Intellectual Property Theft using Microsoft as an example

I have watched Microsoft over the years in China from a distance as they say China is stealing their intellectual property.  Theft of Microsoft software is epidemic in China.  Yet I say that they have smiled all the way to the bank

15 years ago, no one had money or heart to buy proper software. Even U.S. companies were using pirated software.  However, Microsoft was causing it. They faithfully and carefully translated their software into simplified Chinese for mainland China and then sold five copies and those were copied and no one bought anymore.

Why was Microsoft smiling?  Translation cost them little, and selling MS Office for 10 yuan a copy on the streets of China meant that no Chinese company using cheap and capable software engineers could create any future competition for them.

With Microsoft’s mature products, fledgling start up software could not earn any money while it improved its software over a generation  They were destroyed and Chinese people learned how to use a distinctly American software that was culturally far from them. Gradually, everyone in China learned how to use Microsoft and in the present generation have more and more money to buy legal software. The future looks good for Microsoft. Chinese people culturally and by training are now Microsoft’s children. If they had not pirated and could not buy Microsoft as too expensive, they would have bought Chinese versions that would be giants now preparing to drive Microsoft out of Asia.

I know a Western automation software company that customizes for each machine, but does not protect the base program at all. They have found that it crushes the competition.The users they both want learn how to use their U.S.  software and how good it is because they got the pirated so cheap. Later they want full functionality and they come back to the U.S. company. Pirating costs the U.S. company nothing and serves their purposes.

Company trade secrets like how you make high quality product are another thing.

For some of my thoughts on IP, see How to Protect Your China IP

Any other thoughts?

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Posted in: Chinese Culture, Market Entry

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