Chinese Economics Thread

[ahho]

It is pretty funny that apple keeps saying that other are copying them. In my opinion, they only thing the other company copied is the general combination of technology. While the west is still touting Motorola Razr, a lot of people are already carrying Java smart phones with a not so developed app store. Remember when apple say they would not develop app store at first and no notification display on top, guess what, they implemented it anyways. Steve himself say no to oversize Iphone, and Iphone 6+ is out. Samsung have shown working models of pre-android phone that have capacitive touch and icons, and they are still being sued for copying. There were huge capacitive touch screen monitor that came out before Iphone with the similar gesture for zooming in and out of the screen, Apple claimed they invented it with the Iphone , but the patent the Iphone filed was kicked out years later.

In my opinion, when something works and the public have specific demand, there is only certain ways that you can implement things.

 

[Lethe]

Another interesting piece on China, smartphones and economic development more generally:

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It has been observed by trade economists that China captures little value in the total price of an iPhone, with most of the wealth going to Apple itself and other foreigner corporations. Naturally this irks Beijing [....]

Three-quarters of a Chinese-made smartphone's cost are components made by foreign companies, some of which are dominant and outrageously profitable. Beijing's greatest test of wills is against the powerful US semiconductor maker Qualcomm, which earns half its revenues in China. True to form, the chip business is close to a duopoly: Qualcomm and Taiwan's Mediatek dominate. China has its own semiconductor ambitions and is trying to build up a homegrown chip-maker with Intel's help to rival the pair. Qualcomm demands an average 3% IP royalty on the price of every smartphone (even those running MediaTek chips), and more from some Chinese companies. Obviously, with 1-2% profit margins, such a levy would destroy them. So Beijing has blocked all Chinese smartphone makers from paying, while condemning Qualcomm for monopolistic behaviour and for ripping China off: 'You're making money in China and you're hurting China. We won't allow that to happen.' [....] Effectively, Beijing is shielding its companies from some IP costs that Apple and Samsung are paying.

For now, this policy is creating a segregated marketplace: a royalty-lite zone in China, another in emerging markets where IP enforcement is impossible, and another in developed countries where Qualcomm might block infringing Chinese phones with import injunctions. Because they want to export to the US and EU, some Chinese firms are now building up their own patents. Lenovo bought Motorola for that reason. Elsewhere, however, Chinese brands could overrun the world market, hiding behind Beijing's industrial policy bastion. They will face other challenges but if they succeed the global landscape will look very different within three to five years.

Personally, I am glad that China has the strength to stand up to IP bullies and slowly claw back a fairer share of the profits. But this is a mixed and conditional thing: that wealth will in turn not be equally distributed within China, and as China climbs the technology ladder she will increasingly become the IP bully herself, deploying against other countries all the tools that the west has used to keep developing countries in bondage. Power alone triumphs, and humanity is just along for the ride. It's a depressing thought.

 

[AssassinsMace]

Well some say that's what TPP is all about. There was a story recently where a trade agreement Canada has with China would allow China to sue to have Canadian laws changed in its favor. You can imagine some Canadians were outraged. Well that's what was said of TPP where the US can do that very thing to members. So is TPP just like a brand name where people ant to join just for the prestige? Why would anyone want to join other than that? Reading about TPP it seems like the primary benefactor is the US. I'm sure the reason why China has been left out is to establish everyone else beforehand so they can dictate terms to China because China has always been the center piece of TPP. Look at how many countries want to poke China in the eye but they don't want trade being affected. China joining TPP keeps that attitude in place. That's why China shouldn't bother. It fails without China. They could've had TPP before if it's that wonderful. The only factor that has changed is China's economic emergence.

 

[Blackstone]

Another interesting piece on China, smartphones and economic development more generally:

Please, Log in or Register to view URLs content!

Personally, I am glad that China has the strength to stand up to IP bullies and slowly claw back a fairer share of the profits. But this is a mixed and conditional thing: that wealth will in turn not be equally distributed within China, and as China climbs the technology ladder she will increasingly become the IP bully herself, deploying against other countries all the tools that the west has used to keep developing countries in bondage. Power alone triumphs, and humanity is just along for the ride. It's a depressing thought.

What's your definition of "IP bully?" Is it the same in China as the US and rest of the developed countries? How about the other developing countries?

 

[Blackstone]

I don't see a problem in "copying" the best out there.

If I can copy to 90% accuracy, and sell at 40% of the price, guess what? I'll still make money.

Consider a scenario in a relatively open and capitalist market, something like... China.

BYD R&D spends tens of million RMBs and invents a new battery for electric cars that extends range and shortens charging time. BYD now has a new competitive edge.

Chevy Volt of Shanghai "copies" BYD battery technology and follows suit, resulting in BYD losing its competitive edge due to the fact Chinese consumers prefer foreign brands (think Buick).

Questions for you, Xiabonan: do you see a problem with Chevy copying BYD without licensing? Should there be some IP protection for BYD's innovation? And if so, do you think that IP protection should only cover China, or should it cover wherever GM/Chevy does business?

 

[wtlh]

I think some form of IP protection must be implemented, otherwise it will harm innovation. HOWEVER, I am also against the idea that some one should be allowed to eat and profit on their patents and intellectual properties indefinitely for years and years no end.

I am personally all for strict finite term for patents and rights, with no possibility for renewal. The people who initially owns the IP may have a couple of years, say two or three, to be protected and make some finite profit, and then after that everyone is free to copy or do whatever they like with the IP. I think this will best encourage new inventions and make product improvements more efficient.

In most cases, the best products that do the same things inevitably will have very similar properties and use the same technology. This is a part of nature: given the same success conditions, the genetic evolution will always end up with the same gene sequence. And I firmly believe it is counter productive to allow someone who first discovered the success formula to sit on it indefinitely and punish all others who wants to develop based on their patented stuff in the form of loyalties.

The bottom line is: patents should only act as a finite reward for a one-off invention, and should not act as a ticket to life-long free-loading on others.

 

[wtlh]

Consider a scenario in a relatively open and capitalist market, something like... China.

BYD R&D spends tens of million RMBs and invents a new battery for electric cars that extends range and shortens charging time. BYD now has a new competitive edge.

Chevy Volt of Shanghai "copies" BYD battery technology and follows suit, resulting in BYD losing its competitive edge due to the fact Chinese consumers prefer foreign brands (think Buick).

Questions for you, Xiabonan: do you see a problem with Chevy copying BYD without licensing? Should there be some IP protection for BYD's innovation? And if so, do you think that IP protection should only cover China, or should it cover wherever GM/Chevy does business?

In this case study, I believe it is only right that:

1. BYD should be rewarded with a finite amount of increased revenue---due to gaining its competitive edge over their competitors, being protected by the patents---for the first two or three years.

2. After that Chevy and others should be able to copy, use and improve their technology with no bounds.

If BYD does not want to lose its competitive edge, then may be it should continue inventing and beating their competitors on working on improvements of their battery. If it failed to do so, then it is only right that it should lose its competitive edge.

-----------------

I think in the area of intellectual properties, a healthier way of looking at it should be that: there is no such thing as "owning" an intellectual property. Any intellectual fruit should be the shared property of the entire human race. "Patents" should be viewed as a finite and limited reward to the inventor for their services to the human kind. This reward will be in the form of an opportunity to generate a commercial profit with the lease of sole rights to the IP in a predefined and finite time window.

 

[Blackstone]

In this case study, I believe it is only right that:

1. BYD should be rewarded with a finite amount of increased revenue---due to gaining its competitive edge over their competitors, being protected by the patents---for the first two or three years.

2. After that Chevy and others should be able to copy, use and improve their technology with no bounds.

If BYD does not want to lose its competitive edge, then may be it should continue inventing and beating their competitors on working on improvements of their battery. If it failed to do so, then it is only right that it should lose its competitive edge.

-----------------

I think in the area of intellectual properties, a healthier way of looking at it should be that: there is no such thing as "owning" an intellectual property. Any intellectual fruit should be the shared property of the entire human race. "Patents" should be viewed as a finite and limited reward to the inventor for their services to the human kind. This reward will be in the form of an opportunity to generate a commercial profit with the lease of sole rights to the IP in a predefined and finite time window.

We have roughly parallel views on the topic, except I believe inventors have rights to their intellectual properties. Nevertheless, I like the idea other companies may "copy" BYD's invention for the purpose of enriching the general public (and their own pockets). However, the devil is always in the details, so there are real world considerations to take into account. Two immediate items come to mind:

1. Given the amount of investment high-tech research/innovations require in talent, material, and money, two or three years may not be long enough to recoup shareholder investments, to say nothing of making profits. Longer patent times, adequate IP protections, and unbiased government enforcements are required to make it work. That's what the shouting is all about.
   
2. What exactly does your idea of copying "with no bounds" means? Is BYD obligated by law to hand over its innovations to competitors and non-competing research organizations (universities and technology think tanks), or do they have to reverse engineer? I like the essence of what I think you said, because if it's carried out in reasonable ways, the society at large can benefit more than it loses.

 

[wtlh]

We have roughly parallel views on the topic, except I believe inventors have rights to their intellectual properties. Nevertheless, I like the idea other companies may "copy" BYD's invention for the purpose of enriching the general public (and their own pockets). However, the devil is always in the details, so there are real world considerations to take into account. Two immediate items come to mind:

1. Given the amount of investment high-tech research/innovations require in talent, material, and money, two or three years may not be long enough to recoup shareholder investments, to say nothing of making profits. Longer patent times, adequate IP protections, and unbiased government enforcements are required to make it work. That's what the shouting is all about.
   
2. What exactly does your idea of copying "with no bounds" means? Is BYD obligated by law to hand over its innovations to competitors and non-competing research organizations (universities and technology think tanks), or do they have to reverse engineer? I like the essence of what I think you said, because if it's carried out in reasonable ways, the society at large can benefit more than it loses.

I think me and you are on the same boat, even in terms of the notion of "owning" the intellectual property. What constitutes "ownership" or not only depends on how you define the term. Since IP isn't like any physical property, and can be copied, it therefore depends on whether you define "ownership" as a right to restrict copies or request loyalties from the copies.

And the devil is indeed in the details. I only suggested two or three years as a random ball park---the idea being that it should be long enough for a reasonable profit, but should not be longer than necessary, and become some kind of long term asset or stick that one can use to beat competitors down with. In practice, I guess the exact years of patent should be determined on:

1. the cost of development, which may be submitted and perhaps verified by an independent body during the application process.
2. a maximum legally allowed time limit for all patents of a particular category
3. a cost based patent time length application system, where you get a free minimum period, and for every year you wish to add, you need to pay for a cost in the applied category which are monitored and adjusted by a government body. The cost function does not have to be linear (can be quadratic or even exponential w.r.t. added time), and the maximum ceiling still applies.

When the patent expires, ideally, I think the said technology (for the maximum benefit to society) should then be made to become open-source. HOWEVER, in practice I think this would be very difficult to implement and enforce. No company will want to give up their trade secrets. And behind every successful technology, there are countless test data and prototypes that would be totally unfair to force the companies to release these hard-earned data to their competitors.

So, practically speaking, I think once the patent expires, just allowing reverse-engineering and remove the initial patent owner's ability to sue against a "copy of idea" would be good enough.

 

[Blackstone]

I think me and you are on the same boat, even in terms of the notion of "owning" the intellectual property. What constitutes "ownership" or not only depends on how you define the term. Since IP isn't like any physical property, and can be copied, it therefore depends on whether you define "ownership" as a right to restrict copies or request loyalties from the copies.

And the devil is indeed in the details. I only suggested two or three years as a random ball park---the idea being that it should be long enough for a reasonable profit, but should not be longer than necessary, and become some kind of long term asset or stick that one can use to beat competitors down with. In practice, I guess the exact years of patent should be determined on:

1. the cost of development, which may be submitted and perhaps verified by an independent body during the application process.
2. a maximum legally allowed time limit for all patents of a particular category
3. a cost based patent time length application system, where you get a free minimum period, and for every year you wish to add, you need to pay for a cost in the applied category which are monitored and adjusted by a government body. The cost function does not have to be linear (can be quadratic or even exponential w.r.t. added time), and the maximum ceiling still applies.

When the patent expires, ideally, I think the said technology (for the maximum benefit to society) should then be made to become open-source. HOWEVER, in practice I think this would be very difficult to implement and enforce. No company will want to give up their trade secrets. And behind every successful technology, there are countless test data and prototypes that would be totally unfair to force the companies to release these hard-earned data to their competitors.

So, practically speaking, I think once the patent expires, just allowing reverse-engineering and remove the initial patent owner's ability to sue against a "copy of idea" would be good enough.

Some very interesting ideas, and I especially like the last sentence, but I'd allow reverse engineering to start somewhere in the middle of patent period, with enforced licensing or royalty payments to patent owners. One area needs more consideration is at the origin. Innovators and risk takers must have reasonable expectations of benefits for their time, ideas, and risks they must take to create inventions and produce innovations. A universal way to do that is monetary profits (yes, we all know not everyone's motivated purely by money), and patent protections through legal monopolies is probably the simplest way of protecting IP owners, while benefiting the society.