Carefully and in detail Bunnie explains "gongkai", the Chinese approach to intellectual property in the technology space. He shows how a focus on capabilities rather than products, on embodiment rather than licensing, has led to a technology ecosystem that is faster and more customer-focused than the Western system. Because it doesn't have the Western focus on legal means to exclude competition, it is much more competitive. It is capable of supporting both large companies, such as Xiaomi, Tencent, Alibaba and Baidu, but also a vibrant mass of smaller and smaller companies, down to one-man garage shops, all making money. Bunnie uses many examples, including:
- The fact that it is essentially impossible for a small Western company to build a cheap smartphone because of the IP licensing involved, whereas in China a complete smartphone motherboard costs $12 quantity one from any number of manufacturers, ready for the case of your dreams. He compares this with a $29 Arduino, with only a fraction of the capability.
- The comparison between Ailibaba's Alipay ($700B in 2015) system and Apple Pay ($11B in 2015). Note that Alipay is an open platform, Apple Pay is a walled garden.
- The difficulty Western companies have in monetizing consumer technology products, because it takes only a few weeks from the product becoming available on Amazon to its being swamped by similar, but cheaper, products from Chinese companies. See, for example, the hoverboard:
Shane Chen patented a device of this type in January 2013 but in 2015 stated that he had not earned anything from sales and would litigate. Separately Segway Inc. sued various manufacturers for infringement of their patents in 2014, before itself being acquired by one of them, Ninebot, in 2015.Note that patent litigation was filed just as the product died in the market; it was basically irrelevant.
The function of systems based on legal exclusion, such as patents and copyrights, is to prevent competition and implement monopolies. No system of this kind can survive against a truly competitive system because it cannot respond fast enough. A 20-year patent or a 120-year copyright on technology is guaranteed to be obsolete long before it expires.