OPINION
Net's Top Two Powerhouse Players Talk Policy

At the third annual U.S.-China Internet Industry Forum last week, top government and technology leaders gathered to discuss business and policy topics of mutual interest, such as online child protection and intellectual property issues. The United States and China are the world's two largest Internet communities, so the conversation has broad implications for the Net as a whole.

Co-hosted by Microsoft (Nasdaq: MSFT) and the Internet Society of China, the event was also cosponsored by hefty Internet companies such as Google (Nasdaq: GOOG), eBay (Nasdaq: EBAY), Intel (Nasdaq: INTC), About.com, Verisign, Akamai, Yahoo (Nasdaq: YHOO), People.com, Xinhuanet.com, China.com.cn, CCTV.com, SOHU.com, Netease.com and Baidu.com.

Microsoft's Chief Research and Strategy Officer Craig Mundie kicked off the conference by explaining that "there is a fair amount of misunderstanding and polarizing rhetoric about the U.S. and China and the Internet." This situation obviously won't resolve overnight, but Mundie noted that "a collaborative, open approach" and "direct engagement" can go a long way toward helping to create the "Internet we want."

'Social Norms Trump Technology'

John Palfrey, law professor and author of the book Born Digital, explained to the invite-only audience how culture affects Internet usage. Specifically, he argued that children born after 1980 use the Net in different ways from those born before, and that "there is an emerging global culture of digital natives" -- those who grew up with computers, mobile phones, and the Internet. Despite the increased use of technology, however, the key to protecting kids online in either country is not based on gadgets.

"Social norms trump technology all the time," said Palfrey, a concept that also applies to piracy.

A key area of contention between the U.S. and China for many years has been the protection of intellectual property rights (IPR). The United States is a big producer, and China is usually considered a place where IPR theft occurs on a grand scale. Indeed, recent reports suggest that "despite the efforts of the Chinese government, the software piracy rate in China stands today at 80 percent," but that could change as China's economy slowly shifts to a knowledge-based economy.

Better protection of intellectual property would be a welcome development, because, as Mundie told TechNewsWorld, IPR theft "decreases profitability for the inventor which, in turn, decreases the ability to pay for the future."

The future is precisely what is at stake, for both countries. For instance, David Kappos, under secretary of commerce for intellectual property and director of the U.S. Patent and Trademark Office (USPTO), told attendees that "the single biggest filer of IP comes from China," and that China is "a major innovator in its own right."

Realities of the Marketplace

Indeed, Chinese leaders at the event said that concern over IPR is growing in their country, and they pointed out that China is not the only source of IPR theft. Jin Yanlin, deputy general manager of CCTV.com, China's national television station, noted that while China has much work to do, there was great "success during the [2008 summer] Olympics in clamping down on piracy," and that "YouTube was responsible for most of the piracy during the Olympic games."

While it is true that IPR protection in the United States is not perfect, it works fairly well. Given this, Peter Cowhey, senior counselor to the U.S. Trade Representative, argued that there are at least three lessons China can learn from the U.S. experience. These include "not only government leadership and enforcement of rights," but also "freedom to enter and innovate in all services, open entry to foreign direct investment, and no distinction between American and non-American technology."

Of course, another way to fight piracy is by adapting one's business model to the realities of the marketplace. Chinese entrepreneurs have already done this successfully by creating multibillion-dollar companies based on cloud computing, such as Tencent and Shanda Interactive Entertainment. When a company offers software in the cloud rather than in a downloadable format, piracy becomes a non-issue. Microsoft and other American companies are moving in this direction as well.

In all, the conference was a success from the point of view of creating a real dialog about key Internet issues. The Net is still evolving, and continued interaction between Chinese and American players should help to build a bright future.