By John Ruwitch and Jane Lanhee Lee
SHANGHAI (Reuters) - When Peter Vesterbacka visited China last spring, the marketing chief for Rovio, the Finnish firm behind the video game Angry Birds, saw fake Angry Birds products everywhere - and he was happy about it.
"I realized that China was already happening in a big way for us," Vesterbacka said in an interview.
"When you see all these knockoffs, you know that there is a lot of demand."
That rosy view of an intellectual property problem that has vexed global brands for decades - and sparked friction in China's relations with the United States and others - underpins Rovio's novel approach to the world's fastest growing consumer market.
While many companies go on the offensive against counterfeiters with legions of lawyers, Rovio is taking a mixed approach: waving a legal stick at some pirates, but seeking ways to cooperate with, and appropriate ideas from, others.
"It is definitely not a traditional approach," said Kenny Wong, a partner at the law firm Mayer Brown in Hong Kong.
While skeptics may see spin behind Rovio's enthusiasm for Chinese fakes, there are also benefits to accepting the reality that China is the world's top source of intellectual property rip-offs and its courts can't always help.
ONE BILLION DOWNLOADS
Rovio boasts a billion downloads of its video game, launched in late 2009, in which cartoon birds are hurled from a slingshot at pigs that stole their eggs. China, with 140 million downloads, is the second largest Angry Birds market behind the United States.
The firm is planning to unleash a blitz of retail stores and Angry Birds "activity parks" in China starting next month.
Paul Chen, Rovio's General Manager China, says the company is concerned about infringement on its intellectual property and does go after some pirates, especially those found to produce harmful goods.
But, he adds: "We tend to want to collaborate."
Rovio says it is recruiting some IP infringers to be partners, and even offering some of them free ad space on the Angry Birds app.
It also now sells officially licensed Angry Birds balloons after Vesterbacka saw a pirated one for sale in Beijing earlier this year and liked the idea. He calls it "pirating the pirates".
"This actually can be a successful model," said Xiang Wang, an IP lawyer with the firm Orrick. Makers of shoes, integrated circuit chips and laminated flooring are among those that have successfully co-opted counterfeiters in China, he said.
The alternative - attacking pirates in court - can be a morass.
"You can win on paper, but paper means nothing. When you go to enforce it, local companies pay the judges, they pay the local government officials, so enforcement will take years," Wang said.
Mayer Brown's Wong likens Rovio's enthusiasm about knockoffs to the way new stars court media attention: Early on, there is no such thing as bad press, but that eventually changes.
"Once you reach a certain level you don't want the paparazzi to be around all the time," he said.
"I think probably it's an initial strategy."
Eventually, Rovio may have to change tack, because companies can only license so many counterfeiters, Orrick's Wang said. But the counterfeiters-turned-licensees could at least be enlisted to help take on the remaining pirates, he said.
Rovio's retail strategy - going from zero to about 100 stores in the next year or so, starting in Shanghai next month - is another element of its strategy against fakes.
The shops will sell unique goods, and purchases of official gear will unlock "digital rewards" in the game, Chen said.
But the challenge goes beyond hoodies and key chains.
Last year, reports emerged that an entirely fake Angry Birds theme park had opened in the southern Chinese city of Changsha, in Hunan province, replete with a giant slingshot.
Could this eventually become a real Angry Birds park?
"It's not out of the question," said Vesterbacka.
(Editing by Jason Subler and Edmund Klamann)