Tuesday, November 29, 2011

Outsmart the Outlaw

The Art of Strategy
By Michiel Tjoe-Awie

For today (November 24) Danny Friedmann has asked me to attend a workshop in Beijing that focuses on protecting patents. The presentation is hold by Duncan Bucknell (CEO) and Shang A Peng from "Think IP Strategy".

Mr. Bucknell started more than 10 years ago as a Australian attorney in Melbourne. Now he has offices in 10 countries. On his business card it says: ”IP Strategist, Lawyer & Patent Attorney”. Today’s presentation is one long argument to support the order in which he presents himself: the Strategist comes first.

For long Bucknell has many clients, operating or with a wish to operate in China, asking questions about how to protect their IP from Chinese competitors or potential perpetrators. Nowadays these old clients have to share his attention with many Chinese companies who came knocking on his door about how to protect themselves from home competitors or how to survive IP-wise in foreign markets.

This new diversity is reflected in today’s attendees. They represent pharmaceuticals, high-tech companies, lawyers and consultants. Both Chinese and Foreign. Law, health and technology, add education and you have the stardust countries are made off. Thus worth protecting one might say.

Let me start with introducing some of the challenges the Chinese judicial systems entails. China lacks a case law system which often results in comparable cases that are differently judged in different provinces and even in different cities. Adding to this: outside well developed provinces like Beijing, Shanghai, Jiangsu and Guangdong the probable outcome of cases is further mystified by judges who are not properly equipped to deal with the highly specialized character of patent law. A two years old proposal to follow the American example in creating a central court system to trial all patent cases, died a silent death. It’s whispered that the Chinese supreme court had other priorities. But one might speculate that local judges fearing erosion from their power also played a role in blocking this proposal. Last but not least: in China a party committee can overthrow a courts decision if this decision contradicts with party policy.

The last concern seems to decrease in importance now the Chinese party has declared and actively proven to be pro IP. The government, in it’s hope that incentives will spur innovation in China, subsidizes many Chinese companies as long as they are filing a minimum amount of patents. But sometimes the effect contradicts the purpose. A lot of “empty patents” or patents with weak innovative power are filed just to meet the subsidy guidelines. Other companies collects patents with only one purpose: to dazzle their competitors by repeating over and over again, with over with out ground: “That’s my idea it’s already patented, you are infringing!”. For newcomers it might not be worth the risk of proving that what might be a real innovative idea is not an infringement of one of the patents from existing companies. Afraid of the legal misery that might awaits them they back off.

A diffuse landscape to operate in, it seems. However comparing India, Russia and China the Australian strategist concludes that China in many cases has the best environment to protect company patents and role out an effective IP-strategy.

Bucknell and with him all attendees I have spoken to, agree that the legal environment to pursue IP rights has, in accordance with the party line, indeed improved in recent years. But a more important reason for Bucknell to state his claim is that although China’s system might not seem logical or even just in the eyes of many Western legal scholars, a more practical man might be able to look through this and to discover a system.

Understanding the machinations of this system is key in advising a company on protecting it’s IP-interests. This is why Bucknell calls himself a strategist rather than a lawyer. He proposes a holistic solution. Therefore the first question meeting a new client is not: show me a list of your patents but what do you want to achieve as a company or more precise: what is your business plan?

Sometimes it is wise to discourage a client to enter a market because it seems impossible to protect a patent, often the solution lays in buying or working closely together with other parties, preferable local Chinese companies. Bucknell calls this process getting to know the IP-landscape and act accordingly.

To be of good assistant to his clients Bucknell’s “international war-team” is a combination of Australian straight forwardness, knowledge of old and new Chinese culture and the way this effects the behavior of officials and local competitors and American military accuracy in locking the back door[1].

By combining these powers Bucknell tries to detect more or less predictable behavior of stakeholders including officials and courts to wrap his strategy around this behavior.

The difference between a lawyer and a strategist? A lawyer will bill you for the hours he makes filing and protecting or trying to protect patents, a strategist is focused on increasing profits instead of winning or losing cases. Some of the key advices that were discussed during the workshop are:

- The best IP-strategy relies on a business strategy. What can you do to protect your interests outside the help of the law?;
- Know your market (the IP-landscape) and act accordingly;
- Look for local partners to help you find your way (you even might find that it is sometimes more effective to buy a company than to fight this company);
- Be aware that aggressive behavior (being over protective, a strategy that focuses more on fighting than on working together) might not be the most beneficial behavior. Clients, manufacturers and competitors often have overlapping interests;
- (Nevertheless) establish an appropriate reputation for enforcement;
- (And) built your relationships selectively;
- Technological superiority might not be what the market wants most. Thus, build your IP-strategy around the products that are in a market where the competition is fiercest (don’t be blinded by your idealism and the possible technological superior future of your product and forget to protect your current cash cows);
- Shelf companies can veil the name of the owner company and thereby distract competitors who are closely watching you filing your patents.

By building a proper IP-strategy you outsmart your competition or potential perpetrators rather than fighting them in court. Doing so is in line with an ancient Chinese health system that reimbursed its doctors according to the amount of citizens they were supposed to keep healthy rather than to reimburse them according to the illnesses treated. This led to a system in which sickness was prevented and health was flourishing. “Think IP Strategy” aims in a similar way on helping companies to avoid frustrating and expensive court time by building the best prevention system possible.

The Dutch say:” Trust in God but lock your door.” Today’s message goes further: ”don’t rely on the law, rely on strategy and a little bit on Sunzi!”

After the meeting Mr. Bucknell asked me what I think. I tell him that for a non patent specialist there is a lot to process. He comfortingly replies: “Don’t worry we will send everybody sheets…”, to add,”… of course digitally copy and print protected.”

Text Michiel L. Tjoe-Awie

[1] Robert Cantrell has a prominent voice within the Think IP strategy-team, he is ex-American military and wrote a book in which he advices to look back to important Chinese philosophers like Sunzi (Art of War) and Laozi for advice how to create an effective IP-strategy . (Outpacing the Competition: Patent-Based Business Strategy, Robert Cantrell: Wiley 2009)

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