A new breed of intellectual property?

On December 2015, an Israeli entrepreneur finally launched his Kickstarter campaign to fund one of his inventions: a smartphone case that could easily be converted into a selfie-stick. The entrepreneur had spent a year developing the product, designing prototypes and acquiring minimal funds to achieve his goal. What was his surprise when, one week after launching his Kickstarter campaign, his idea was already being sold for really cheap prices on Chinese e-commerce websites? On the course of a week, Chinese manufacturers were capable of analyzing that entrepreneur’s idea, developing his product and putting it on sale.

This kind of situation happens more often than it seems. The Chinese ‘copycat’ phenomenon is a consequence of a sharing and innovation culture that traces its origins back to the 90s, when several North American and European multinationals set up the bulk of their hardware manufacturing on the Chinese Special Economic Zones (SEZs), especially Shenzhen. If on the software niche there are trends that advocate for the freedom of studying, altering and sharing code (The so-called Free and Open Source Software – FOSS – movements),  when it comes to hardware, a specific culture dedicates itself to the “open source hardware”: it’s the maker’s movement. Regarding the Free Software movement, there are four essential freedoms that, in one way or another, were also absorbed by the maker movement in what concerns hardware:

• Freedom to execute the program as one wishes, for any purpose;
• Freedom to study the program, and alter it as desired;
• Freedom to distribute copies in a collaborative manner;
• Freedom to share modified copies, giving everyone a chance to enjoy the benefits of the modifications you’ve made;

The maker culture is an intersection between DIY ideas with the hacker culture that concentrates on the creation of new devices and experimentation with already existing hardware.

The city of Shenzhen was the first Special Economic Zone in China, and during the 80s, 90s, and 00s, experienced fast growth fueled by foreign investments and characterized by its focus on the production of manufactured goods such as textiles and electronics. Especially after the 90s, it became common for Chinese factories used to manufacture branded electronics to be used also for the production of copycat versions of these same products, so they could be sold for lower prices in Chinese and foreign markets alike.

That trend, known as shanzhai, was considered a nuisance to European and North American innovation hubs as they benefitted from the innovations developed on central countries without offering any compensation. Besides that, they usually didn’t offer any guarantees or technical support and often acquired a reputation for being of low quality and unreliable.

That scenario, however, changed rapidly. The shanzhai products gradually acquired quality equivalent to the branded originals such as Samsung, Apple, Sony and etc. In some cases, innovations developed by Chinese manufacturers made their products even superior to the branded designs. The first dual SIM phones, for instance, were developed like this before becoming a standard on the global market. Chinese Entrepreneur Jack Ma, the founder of e-commerce website Alibaba, was criticized for saying that copycat products manufactured in Shenzhen were better than the originals.

Nowadays, Shenzhen is referred to as “the Silicon Valley of Hardware”. The city spends approximately 4% of its GDP on R&D (Double the rest of the country), produces more than 40% of Chinese patents (And high quality ones, unlike most) and is estimated to add up an average of 76% of added value to products manufactured there (For the sake of comparison, Europe adds 86% and usual low-end manufacturing countries add around 5%).

Shanzhai products eventually faded with time as Chinese businesses began to develop their own innovation, but the culture of sharing knowledge remained. Even though many original brands have been born in Shenzhen from copycat manufacturers, the mindset of manufacturers in the Special Economic Zone still rules that hardware and product design are open to being altered or “borrowed”. Traditional notions of exclusivity in intellectual property are not found there.

How, then, is it possible to foster innovation if there are no legal guarantees for the outcome of research & development? It is counter intuitive to think that it is possible to make a profit like that: if an innovation is open to being used by anyone, even by those who have not spent a penny on its development, why innovate?

The answer lies in the speed of innovation cycles in hardware hubs such as Shenzhen.

The innovation speed in Shenzhen is so fast that, before an idea can be copied, it was already surpassed by the developer. Innovation cycles in Shenzhen have reached such a fast pace that traditional protection of intellectual property becomes irrelevant. Most of the profit with an innovation is made before it can be copied. In some cases, an innovation developed is copied by another entrepreneur, improved, and then copied back by the original developer.

Is it possible to replicate this rhythm of innovation in other ecosystems, or are the unique conditions and background of the Chinese city a barrier to aspiring hardware hubs?

The answer is uncertain, but Shenzhen certainly teaches us a lesson on innovation and intellectual property: maybe the idea that a single person or company in the entire world holds exclusive rights to an idea – such as Apple holds right to the rectangle with curved edges phone – isn’t exactly the best and only way of fostering innovation. Opening up the opportunity to the sharing of ideas and knowledge – especially in developing countries without proper means of accessing knowledge and resources – and drifting away from notions of protection originated in the 19th century may be more successful in achieving a democratic and nonmercantilist dissemination of knowledge.