Non-practicing entities can help support innovation and tech companies in China

By Erick Robinson Source:Global Times Published: 2016/12/28 0:08:39

I agree that the next patent war in the smartphone industry will involve China as stated in the recent Global Times article, "Chinese businesses need to prepare for patent wars." It pointed out that Chinese companies have been sued in India and have also been involved in US patent litigation. But the future smartphone patent wars will most certainly be fought in China.

While the US has been destroying patent rights, China has quickly put together one of the best patent enforcement systems in the world. Based largely on the German system and all of its advantages, but with selected portions from US law, China has now become a top forum for patent litigation and injunctions are now issued over 99 percent of the time to winning parties. Further, unlike most countries which enjoin making, using and selling in-country, as well as imports, Chinese law also bans infringing exports from leaving the country. For example, if the accused device is Apple's iPhone, not only can iPhone sales in China be enjoined, but so can exports of the device from China. Therefore, a patent owner can achieve an effective worldwide ban, since iPhones are manufactured in China. Patent litigation win rates in China are high, currently hovering around an average of 80 percent. Further, foreign plaintiffs fare better, statistically, than Chinese plaintiffs. The time from filing to judgment and injunction is short, ranging from six to 14 months. Legal costs are also low - in many cases one-tenth the cost of US patent litigation.

In November 2014, China set up specialized intellectual property courts in Beijing, Shanghai and Guangzhou, whose judges take pride in their skill and fairness. In addition, the government has issued an edict to advance innovation through patent enforcement. This has not been done altruistically, but because China has a strong technology market to protect. Indeed, some of the most innovative companies in the world are based in China.

Examples of the growth in patent litigation in China can be seen in cases like Huawei against Samsung, Qualcomm against Meizu, and Shenzhen Baili against Apple. Importantly, misconceptions regarding "patent trolls" are misleading. First, any entity that took advantage of poor patents and the cost of litigation is likely now gone. Recent changes in US patent law have largely eliminated true trolls. However, sophisticated investors in technology via patents are still breathing and are looking for markets better dedicated to innovation, such as China.

Such licensing companies, sometimes called non-practicing entities (NPEs) have a unique ability to support innovation in China and help Chinese technology companies. Such firms are already in China and beginning to file cases which are targeting foreign companies. By putting pressure on foreign enterprises, such licensing companies can assist Chinese businesses in gaining greater market share at home and abroad. NPEs can also work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents. Many of the goals of the Chinese government regarding elevating innovation and growing the domestic market can likely only be achieved, or achieved in a short time, with the direct assistance of foreign NPEs.

China is a brave, new world of technology and innovation, and now in the patent world as well. Having NPE friends will also serve China well.

The author is Chief Patent Counsel Asia Pacific of Rouse & Co. International LLP and former director of Patents for Qualcomm in Asia.

Posted in: MOSAIC

blog comments powered by Disqus