China Internet: The Enclosure Movement Of Fierce Fighting

Merciless, dead and alive. In recent weeks, China Internet The tension between the main competitors has heated up to a dangerous level. For example, Shanda, an interactive entertainment provider, accuses the search giant Baidu Inc of copyright infringement, and the Internet instant messaging giant Tencent Inc and anti Virus Inc Qihoo 360 have blocked each other's online products and services around allegations of infringement of user privacy. But these battles are striking because the scale of their business is extraordinary. But these violations of intellectual property rights and other surreptitious behavior are very common in this industry.

If you want to find an analogy, think back to the lawless years of the Gold Rush in California in nineteenth Century. Internet entrepreneurs are the contemporary "prospectors" who declare their ownership of certain regions in a vast wilderness. In such places, the appearance of the sheriff is seldom seen. "China is a fast growing economy. In the past 20 years, this country has undergone tremendous changes. You can even say that they have no time to establish widely accepted ethics and business practices." Mark Natkin, executive director of Marbridge Consulting, Beijing, said (Mark Natkin). "In China, people have some kind of" gold rush "and" Seize the territory " Psychology. "

He believes that an unstable regulatory environment is partly responsible for this mentality. Online video, blogs and social media businesses may turn into unregulated business opportunities overnight. "Some people have witnessed the change of laws and regulations. In this environment, yesterday's business opportunities could vanish today, because the government will change the rules overnight." He talked about it. "This situation has created a very short-sighted concept of earning money, because the period of money making is very short, so people will find shortcuts."

The number of Internet users in China has far surpassed that of the United States, though the market in China is relatively small. However, with the growth of people's disposable income, with the steady increase of Internet users, the country has become a "gold mine". Here, in order to win and defend the site, enterprises are struggling.

Tim Smith, a practising intellectual property lawyer (Rouse) practising in Beijing, also holds similar views. Tim Smith "In China, the main incentive for companies is to" seize the market ". Because this is a merciless business environment, there is no need for them to gain commercial territory. " Smith once acted as a client of the record industry to sue two major search engines in China, Baidu and YAHOO China. He said: "just like any company that is facing the same situation, they will do all they can to impede the filing and delay process, and do their best to defend themselves against any litigation that accuses their business models of infringing on the rights of others."

For foreign companies wishing to enter the Chinese market, the behavior of Chinese counterparts has created a difficult and difficult area to forgive. Western companies such as eBay, Amazon Co (Amazon) and Yahoo Corp (Yahoo) have been defeated. Other companies such as Google Corporation (Google) and MSN are struggling with their local competitors. YouTube, Twitter and Facebook are blocked by China's law and "China firewall" (Great Firewall). Although some enterprises may feel wronged by the problems of their operation environment, their failure may be partly attributed to their stubbornness and the failure of the business model to adapt to China's reality.

If a company's business philosophy is "just copy the rules and systems that apply to other markets to China, then you will probably end up in failure." Yu Yang, President of Analysys International, a consultancy in Beijing, said Edward Yu. "But if you can adapt to the market a little bit, you can still use some ways to increase your ROI."

　 [ Enclosure movement ]

Despite many challenges, investors are willing to join the wave of gold rush. "Everyone closed their lips and jumped into this pond." Natkin talked about it. "We provide advisory services to various hedge funds and venture capital institutions. We will continue to emphasize the risks involved. The purpose of our efforts is not to prevent them from entering the market, but to make them aware of what may happen. But because the potential rewards are really high, they still can't help participating. "

William, William Innov8 Bean, managing director of SingTel Innov8, a venture capital fund backed by Singapore Telecommunications, points out that investors see China as a "big pond" with huge profits, though the market may lack innovation. "China is a place where various services are constantly being created. Perhaps there is no high level of technology here, but there are indeed a variety of new services." William said. "Maybe 5 years ago there was something to do with the lack of supervision and regulation. But now, the real focus of attention is on where the value lies. For us, what we are looking for in the United States is the technology that can change the rules of the game, and what we are looking for in China is the service that can make money in this area.

Making money does not necessarily mean innovation. To a large extent, the "virgin land" market, whether it's economic development or consumer groups, has been successful in other places, is still a new service for China, and can easily become the target of local imitators. As Yang Yang of Analysys International has mentioned, in China, people often copy the products and services of other people undisguised.

Yu Yang said that at present, investors are happy to provide support for companies that imitate or copy similar business models abroad. "In fact, Baidu's model is very similar to Google, but it is only a little localized adaptation. CTrip is the mirror image of Travelocity (the famous travel ticketing, travel agency website) and Expedia (the world's largest online travel information company). From the perspective of investment return, you can make full use of this. But from a moral point of view, the nature is completely different. "

Yang said that China has hundreds of start-ups in copying Facebook, Twitter and other social media and entertainment websites. They often copy web pages. However, there is also a "macro" level of innovation. Yu Yang said: "some companies are thorough counterfeiters, but some companies do what we call" macro innovation "(macro-innovation). At the same time, in order to be more acceptable to the Chinese market, they have transformed products and services.

Bin William's SingTel Innov8 fund tries to find products and services that can be pushed into other markets. For investors like them, China is creating ideal products and services. "When an American company comes to China, it will change the services provided by developed countries to the services of developing countries. For example, Chinese companies develop services on the basis of mobile phones, text messaging rather than e-mail. " He said that these services can easily be transferred to the Southeast Asian and African markets, which is also the area where SingTel Innov8 funds operate. {page_break}

　 [excuses and truth]

A major complaint (perhaps an excuse) among Western companies is the country's feeble and undeveloped regulatory system, especially in terms of intellectual property protection. Yang Yang of Analysys International said that despite the lack of strict supervision in China's Internet field, "the implementation of regulations is a bigger problem." In some cases, it is clear to all that certain actions violate the law, but from a legal point of view, it is difficult to verify the infringement or duplication of an innovation. It usually takes months or even years to prove it. "

Although the fact may be true, Dan Harris Dan Harris, Harris & Moure international law firm, a professional law firm specializing in investment in the US, believes that people should judge the whole regulatory system in the macro context. "Americans are always complaining about China's poor enforcement." He said, "but what they really mean is:" the government is not doing enough to stop some people from making fake Adidas (Adidas) products. But in the US, the government's performance in this regard is also not positive.

Smith, a Roth international intellectual property law firm, adds that many of the challenges facing businesses are only immature in this field, just like what happened in the United States. He believes that in the early days of Internet technology development, many leading companies in the United States were developing businesses through similar means. "If you do not allow commercial video programs to be uploaded to the website before you have the ability to provide large amounts of your own content, it is doubtful whether YouTube will grow to such a scale today. Now, YouTube has been authorized to broadcast commercial content, and also has the technology to confirm whether the uploaded video is copyright.

Smith pointed out that today, in western countries, making money by stealing or infringing intellectual property rights will face the risk of being prosecuted or even sent to prison. But in China, the situation is not. "In Britain, if a court orders a company to do something, but the company refuses to execute it, the company's supervisor will eventually be sent to prison. But the situation in China is totally different. China's courts do not have the power that Western courts have. "

Other experts agreed. Harris believed that although China's legal system is generally good at handling litigation problems in a fair way, the effectiveness of punishing immoral behavior is not. "The reality is that China's courts do not have the power to enforce the verdict, unlike the US courts. In the United States, if you sue an American company, the judgment is that it has to pay you $5000, but if they refuse to pay, then you can bring the sheriff to seal up the company's equipment and bank account. Of course, you can do this in China, but it is much more difficult. The court is not really a powerful institution. "

Though not perfect, Smith believes that China's legal system is increasingly being used to resolve conflicts. At the same time, facts show that the system has the ability to deal with the increasing number of cases to be dealt with. "Last year, China had 30 thousand claims for intellectual property rights, the largest number of intellectual property litigation cases in the world. This system works very fast. You are expected to get the initial ruling within six months, and you can appeal within one year. He talked about it.

　　 After the gold rush

So, how long will the tragic competition between competitors in China's Internet industry last? Observers predict that with the growth of the company, the increase in innovation, and the establishment of better and more suitable brands, the market share and the "fast money" craze will gradually subside. "Ideally, once a lot of larger companies destroy most of the small companies one by one, or once the small companies fall down one after another because of their inability to compete, the government officials will intervene and start supervising 10 companies instead of 300 or 200 companies." "It is easier to control a large number of companies than to supervise a large number of small companies that do not have much to lose," says Mr. In addition, he also said that as more and more Chinese lawsuits involve large companies, "you should be able to see that the legal system will become a better tool, and disputes will gradually subside."

Harris from Seattle generally agrees with this view. "I have a strong feeling that, to a certain extent, the richer a country is, the better its intellectual property rights will be. Once a country has many large and powerful companies, and these companies have their own intellectual property rights that need to be protected, they will not regard intellectual property protection as a "foreigner". In fact, China's intellectual property protection has begun to improve. Such companies are also emerging in China.

It is believed that as more China Internet Corporation get rid of the "gold rush" mentality and begin to invest more in R & D and innovation, they will seek legal protection for their own intellectual property rights. Smith believes that the government will also encourage this, because both the progress of innovation and the development of huge domestic consumer market are likely to be the core pillar of the next five year plan. "In the next 10 years, these two aspects are the foundation of China's continuous progress. As an intellectual property lawyer, I think fundamentally, the completion of these goals depends on the development of science and technology and the protection of technology. "