Chinese copycats challenge U.S. small businesses
HONG KONG -- SylvanSport founder Thomas Dempsey learned last summer that a product similar to one he'd patented was being made in China when a customer sent him a link to a Chinese company's website.
On the website, Dempsey found a recreational camper trailer that looked eerily like the one he designed and patented and sells through his 8-year-old Brevard, N.C., company.
"We were shocked," says Dempsey. "We thought at first that what we saw was our product, but as we looked at some of the video and photography, we realized that this is tooled up from scratch."
It was the beginning of what would be a nightmare for any small-business owner. Since then, distributors in South Korea and Japan have opted to market the Chinese company's product instead of Dempsey's. A Japanese distributor mistakenly thought it was buying products from SylvanSport's Chinese factory, says Dempsey. Confused consumers have also e-mailed SylvanSport, asking about its affiliation with the Chinese product, owned by Wuyi Tiandi Motion Apparatus, a maker of dirt bikes and camping gear in Jinhua City in eastern China.
These problems have left the promising U.S. upstart, whose camper trailers retail for about $8,000, in a precarious position. While SylvanSport expects a "break-even" year, with sales around $3 million — more than double 2011's — business could suffer in coming years if distributors keep fleeing to the Chinese competitor, Dempsey says.
In 2011, SylvanSport got about 15% of its sales from outside the U.S. and about half of that from South Korea, Japan and Australia. Dempsey expects 30% of 2012 sales will be international.
"Our politicians, when they describe the companies that are necessary for the economic recovery, (they are talking about) companies like ours," he says. But because of SylvanSport's lost sales, "There's a very real chance that the Chinese company could be the survivor here and we could go out of business."
Legions of imitators
The "shanzai," or copycat, culture is thriving in China. A Google search for "shanzai China" produces references to Dolce & Banana, KFG fried chicken and the HiPhone, imitations of Dolce & Gabbana, KFC and the iPhone. You might even find a reference to the Goojje search site, whose logo once closely resembled Google's.
China isn't the first developing nation to struggle with a copycat business culture. Most nations — even the U.S. — faced the same issues during the last century, says Cai Jun, a professor in the industrial design department at Tsinghua University in Beijing. Developing nations imitate the more advanced technologies of other countries in order to learn, says Cai.
Yet in Asia, "The Western idea of intellectual property seems not yet fully established," says Peter Zec, the founder of the Red Dot Institute for Advanced Design Studies in Essen, Germany, and a former president of the International Council of Societies of Industrial Design.
The severe copycat problem in China and other Asian nations exposes foreign companies, big and small, to copyright, patent and trademark infringement issues, legal experts say.
China is the "factory to the world, so you're going to have good stuff produced and bad stuff produced," says Joseph Simone, a partner in the intellectual property practice group at the Baker & McKenzie law firm in Hong Kong.
