NYSE: CHU) to market the real version which they began late last year.

The International Intellectual Property Alliance, formed to protect the interests of  the software, entertainment, and the recording industries,recently reported that China was not making proper efforts under WTO rules to pursue and prosecute piracy inside its borders.

There are only a few conclusions that can be drawn from China’s attitude toward piracy. The first is the government does not want Chinese consumer dollars to go overseas but rather wants them spent on goods produce within the country. The other is that China’s GDP is helped by the sales of pirated material sold by local merchants to its own citizens. The two motivations are so linked that they are almost indistinguishable.

No matter what the reason, China clearly has no intention of cracking down on intellectual property violations, which leaves US companies to ignore the huge market or live with the fact that their profits in the People’s Republic will always be modest.

Douglas A. McIntyre