Shanzhai(山寨) , literally originally meaning "mountain stronghold", a place out of monarchy control, is a typical phenomenon in Chinese mobile industry. Shanzhai products are characterized as lacking technology, cheap and low-quality. However some companies have moved from low-level Shanzhai -- "imitation", "counterfeit" and "piracy", to high-level Shanzhai -- fast, flexible and value-added. Shanzhai phenomenon symbolizes the transitional phase in China from "made in China" to "recreated in China".

The research is aim to analyze what the foreign IP holding firms in China can learn in IP value exploitation by studying the case company Tianyu. The article explores how Tianyu (‘King of Shanzhai’) with no background of R&D has developed to be the Chinese domestic mobile phone giant during 6 years from a small Shanzhai mobile phone company. Tianyu's case implies that innovation in the business model is more important than in the physical products due to lack of IP protection in the market. It is necessary to use the complementary assets for foreign IP holders to appropriate the innovation rents in weak appropriability regimes like China. The theoretical contribution in IP management is that using complementary assets to exploit IP value is an important alternative IP strategy in the Chinese Shanzhai phenomenon.

Key words: Shanzhai, intellectual property, weak appropriability regime