Introduction:

A blogger recently disclosed the existence of five fake Apple stores in Kunming, China. The stores looked like authentic Apple stores. The blogger wrote that the stores "had the classic Apple store winding staircase and weird upstairs sitting area. The employees were even wearing those blue T-shirts with the chunky Apple name tags around their necks." Indeed, the blogger reported that the employees actually thought they worked for Apple. Chinese authorities ordered two of the five stores to suspend business while they were being investigated because they were not licensed to do business in Kunming. However, officials said they could do nothing about the other three stores despite the fact that they prominently displayed Apple's signs and logos because they claimed they could not find any fake Apple products for sale in those stores.

Continued investigations quickly revealed the existence of at least additional counterfeit Apple stores in China. According to a recent CNN article, documents released by WikiLeaks indicate that Apple has been trying to combat counterfeiting in China since it entered the Chinese market in 2008, but with little assistance from the Chinese government. In March 2009, the Chinese authorities reportedly declined to investigate a factory that was manufacturing counterfeit Apple laptops because it "threatened local jobs." Similarly, a raid on an electronics mall in the Guangdong province was called off due to fears that it might drive away shoppers.

Apple is not alone in its struggle to protect its intellectual property in China. Recent news stories have highlighted problems faced by well-known foreign companies including IKEA, Abercrombie & Fitch, McDonald's, KFC, and Starbucks. According to the US International Trade Commission, U.S. companies that conduct business in China reported losses of approximately $48.2 billion in sales, royalties, or licensing fees as a result of intellectual property infringements in China.

What recourse, if any, is available to a brand owner like Apple when it believes that its intellectual property rights are being blatantly infringed in China? Have the Chinese authorities made a calculated decision that enforcement of intellectual property rights, particularly those of foreign companies, is simply too costly? Are China's intellectual property laws a mere façade, and is the world expected to look the other way? These are some of the questions addressed in this article.

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