Beijing Hilon, one of the electronics malls emerging in Zhongguancun more than a decade ago, is still of great influence in China now. On the path of development, Hilon suffered a lot from IP infringement, especially from the pirated software and counterfeit trademarks, which inflicted a severe impact on its market share. However, by taking vigorous measures, Hilon enhanced its capacity of IP protection, increased the use of legitimate software, improved its IP administration and protection system, and successfully achieved transformation as well as upgrading in recent years.

Hilon: taking measures to build brands

In the early days, the electronics malls like Hilon were only in charge of property management and shop lease. When faced with pirated software and counterfeit trademarks, they had nothing to do but persuade and guide. Lu Ruiqing, chairman of the board of Beijing Hilon Group, said frankly, "This phenomenon is closely associated with the popularity of China's IP culture, and is an inevitable phase of the development of Chinese market."

In 2006, Hilon began its first rectification and cleared out some vendors involving IP infringement. With the number of shops decreasing from 1000 to 600, IP infringement in Hilon was greatly reduced.

In 2010, Hilon made its second rectification. By signing the agreement "protect copyright and promote authentic versions" with some well-known software manufacturers, Hilon called on all Zhongguancun vendors to respect IPRs, protect copyright and encourage innovation. Targeting IP infringement products especially the counterfeit goods, Hilon terminated contracts with all vendors, and specially invited some branded and IPR advantageous enterprises to the mall.

It is worth mentioning that Hilon was on the notorious list of the 2010 Special 301 Report released by the Office of the U.S. Trade Representative due to IP infringement. However, benefitting from the successful transformation, Hilon's IP protection won praise from the right holders around the world, and hence was removed from the list in 2011.

Vendors: being self-disciplined to assist with management

Li Fusheng, a representative from the purchasing section of Beijing Xinyue S&T Co., Ltd., said the number of vendors in Hilon peaked around 2005, when Hilon was a leader in Zhongguancun with the number of daily customers over 50,000, annual customers more than 10 million and annual sales near 2 billion yuan. "However, there were some short-sighted vendors who blindly pursued profit. They sold pirated versions to consumers and were denounced hence." said him, "At that time, there were about 200 booths on the fifth floor (less than 3,000 square meters), and pirated software as well as fake brands could be found everywhere."

From 2008, products involving IP infringement were boycotted in the market. To combat piracy, Microsoft firstly announced the screen would be completely black if the Windows XP operating system was not authentic, which triggered a chain reaction and gave a heavy blow to part of the vendors. Due to the pirated operating system, dozens of vendors were filed complaints and conflicts even arose in some cases.

The serious consequences caused by IP Infringement plus the double blow from e-commerce and home appliance retail chains make the vendors realize that IP protection is not only the norms for them, but also a impetus to the development of electronics industry, hence they are active to be self-disciplined and start to assist the mall in IP protection in recent years.

From 2010, vendors began to sign IP protection commitment with Hilon every year. They take precautions in purchasing and selling, and protect IPRs on their own initiative. Except the campaign against hawkers as well as counterfeit goods, they actively participate in using price tag, establishing a unified pay system and providing high-quality service, which Hilon advocates. With delivery channels renewed, they build up stable customer groups.

Nowadays, there are over 300 vendors selling products in Hilon, with IP inspectors making inspections at any time. IP protection has not only been an agreement that must be signed but also an obligation that vendors are willing to fulfill.

Right-holders: seeking cooperation to optimize product channels

A representative from Hewlett-Packard Co Ltd said Hilon was once a big headache for IP rights holders which he felt reluctant to mention. After years of development, problems arose in the business model based on assembled computers. "One of the prominent problems was that IP infringement such as OEM, counterfeit goods and piracy emerged due to the multi-source of products, which made the right-holders suffer a great loss." said him.

Against the background of China's promotion of IP protection, right holders begin to make more efforts to protect their interests, and many of them choose to seek cooperation rather than make complaints and accusations when dealing with the IP infringement in Hilon. On one hand, they try to reduce the occurrence of infringement in Hilon, and on the one hand do their utmost to expand the influence of the authentic versions. During the process, "brand stores", as the core of the business model, become the first choice for right holders.

With the right holders' efforts, Hilon brings in a large number of foreign and domestic brands as well as the "experience stores", supports vendors with good reputation, draws in more vendors recommended by brand enterprises, and establishes business files, which include the copies of business licenses and brand certificates. These measures ensure the interests of brand enterprises and reduce the occurrence of IP infringement significantly.

In addition, such software enterprises as Microsoft, devoted to the promotion of software legalization, have deepened the cooperation with Hilon in recent years. In April 2011, Microsoft participated in the activity of selling legitimate software and protecting copyright initiated by Hilon. Wu Haitao, director of the IP department of Microsoft, said Microsoft invested $9 billion on software development annually whose sustainable development and innovation would be impossible if the investment was not paid by IP protection.

In the interview, the reporter also learned that the Chamber of Beijing Zhongguancun Electronic Trade is strengthening cooperation with large enterprises like Microsoft while promoting the way "from enterprises to vendors", in which the trade chamber firstly purchases the products installed with legitimate software from the enterprises and then sells to vendors in order to guarantee a reliable source of products and get rid of piracy.

Consumers: starting with myself to reject IP infringement

As far as Lu Ruiqing is concerned, demand is another key factor in Hilon's early IP infringement except profit and poor management.

From 1999 to 2005, the business of assembled PC boomed in Hilon, accounting for nearly 70% of its total sales. At that time, consumers were mostly from small and medium-sized enterprises, universities and high schools located near Zhongguancun and Xue Yuan Road, who considered price the top priority, pointed out by Li Fusheng.

However, due to the price drop of brand computers, the number of assembled PC at Zhongguancun decreases by 50,000-100,000 annually, accounting for 20% of Zhongguancun's total sales. "With the environment of China's IP protection increasingly improving and consumers' IP awareness enhanced, the number of IP infringement has greatly dropped. Meanwhile, as problems like computer crash arise from pirated software, consumers become more inclined to legitimate software turned out by brand enterprises. Particularly, the price decline makes IP infringement products lose revenue advantage." said Lu Ruiqing.

Hilon's long-term consumer Li Yining, also known as a "World of Warcraft" player, once suffered a lot from pirated software. In 2012, he participated in the activity "You report and I reward" initiated by Hilon, during which he reported two vendors selling pirated software to Hilon. After verification under thorough investigation, Hilon imposed tough penalties on the vendors and offered rewards to Li Yining. "This activity greatly enhanced consumers' awareness of IP protection." said him.

Thanks to IP protection, Hilon, from being criticized to being welcomed by comsumers, opens a new page. 

(China IP News)