Chinese Knockoffs Pose Headaches for Korean Online Game Makers

      October 17, 2009 08:23

      Exports of Korean online games have surpassed US$1 billion to become one of the country's hottest new products, but the industry is being plagued by Chinese knockoffs. Korean companies are finding little relief as copyright infringement is difficult to prove in China and victims are reluctant to take legal measures, mindful of clashing with the Chinese government.

      ◆ Explosive Growth of Imitations Harms Korean Companies

      Chinese knockoffs range from partial copies that lift only the plots of Korean games to nearly exact reproductions down to the characters and backgrounds. Even leading Chinese game providers are making imitations. The phenomenon is so widespread that industry insiders joke that a game cannot be considered popular until its Chinese clone has appeared. The explosive growth of imitations has reduced the market share of Korean game providers in China from more than 70 percent in the early 2000s to the 20-percent level at one point last year. Chinese game providers, meanwhile, have increased their market share to 56.8 percent. "About a third of the market share captured by Chinese online game makers was achieved through knockoffs," said an industry executive.

      "Elsword" (left) by Korean game developer KOG Studio and its Chinese imitation "East Fantasy" /Courtesy of KOG Studio

      ◆ Lawsuits Create More Problems

      In 2003 Korean game maker Wemade Entertainment filed a copyright infringement lawsuit against a Chinese company called Shanda, accusing it of copying the Korean company's "Legend of Mir II" to produce its "World of Legend" game. Wemade ended up accepting an out-of-court settlement after the suit was held up in the Chinese court system for four years. Wemade suffered significant sales losses while the lawsuit was pending by failing to provide adequate services to its customers. In contrast, Shanda reaped W500 billion (US$1=W1,174) in sales during the court delay, eventually becoming one of China's top game providers after listing on the Nasdaq.

      Copyright infringement suits in China are difficult to pursue because local copyright regulations do not offer clear-cut parameters to determine if an online game has been copied illegally. There are no copyright laws specifically for online games in China; instead the games are considered art works or software products. Game makers have to register for separate copyrights for the images, music and software code behind the games, making filing infringement claims a challenge even when the overall look and feel of a pirated game mirrors the original.

      According to Park Chul-hong, head of the Beijing office of the Korea Copyright Commission (KCC), Korean companies are also reluctant to pursue copyright complaints for fear of raising the ire of the Chinese government. Doing so could affect their businesses since they must apply for a government license each time they want to offer a new game there, he said.

      ◆ Industry Calls for Gov't Help

      China's online game market is valued at W5.4 trillion and is growing 30 percent annually, making it a crucial market for Korean game makers. And Chinese knockoffs have begun competing with their Korean originals not only in China but in other countries as well. The KCC last month agreed with Chinese copyright officials to come up with a set of standards to determine copyright infringement in online games, but this will take time. "Solving this problem is going to be hard for individual Korean game companies as long as the Chinese government is overtly protecting local businesses," said Lee Se-jin, head of China operations at Korean game company Webzen. "We need to address this problem and do it consistently at the governmental level." 

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