Business English: Villagers fight over patents in rural China

Xu Song recently became the proud owner of 799 Chinese furniture patents. The problem is, he admits that he did not invent the furniture: his neighbours made it first - and they just copied it from Ikea anyway.

Designed by Ikea, copied by the neighbours, patented by Mr Xu: this may not be the kind of creative progression Beijing has in mind, when Chinese leaders talk about building an economy based on innovation.

But in a strange kind of way, the fact that Mr Xu and his neighbours - former migrant workers and pig farmers in a rural Chinese village - are fighting over patents is a sign of the growing sophistication of the Chinese economy, legal experts say.

  A customer pushes her trolley through "11 Furniture Store", a chinese imitation of Ikea

Until Mr Xu launched the current patent war over the village knock-offs - copies not just of Ikea furniture, but also of Korean and Japanese designs - most villagers had no idea what a patent was. Now they know there is money to be made from owning intellectual property, and not just from stealing it.

It all started when hundreds of former migrant workers moved back to Dongfeng village, a poor hamlet in China's eastern Jiangsu province, to turn it into a "Taobao village": a place where almost every home makes furniture in a shed in the back garden, and sells it from a virtual storefront.

Mr Xu and his neighbours are part of a vast national reverse migration of workers from the factories of the developed south and east, to become e-commerce entrepreneurs back home. But to launch their businesses successfully, they need to build brands - and for that, they must innovate. China's leaders recently reinforced the message in their parliament: they want people like Mr Xu to add brainpower to the products they make.

Mr Xu is adamant that he is merely responding to that call, by registering all of the products made by his neighbours, as a way to protect them from being pilfered by copycats. He admits that his neighbours made the patented products before he did - a crucial distinction in patent law, where being first is what counts. And they all admit that they copied the designs from elsewhere in the first place.

But Mr Xu insists: "I didn't steal their products, I just registered the patents." He thinks he should be rewarded with licence fees from everyone else in town - because he had the bright idea of protecting the town's IP. He can easily use his patents to get Taobao to remove their products from its website, if they do not comply.

Such disputes are breaking out all over China: the top court says IP lawsuits rose 38 per cent last year to an astounding 66,000. The stakes are increasingly high: Apple is fighting a trademark suit in China that threatens to shut down mainland distribution of iPads; Hermes recently failed to stop a Chinese menswear company from selling clothes under its trademark, and Pfizer lost a trademark case against a Chinese company that sells electronics under the brand Little Viagra.

Mr Xu says he is just "brand building". But his neighbours see things differently. "He opened his factory long after the rest of us," says Ding Cuihua, who claims to have run Dongfeng's first Taobao furniture factory. She admits that everyone in the village copies everyone else - and competes only on price - but she says none of the villagers will pay Mr Xu to stop the short-sighted cloning.

But most villagers, surprisingly, say what Mr Xu has done is, in the words of Sun Han, head of the Shaji Ecommerce Association, "not 100 per cent a bad thing". He is trying to make a deal with Mr Xu to use his patents, not to extort licence fees from neighbours, but to build the town's brand. "Otherwise everyone will copy each other and destroy the industry," he says.

Tony Chen, intellectual property lawyer at the law firm Jones Day in Shanghai, points out that there is nothing illegal about what Mr Xu did. To obtain a so-called "design patent" in China, an "inventor" need only send in three pictures or drawings of the design; the patent office does not independently confirm whether the design is innovative. "This exposes the weakness of Chinese patent law," says Mr Chen. The Chinese patent office granted 380,000 design patents in 2011 while the US Patent office granted only 21,000. "These numbers do not reflect the innovation reality."

Ironically, no one in the village seems at all bothered by the fact that their furniture designs were all, originally, "borrowed" from others. They think it is fine to steal IP from foreign companies - just not from the neighbours.

Additional reporting by Shirley Chen