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Disney drama reveals the depth of China's IP problems

rollycoasterx.JPGChina has long been depicted as a wild west for intellectual property rights. For decades it was famous as a pirate publisher and maker of knockoff products.

The country has been trying to adopt a more law-based approach to IP, but problems continue to occur. The latest company caught up in this confusion is the Walt Disney Company.

Disney licenses Disney Shanghai, an immense installation that opened this past June. As is customary, Disney gave the park exclusive rights to its characters.

Imagine the consternation, then, when a competing theme park operator, Dalian Wanda Group Company, opened its new park ahead of Disney Shanghai - featuring classic Disney characters such as Snow White and storm troopers from the new Disney-owned Star Wars picture.

Disney protested the infringement. The Wanda Group explained that the use of the characters was by third parties.

Wanda founder Wang Jianlin called the Disney park a "lone tiger" that would be quickly done in by his own park's "pack of wolves." [Source: Fox News]

Ironically, Wang Jianlin had earlier stated that a major advantage of Wanda over Disney would be the its emphasis on homegrown culture, as opposed to the pop culture imported by Disney. So it was a contradiction when Captain America and other Disney trademarks were reported greeting visitors at the Wanda opening.

China's IP background

Doing business in China will likely be a tremendous success for Disney, but not without continuing IP issues, as China tries to move away from its history of infringement and comply with international norms.

A recent scholarly paper, titled "Intellectual Property Rights Protection, Ownership, and Innovation: Evidence from China," suggests that China has been acknowledging the importance of intellectual property protection in its own unique way, fashioning a motivated, innovative economy built on private business.

This evolution from being a developing country relying on cheap labor and copycat practices to a global leader capable of world-class innovation is one of the wonders of the 21st Century.

But this evolution has meant headaches for U.S companies, adjusting to the norms of doing business in China, which seems to be growing more nationalistic and assertive of its demands by the day.

China is pressuring companies to lower prices and in many cases turn over proprietary technology. The country wants to honor international IP protocols, but customs and laws vary from province to province. The Disney/Wanda blowup, for instance, is occurring in competing parts of the country.

Chinese economists see the tourism industry doubling in size by 2020, to $610 billion tourism industry annually. A great deal is at stake in this intellectual property battle between giant competitors.

Disney remains optimistic. The Shanghai theme park has been described by a Disney spokesperson as the company's greatest opportunity since Walt Disney himself bought a tract of swamp land around Orlando, Florida.

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