MSUB China and Intellectual Property Question

Description

i will provide the article after bidding

One purpose of the assignment is to have you take the time to look at some of the international business
newspapers and international coverage in business periodicals. Written Requirements
You will write a summary of and provide comments on the article.

The summary and commentary should
include the following:
Content
• A summary of the article, including how the article adds to the information in the textbook.

Your comments about what you learned, what you thought was surprising, what was most interesting,what was most valuable from the article, etc.Format

Include a title page which contains the following: (1) the article title, (2) the course number, (3) your

name, and (4) the date.

The written assignment should be at least 2 pages in length, with at least 1/2 page devoted to your

comments. The assignment should be double spaced.

Use 1 inch margins.

Use a font no larger than Times Roman 12 pt. font.

Citation and Article

Provide a citation of the article at the end of your paper using APA format. Information on writing a

proper citation in APA format is provided in two links to Purdue University in the D2L section titled

“Writing Assistance.”

Upload a copy of the article along with your paper. In the case of videos and podcasts, the citations

will suffice.

Issue #1: Intellectual Property Rights in the Global
Environment
BGEN 360: International Business
INSTRUCTIONS
Topic
The first issue we will cover in class is intellectual property rights (IPR). You are to focus on the international
aspect of IPR. The purpose of this topic is for our class to learn as much as we can about what intellectual
property rights are, the importance of the role they play in the global marketplace, how they are enforced and
how current enforcement is working, and any controversies surrounding the topic. We should also learn from the
discussion about some specific disputes surrounding IPR currently occurring in the world.
Assignment Requirements
Please refer to the document titled “Issue Presentation Instructions: Teams and Individuals” found on the D2L
content page of our course for detailed instructions on the requirements for the assignment. Both the
instructions for individuals as well as the presenting team are provided.
STARTER MATERIAL
Textbook
The material on IPR from chapter 2 of the textbook is found on pp. 51-53. Chapter 7 devotes some pages to the
World Trade Organization, and pp. 200-203 discuss a WTO agreement called TRIPS (Trade-Related Aspects of
Intellectual Property).
Other Starter Material
Below are a few other resources related to IPR that might spark an idea or two related to what you might search
for on the topic of IPR.
•
WTO information on TRIPS (http://www.wto.org/english/tratop_e/trips_e/trips_e.htm)
o
•
Patents on seeds (http://www.digitaljournal.com/article/322794)
o
•
This link gives some good basic information about the agreement. It would also be a good idea so
type in TRIPS on the WTO main webpage to find links to press releases from the WTO on the
subject.
In this video (4:47 min.) a famous Indian activist, Vandana Shiva, discusses some of the downsides
of globalization. Shiva discusses IPR relating to pharmaceutical and seed companies and its
impact on the world’s farmers.
Article on risks of losing intellectual property to international partner
o
This article illustrates a Taiwanese company’s concerns about losing intellectual property to a
mainland Chinese
o
The article is found below on the next page
EXPERIENCE
hbr.org
Case Study
Willy C. Shih is a professor of management practice at Harvard Business
School. Jyun-Cheng Wang is a professor of service science at National Tsing
Hua University’s College of Technology Management, in Hsinchu, Taiwan.
A maker of hybrid-car components struggles
with the risks to its proprietary technology.
by Willy C. Shih and Jyun-Cheng Wang
The Experts
Eric Giler, CEO of WiTricity
Illustration: Federico Jordan
Mats H. Olsson, senior vice
president of Ericsson Group
HBR’s fictionalized case studies present
dilemmas faced by leaders in real
companies and offer solutions from experts.
This one is based on research by Willy C. Shih
and Jyun-Cheng Wang.
Will Our
Partner Steal
Our IP?
O
ne person wasn’t smiling.
Prime ElektroTek’s chairman
had just announced big news to
the employees and managers gathered on
the shop floor: The Taipei-based company,
which over the past decade had evolved
from manufacturing simple power supplies to designing hybrid electric power
trains for automobiles, had finally secured
a deal with Blue Sky Vehicles, a stateowned enterprise that was one of the most
dynamic automakers in China. If all went
well, Blue Sky would soon be using Prime’s
components in its energy-efficient cars and
trucks.
“At last,” the chairman had said, “we
have a foothold in the electric vehicle
market. While Blue Sky is an SOE, I think
they really want to differentiate themselves, and they’re willing to use a lot of
our technology.”
Lin Tung-Hsin, the VP and general
manager of the automobile electronics
unit, cheered. The workers standing near
him applauded. The only person not applauding was Wang Hsi-Guo, the engineer
who had led the development of Prime’s
power train technology.
Lin caught up with him afterward to
tease him. “What’s the matter, Professor?”
he asked, using the nickname Wang had
earned because of his propensity to engage
people in conversations about technical
details. “Your lunch didn’t agree with you?”
“I don’t trust our new partner,” Wang
replied. “Our power train electronics are
sophisticated and efficient—I think as good
as anybody’s. They’re better than any technology Blue Sky has ever seen or used—but
now we’re supposed to jump for joy that
it’s buying a few of our components for
a prototype, which may or may not end
up getting produced? I’m sure you know
what’s going to happen.” Wang shook his
head. “As soon as they get their hands on
the components, they’ll tear them down
and study them. Within a year they’ll not
only be making their own versions of our
components, they’ll be selling them to others. I don’t call that the road to prosperity.”
Lin patted him on the back. “I understand why you’re nervous,” he said. “But
we play in the real world. We can’t be afraid
to mix it up with a big Chinese customer
like Blue Sky. Remember, before we had
this deal, we had no one.”
“We had Apex.”
Lin scoffed. Apex Automotive was a
Taiwanese company that might generously be termed third tier. It had been
January–February 2013 Harvard Business Review 137
EXPERIENCE
an early customer at a time when most
car manufacturers wouldn’t even look at
Prime because of its roots in the electronics business. Executives at Apex had been
impressed by a test car Wang had built—
a hollowed-out blue Volvo with a Prime
drive train and a battery pack tucked
inside—and the Professor had loved working with Apex, because of its managers’
freewheeling attitude and loyalty to Prime.
He had led a team that created several
prototypes for Apex.
But the chairman had made it clear to
Lin that Prime would never become a big
player in the auto components business by
working with small, frugal companies. And
because first-tier automakers such as Nissan and GM typically wanted to build their
own hybrid or electric power trains, Prime
needed a powerful second-tier partner.
That’s why it had looked to China despite
the risky IP environment there.
Blue Sky fit the bill perfectly. It was
among the fastest-growing Chinese automakers, and it was racing to get into the hybrid market. During a long sales campaign
that included a lot of relationship building,
Prime had gradually moved up the ladder
from supplying a few minor parts for
dashboards and lighting systems to signing
a contract for major components, and Lin
was as ecstatic about it as the chairman.
Lin chided Wang. “In any case, you
overestimate our new partner,” he said. “I
don’t think they’d be capable of reverse
engineering every one of the components.”
“I don’t underestimate any Chinese
company,” Wang said.
Entering the IP Badlands
The People’s Republic of China was, Lin
knew, notorious as a place where companies lost control of intellectual property.
Engineers there were adept at cloning
products in many industries—he had seen
this happen when Prime’s power supply
division had partnered with a Chinese
computer maker. The Chinese company
was soon selling copies of Prime’s power
supplies at steep discounts. And leakage
typically didn’t stop there: Once a trade
were tantalizing: Blue Sky was doing its
secret was out of the bag, it would spread
part to help China meet its goal of producto other companies. There were laws
ing half a million “new energy” vehicles
against such things, but going through the
in the next few years. Using components
Chinese courts rarely resulted in recovery
from Prime and other suppliers, Blue Sky
of sufficient damages to make up the cost
was committed to rolling out at least five
of a lawsuit. Virtually every company on
hybrid models within 12 months.
the mainland was a threat—Blue Sky very
At a meeting later among the technimuch included.
cal people for both sides, the mood was
Prime’s chairman knew these risks
celebratory. Even Wang was smiling. Hoptoo, and during the long courtship of Blue
ing to give him a chance to show off his
Sky he had questioned Lin repeatedly
knowledge, Lin encouraged the Blue Sky
about them: Would the carmaker be able
engineers to ask questions about Prime’s
to steal Prime’s know-how? Did it plan to
technology. Someone asked why Prime
use Prime as a stepping-stone to becomhad chosen to focus on series rather than
ing a vertically integrated manufacturer of
hybrid power trains in its own right? Worse, parallel hybrid power trains. Lin was surprised to hear such a basic question. Wang
could it end up selling those components
explained that in parallel hybrids, such as
on the open market?
Toyota’s Prius, the electric traction motors
Lin had reassured his boss. For one
and the internal combustion engine are
thing, Blue Sky was buying only select
linked to the drive train, and the battery is
components. It wasn’t buying the vehicle
charged by both the engine and the brakes.
control unit, a critical part of the hybrid
When the brakes are applied, mechanical
drive train. For another, Prime had embedenergy flows back to the traction moded a great deal of tacit knowledge into
tors, which then generate electricity. This
some components—knowledge that was
interconnection makes the control system
more “know why” than pure know-how.
quite complex. Series is a simpler and less
Lin had argued that although an outside
expensive way to go. A series hybrid, such
company might be able to make facsimiles
as the Chevy Volt, runs purely on electrical
of the components, copying the hardware
power, with the gas engine functioning
without understanding how it worked
only as a generator.
would result in a car that was close but not
Lin felt vindicated by the Blue Sky enexactly right. Third, Lin had stated bluntly,
gineers’ befuddled looks. He was sure the
Blue Sky’s engineers didn’t seem all that
Chinese company didn’t have the expertise
sharp when it came to systems engineerto copy Prime’s products.
ing. In technical discussions with them,
Wang began asking his own questions.
Lin had observed that although they were
skilled at narrow design tasks, they weren’t “So,” he said, “you’ll be creating the vehicle
control unit yourselves?”
very good at understanding big, complex
Yes, the Blue Sky managers said. The
systems designs.
deal stated that in addition to supplying
This view was reinforced a couple of
certain components, Prime would provide
weeks later, when Lin and the Professor
specs for linking them to the vehicle conaccompanied the chairman to Guangzhou
trol unit—the car’s brain.
to visit Blue Sky.
That unit, about the size of a shoe box,
Lin had been to the factory several
would be a highly sophisticated device
times during the forging of the deal, but
able to take commands from the driver
the trip was Wang’s first. Lin could see that
and control the car’s speed, acceleration,
he was awed by the scale of the operation.
braking, and charging systems. When the
Cars took shape by the hundreds on imdeal with Blue Sky was coming together,
maculate assembly lines tended by robot
Lin and Wang had at first assumed that the
arms and white-suited workers. And the
automaker would want to buy a vehicle
numbers the Blue Sky managers threw out
138 Harvard Business Review January–February 2013
hbr.org
HBR.ORG
Tell us what you’d do.
Go to hbr.org.
control unit from Prime. With Lin’s approval, Wang had gone as far as to lead a
team in building one specifically for Blue
Sky. In addition to being highly efficient,
the prototype was a marvel of embedded tacit knowledge. But in the end the
automaker said it planned to build its own.
Because a car gets its “road feel” from its
vehicle control unit, first-tier automakers take pride in developing rather than
outsourcing the unit. Blue Sky evidently
aspired to join those lofty ranks.
“How far along are you?” Wang asked.
“I know from our experience that it can
be tough to design a really good vehicle
control unit.”
The Blue Sky managers looked at one
another, seemingly unsure how to answer.
Finally one of them said, “Don’t worry.
We’re making progress.”
During the flight home, Lin recounted
this story to the chairman as further
evidence that Blue Sky posed little IP risk
to Prime. “These guys aren’t systems
guys,” he said. The chairman nodded
thoughtfully.
Back in Taipei, Lin asked Wang about
the prototype vehicle control unit that had
been built to Blue Sky’s specs, and Wang
replied that because there had been no
need for it, it had been dismantled.
Lin groaned. “Can you put it back together again?” he asked. “Quickly?”
One Important Condition
A month later the chairman stopped Lin in
the hall to ask about Blue Sky’s progress
with its prototype vehicle. The chairman
thought it ominous that there had been no
word. Had something gone wrong?
Lin said he had heard nothing negative.
“We really need this deal to work,” the
chairman said, nervously slicking down
a wisp of hair. “Blue Sky’s competitors
in China are already way ahead in selling
hybrid cars and trucks. If Blue Sky gets seriously behind, it could be in trouble, and
then we’d be in trouble. Blue Sky is the only
big automaker that has shown an interest
in us. If anything happens to this deal, we
might be finished as an auto supplier.”
Lin immediately began calling his contacts at Blue Sky, but person after person
was noncommittal about what progress
had been made. Finally the head of the hybrid unit invited him back to Guangzhou to
see the prototype. The absence of fanfare
was conspicuous—Lin and the Blue Sky
managers and engineers met in an outdoor
lot by the test track, where an unprepossessing two-door car was waiting. Lin got
behind the wheel, stepped on the accelerator, and started driving around the loop. He
could tell that something was wrong; he
had expected much crisper performance,
and the gas engine seemed to be cutting
in too soon. Clearly the control system
needed major work.
Lin believed that the
Chinese company
posed little IP risk.
“These guys aren’t
systems guys,” he said.
“I’m sorry,” the Blue Sky manager
said, reading Lin’s expression. “We are
still making adjustments to the vehicle
control unit.”
This was as far as they had progressed
in six weeks? Lin suppressed the impulse
to make a cutting remark. Instead he said,
“We have one we can give you—one that
was designed to work with the other components and to meet your specs.”
“That’s a big relief,” the manager replied.
“Your engineer, the Professor, was right
about it being tough. We didn’t realize.”
Lin agreed to ship the unit as soon as
possible. By afternoon he was back in
Taiwan and had scheduled a meeting with
the chairman for the next day. He was expecting to take grim pleasure in telling the
story. It would allay the chairman’s fears
about the delay while demonstrating his
own foresight in having Wang reassemble
the prototype control unit—not to mention
confirming his assessment of the Blue Sky
team’s lack of systems depth.
But the meeting didn’t go as planned.
“I just got off the phone with Blue Sky,”
the chairman fumed as Lin entered the
office. Lin had never seen him so agitated.
“This is absolutely unacceptable!”
“I don’t understand,” Lin said. “Blue Sky
can’t make its own vehicle control unit, so
they want to outsource it to us. We’ll play
a much bigger role in the development of
their prototype, which means we’ll probably get a much bigger share of their business going forward. That’s a good thing.”
“But didn’t they tell you? There’s a condition,” the chairman said. “Blue Sky will
accept our vehicle control unit only if the
IP belongs to them.”
Lin was so surprised that he could only
echo the words. “Belongs to them?”
“Yes. We have to give them the source
code for the software, and all the control
system algorithms. If we don’t agree, they
won’t accept the unit, which means they’d
have no vehicle controller—and no car.”
With all the discussion about reverse
engineering, it hadn’t occurred to Lin that
the automaker might demand Prime’s IP
as the price of playing. He thought back to
the many assurances he had given about
the Blue Sky managers’ not being rocket
scientists. What would the Professor say
now? That the automaker had been lulling
Prime into a partnership that would strip
the smaller company of its intellectual
property?
“They claim they need it,” the chairman
said. “Without the IP, they say, they won’t
have any use for the other components
we were hoping to sell them. So they’ll
find another supplier who will give them
the whole package. But if we accept these
terms, how can we sustain a business
in China?”
Q
Should Prime
release the IP
for its vehicle
control unit?
See commentaries on the next page.
January–February 2013 Harvard Business Review 139
EXPERIENCE
The Experts Respond
Eric Giler is the CEO of WiTricity, which develops
technologies for wireless delivery of electrical power.
If I were the CEO of Prime, I’d walk away
from this deal. Blue Sky might one day turn
out millions of vehicles that use Prime’s
components. But if the deal undermines
Prime’s ability to make money in the future,
so what?
Prime spent a great deal of time and
money figuring out how to build hybridvehicle components. I’m sure that Wang
and his team had all the usual adventures
of inventors—hitting dead ends, getting
frustrated, stumbling on solutions. The
company’s IP is the result of their toil. If
Prime gives Blue Sky its source code, the
carmaker will instantly be on the same
footing.
It should be said that the Chinese
companies most likely to reverse engineer
and copy a technology are not always the
big manufacturers like Blue Sky. Many
times it’s the small companies that you
have to worry about. As Chinese firms
become larger and more global, they
learn that they have to respect other
companies’ IP—otherwise, they’ll have
trouble finding partners. In fact, the
biggest Chinese manufacturers do exactly
what European and U.S. corporations
do—fight constantly to guard against
infringement. A Chinese multinational
might be juggling 100 lawsuits at any
given time.
What’s unusual about Prime’s situation
is that its partner isn’t trying to steal its
meaningless elements. You can see why
this might be useful: If another company
were to come out with a similar product
that contained the meaningless material,
Once you sell a technology, you can’t restrict
the buyer from taking it apart and learning how
it works.
IP; it’s trying to buy it. But that doesn’t
matter much. The reality is that once you
sell a technology, you can’t restrict the
buyer from taking it apart and learning
how it works. Lin may be right that Blue
Sky’s engineers aren’t capable of complex
reverse engineering. But the technology’s
underlying ideas would be at risk no matter
how sophisticated the science and no
matter what limitations Prime might try to
place on Blue Sky. That’s true not only for
capital-letter IP—the patented material—
but also for lower-case intellectual prop­
erty, the trade secrets incorporated in
hardware and software.
Building tacit knowledge into a technology is an art, by the way. Not only do some
suppliers embed “know why” in such a way
as to make their hardware very difficult to
copy, but some also inject misleading or
it would be obvious to a court of law that
the competitor had cloned the product.
Nevertheless, embedding tacit
knowledge often amounts to little more
than buying time. Eventually a determined
competitor can probably figure out how
your technology works and how it’s made.
So is there anything Prime can do to
protect itself? One option is to get Blue
Sky to grant audit rights, which would
mean letting a Big Four accounting firm
monitor the Chinese automaker’s use of
and payment for Prime’s IP. Another is to
include any foreign subsidiaries of Blue Sky
as parties to the partnership agreement.
That way, if Prime suspected that its IP
was compromised, it could sue in the
subsidiary’s country, which might produce
better results than a lawsuit in China.
But these are iffy solutions at best.
What Would You Do?
Some advice from the HBR.org community
If Prime surrenders its IP rights,
it’s effectively surrendering its
soul—and risking termination or
absorption into Blue Sky for a shortterm gain. If Prime refuses to bow
to Blue Sky, it can stay in the game
and retain the potential for future
success.
Andrew Blaine, founder, Business
Planning Solutions & Support
The Taiwanese company should
license the IP for the vehicle control
unit to Blue Sky on a nonexclusive
royalty basis.
Hubert Savelberg, CFO,
Euregio.net
140 Harvard Business Review January–February 2013
Prime should offer Blue Sky
equity. With minor ownership of the
company, Blue Sky would have access to the technology and competence it needs at a fair price, and
the arrangement would prevent that
knowledge from falling into competitors’ hands. This would allow Prime
to secure a revenue stream while
keeping its development team—a
core resource—independent and
motivated.
Pedro Antão Alves, director of
sales and marketing,
Cofely-GDF Suez
hbr.org
Mats H. Olsson is a senior vice president of Ericsson Group
and the president of Ericsson North East Asia.
It might be in Prime’s interest to guarantee Blue Sky some form of access to its
source code. If that seems counterintuitive,
let me back up a bit.
I believe strongly that a company must
secure its intellectual property assets.
Prime has spent years investing in R&D, and
its proprietary technologies represent its
future revenue stream.
The mobile communications industry, in
which Ericsson is active, differs from the
automotive sector because of the need for
interoperability (you can use your smartphone in China as easily as in the U.S.).
Some of Ericsson’s patents are essential
for the development of industry standards;
therefore, through an extensive licensing
program based on “fair, reasonable, and
nondiscriminatory” terms, we make those
patents widely available. This gives us a
solid return on our R&D investment, benefits established companies, and enables
new companies to enter the market.
At the same time, we invest in proprietary solutions—our equivalent of Prime’s
source code—to differentiate ourselves.
We don’t provide our competitors with
those solutions, and we protect them
with every tool available to us. We pursue
legal action both when a standard adopter
unreasonably rejects our licensing program
and when we see unauthorized use of our
proprietary solutions.
Given the threat to its IP, Prime is prudent to embed tacit knowledge in its software. That can provide some protection.
But the embedded-knowledge approach
is beside the point if a partner simply
demands a technology’s underlying IP, as
Blue Sky has done. That’s a threat Prime
apparently didn’t expect.
Prime’s reaction was to perceive two
equally unappealing options—give in to the
partner, or give up on the venture. But there
could be legitimate strategic concerns
behind Blue Sky’s demand, and if Prime can
understand them, it might be able to craft a
solution that benefits both sides.
Blue Sky might have doubts about
Prime’s prospects in the hybrid-car indus-
try. It is cause for concern that Prime has
struggled to win big customers. If Blue Sky
makes a sizable investment in Prime and
Prime’s auto unit gets into trouble or goes
Prime’s dilemma raises
a larger issue: The
firm needs to become
expert at IP rights.
belly-up, the Chinese company’s business
could be in jeopardy. In that case, access to
the source code would be a lifeline.
If that is the worry, Prime could pursue
an escrow option, under which the source
code would be unavailable to Blue Sky as
long as Prime’s auto unit is in business. If
anything happened to that unit, though, the
Chinese company would be granted access.
That’s a fair arrangement and one Blue Sky
would undoubtedly accept, assuming its
intentions are good.
Prime’s dilemma points to a larger issue:
The firm needs to become expert at IP and
licensing.
All major technology companies engage
in extensive cross-licensing. Ericsson has
more than 90 agreements in place, including several with Chinese firms that are our
competitors. Our agreements are global,
and if they are breached, we can take legal
action wherever the infringement occurs.
Similarly, if Blue Sky were to copy Prime’s
technology and sell the resulting components outside of China, Prime could pursue
lawsuits in those markets. Recourse would
be more difficult within China, because
despite obvious improvements in the past
few years, legislation is not always enforced
in a predictable way, and the courts are not
yet fully transparent.
If Prime wants a place among the inno­
vative suppliers to the high-tech auto
industry, it needs to treat IP rights as a core
HBR Reprint R1301M
competency.
Reprint Case only R1301X
Reprint Commentary only R1301Z
Wisdom They Don’t Teach
in Business School
Michael E. Rindler
Jack H. Mitstifer, MD
Written for healthcare
leaders and physician
executives. Wisdom
applies to all leaders.
Available for iPad
and Kindle.
PartnersRindler and Mitstifer
advise healthcare systems,
hospitals, andphysician groups
on performance improvement:
leadership, financial, and
governance. Fifty years of
exceptional leadership
and medical experience.
Solutions for thriving in the
era of healthcare reform.
integrityhospital.com

Purchase answer to see full
attachment