Think IP Strategy Workshop 23 November 2011 Shanghai

By Mathijs van Basten Batenburg

On this early morning (November 23, 2011) I visited a workshop that the consultancy “Think IP Strategy” (TIS) was so kind to provide in Shanghai. The audience consisted mainly of IP counsels of larger corporations and before the presentations we enjoyed ourselves with exchanging war stories ranging from local competitors copying hotels to ex-employees starting factories next door, coincidentally making the same products. Chinese reality is always a great source for IP stories that get the laughing muscles warmed-up in the morning.

Seated behind a complimentary piece of paper and a familiar red and black Staedtler design pencil (made by Cheunghwa) I listened to our host of the day – Mr Duncan Bucknell- who introduced us to TIS and the way they aim to help their clients. He stressed the importance of a broad approach towards a company’s IP strategy and illustrated the importance of information gathering by a story about Alexander the Great who defeated a larger Persian army just by getting his intelligence right.

The key point Duncan made was that since business is getting ever more international, this means that the way a company will have to manage its IPR will increasingly call for an international perspective. Given the wide array of possible IPR, and the ways to utilize these, it therefore stands to reason that these days an effective approach towards IPR management can not simply be limited to claiming and enforcing IPR on a case to case basis. Companies will ever more often have to formulate a comprehensive strategy to successfully handle their IPR protection, taking into account their business strategy –such as the markets relevant to them- and preferred ways to use IPR to defend their positions. Obviously TIS’s focus is on advising on these issues. Law firms generally have a deep knowledge of their own jurisdiction but might miss the international and business perspectives. TIS aims to bridge this gap.

From Persian elephants that got routed by Greek archers we moved to the ancient game of “围棋”, known in English as “Go”. Apeng Shang listed many aspects that were good to bear in mind when working out your IP strategy. Quite a few sounded more like good business practise to me, such as improving the communication between legal and other departments, or working from a strategy instead of ad-hoc. However, although a lot of these points might sound like “common sense”, I have to admit that also in large multinational companies these bases are not always covered.

The third part was a nice horror story about a Chinese company that had a bright (patentable) idea, but missed out because they didn’t play their cards right. Step by step the company sunk deeper in a quagmire of issues, being out manoeuvred by competitors and abandoned by its business partners. Some lessons we should learn from this are: be pro-active regarding IP strategy and be practical (don’t only look at the legal points). As for being practical: it might help that Duncan also qualified as veterinarian; I imagine this profession teaches people to be more practical than law school does. In general it was an interesting pitch and TIS convinced me of having a refreshing and valuable approach towards dealing with a company’s IP.

Text Mathijs van Basten Batenburg

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)

Patents, Trade and Innovation in China, December 13, 2011 George Washington Law School

George Washington University Law School and Fordham Law School have organised a public discussion on “Patents, Trade and Innovation in China." The goal is conveying practical Strategies for engaging China.

When: December 13, 2011 

Where: George Washington Law School.

Who are your discussion partners? The "lineup" is experienced and knowledgeable: 

• David Kappos, director USPTO;
• Chief Judge Rader, Court of Appeals for the Federal Circuit; 
• Professor Mark Cohen (Fordham), who worked as director international IPR at Microsoft and before that, did a lot of negotiating with the Chinese government as senior IPR attache for the U.S. government;  
• Professor Carl Minzner (Fordham), who wrote an interesting article called 'China's Turn Against Law' about China's policy to de-emphasis formal law and court adjudication. I think this also applied to intellectual property conflicts for a long time, but since the last few years I have noticed things are changing.

If you are interested in participating in the discussion RSVP to iplaw@law.gwu.edu with the subject line: “China Conf.”

Shenzhen Intellectual Property Index Starts Before Hong Kong's

Race has only just begun, everything is still possible...

Congratulations to Shenzhen with its own IP Index. There is a fierce competition going on between Asian cities to become the IP hub of Asia. And have your own IP index is conducive to attain this goal. For Hong Kong, with its peculiar patent system, read here, the competition seems difficult, but who knows, the race has just started.

Read Anita Lam's SCMP article here. Hat tip to Ron Yu.

Hu in Honolulu: Reform into Open Green Innovative Economy

During the CEO summit of the Asia-Pacific Economic Cooperation (APEC) in Honolulu on November 12, China's president Hu Jintao announced 4 points to continue economic growth. All points are relevant to intellectual property rights.

• deepen economic structural reform;
• grow a green economy;
• China will step up protection of intellectual property rights and make itself a country driven by innovation;
• open wider to the outside world.

Read the short Xinhua article by An here, or the longer Xinhua article by Mo Hong'e here. 

Is American Superconductor Fighting Chinese Windmills?

Don Quixote:      "Do you see over yonder, friend Sancho, 

              thirty or forty hulking giants?"

Sancho Panza:  "What giants?"

In Don Quixote, Miguel de Cervantes' masterpiece (1605 part I, 1615 part II) Cervantes wrote that Quixote was tilting at windmills, because he thought they were ferocious giants. This lead to the English expression: "tilting at windmills", which means: "attacking imaginary enemies" or "fighting unwinnable or futile battles". 

American Superconductor is suing its former largest customer Sinovel Wind Group Co. of Beijing in several law suits in China for alleged trade secret theft and "copyright" (I think it might be patent and copyright) infringements.American Superconductor is seeking 1.2 billion dollar in damages. 

Is American Superconductor the 21st century version of Don Quixote? 

In June 2011, American Superconductor discovered an imperfect replica of its software in a Sinovel wind turbine. Then they found the possible leak, an engineer at a subsidiary in Austria, who was sentenced to a year in prison.

American Superconductor chief exectuvie Daniel McGahn was quotes saying that they had strong evindence against Sinovel and that hundreds of emails between senior Sinovel staff members and our now incarcerated former employee were found. That these messages give a detailed account of the timetable of the crime and  show that certain senior level Sinovel employees knew that these intellectual property rights were illegally obtained.

To find trade secret thiefs can be elusive. Unless your company have the right safety procedures in place so that trade secret theft can be avoided or at least traced, courts will think you are fighting an imaginary enemy, just like Don Quixote was doing. So protect your company so that your battles will be neither unwinnable nor futile. 

Read Erin Ailworth's article for the Boston Globe here.

Think IP Strategy Has A Free Seminar in Shanghai and Beijing

Think IP Strategy has two promising events:

• November 23 in Shanghai
• November 24 in Beijing

Three topics will be dealt with:
- Building a first class IP Strategy for a Product;
- Establishing Global IP Freedom of Action to Compete on the World Stage;
- 6 Ways to Improve your IP Strategy.

Speakers will be:

• Duncan Bucknell, founder and CEO of Think IP Strategy, which exists out of a team of eleven experts in the field of IP. In his free time Duncan authored the book Pharmaceutical, Biotechnology and Chemical Inventions World Protection and Exploitation, which is full of invaluable information, and is not expensive if you divide the 2,536 pages through the price. Duncan thinks and breathes intellectual property. He is the initiator of IP Think Tank, which provides weekly all-inclusive overviews of the IP related news, see here.
• Apeng Shang, Consultant and China Specialist of Think IP Strategy with a decade of experience.

Find more information the events here.

Crazy Copyright Infringement Or Ga Ga Transformative use?

In the category OMG: Shanghaiist has another interesting post. See here. 

Hat tip to Ron Yu.

Star-struck and Creatively Challenged Movie Poster

A U.S. movie and Taiwanese movie poster both use the sky of Starry Night by Vincent van Gogh. Independently created? I have seen both movies, and beside the poster, they have nothing in common.

Woody Allen's Midnight in Paris
September 2011

Tom Lin's 星空 (Starry Starry Night), Taiwan
November 2011

Starry Night also inspired Starry Starry Night by Don McLean's, listen to it here.

Chinese Trade Secret Cases via Internet Might Be Tip of The Iceberg

Foreign Spies Stealing US Secrets In Cyberspace, Report to Congress on Foreign Economic Collection and Industrial Espionage 2009-2011 is published this October, see here.

In the report both China and Russia were named as the most important culprits in the area of misappropriation of intellectual property and stealing trade secrets. The reports confirms that data on the internet are, indeed, vulnerable to cyber attacks. And that corporate victims are, indeed, not very eager to share to the world that they there information has been stolen because they do not want to expose the vulnerabilities in their system to their world.

The most interesting of the report is that only so little corporate trade secret thieves were caught. Based on the sheer number of inhabitants in China these cases below must have been the tip of the iceberg:

• "In a February 2011 study, McAfee attributed an intrusion set they labeled “Night Dragon” to an IP address located in China and indicated the intruders had exfiltrated data from the computer systems of global oil, energy, and petrochemical companies. Starting in November 2009, employees of targeted companies were subjected to social engineering, spear-phishing e-mails, and network exploitation. The goal of the intrusions was to obtain information on sensitive competitive proprietary operations and on financing of oil and gas field bids and operations." (p. 5)
• "In January 2010, VeriSign iDefense identified the Chinese Government as the sponsor of intrusions into Google’s networks. Google subsequently made accusations that its source code had been taken—a charge that Beijing continues to deny." (p.5)
• "Mandiant reported in 2010 that information was pilfered from the corporate networks of a US Fortune 500 manufacturing company during business negotiations in which that company was looking to acquire a Chinese firm. Mandiant’s report indicated that the US manufacturing company lost sensitive data on a weekly basis and that this may have helped the Chinese firm attain a better negotiating and pricing position." (p. 5)
• "Participants at an ONCIX [Office of the National Counterintelligence Executive] conference in November 2010 from a range of US private sector industries reported that client lists, merger and acquisition data, company information on pricing, and financial data were being extracted from company networks—especially those doing business with China." (p.5)

Then the report is naming and shaming the thieves of corporate trade secrets.

• "Dongfan Chung was an engineer with Rockwell and Boeing who worked on the B-1 bomber, space shuttle, and other projects and was sentenced in early 2010 to 15 years in prison for economic espionage on behalf of the Chinese aviation industry. At the time of his arrest, 250,000 pages of sensitive documents were found in his house." (p. 2) Read the Bloomberg article Ex-Boeing Engineer Chung Guilty of Stealing Secrets by Edvard Pettersson, here. 

With the following convicts the photos are included. I have my doubts about whether this deterrent is effective or justified for convicts that are already serving time in prison.

• "David Yen Lee ... chemist with Valspar Corporations ... between late 2008 and early 2009 used access to internal computer network to download about 160 secret formulas for paints and coatings to his own storage media ... intended to take his proprietary information to a new job with Nippon Paint in Shanghai, China ... arrested March 2009 ... pleaded guilty to one count of theft of trade secrets; sentenced in December 2010 to 15 months in prison." (p. 4)  Read the article Trade Secrets: They're Not Just for Civil Actions Anymore. New Justice Department Task Force Takes Aim At Prosecuting Trade Secret Theft by Robert Silverman of Foley and Lardner, here.
• "Men Hong ... DuPont Corporation research chemist ... in mid-2009 downloaded proprietary information on organic light-emitting diodes (OLED) to personal e-mail account and thumb drive ... intended to transfer this information to Peking University, where he had accepted a faculty position; sought Chinese government fundting to commercialize OLED research ... arrested October 2009 ... pleaded guilty to one count of theft of trade secrets; sentenced in October 2010 to 14 months in prison." (p. 4) Read the Computerworld article DuPont sues Chinese scientist for trade-secret theft by Jaikumar Vijayan here. 
• "Yu Xiang Dong (aka Mike Yu) ... product engineer with Ford Motor Company who in December 2006 accepted a job at Ford's China branch ... copied approximately 4,000 Ford documents onto an external hard drive to help obtain a job with a Chinese automotive company ... arrested in October 2009 ... pleaded guilty to two counts of theft of trade secrets; sentenced in April 2011 to 70 months in prison." (p. 4) Read the WSJ article China Singled Out for Cyberspying by Siobhan Gorman here.

The Nissan That Became a Lamborghini Not Confiscated For Likelihood of Confusion

This Summer Bertel Smitt reported for the Truth About Cars about a Kunming barber who changed exterior of his Nissan Bluebird into a Lamborghini Aventador.

The police confiscated the car. But not because of intellectual property rights infringements (based on trademark, copyright or design-patent rights) Smitt wrote:

"When a car is registered in China, a picture is taken of the car. If the car doesn’t resemble the picture, you have a problem. An insidious punishment was handed down: The barber was ordered to restore the car to its original documented shape."

So the basis for the confiscation is not the likelihood of confusion (when you hear the race monster's modest motor this might become obvious) but the inability for the police to identify the car. Read here. Compare with the original Lamborghini Aventador here.

Taiwan Dead Serious About Copyright On Funeral Music

Ralph Jennings reported for the Voice of America about two lawsuits of Taiwanese studios against funeral houses in Taichung. Mr Jennings writes: "Taiwanese funeral homes play pre-recorded music at traditional ceremonies, some of which also involve live bands and street parades to honor the dead." Read more here.

Lin Shu-hui previously wrote for the Taipei Times: "Music and Buddhist chants during funerals are usually provided by the funeral homes, mostly using a gadget called the Electric Buddhism Sutra Player or music CDs." Read more here.

A life band playing during a traditional ceremony can be seen as a public performance.
Article 7bis Taiwan's Copyright Law 2008: A performance by a performer of a pre-existing work or folklore shall be protected as an independent work. Protection of a performance shall not affect the copyright in the pre-existing work.
And relating to the CDs: according to article 5 (8) Taiwan's Copyright Law 2008, sound recordings are copyrighted works.

What about Buddhist chants that are played via a CD or an Electric Buddhism Sutra Player, which is a device that plays a sutra (teaching of the Buddha) continuously by going in a loop, and is often given away for free at Buddhist temples. Even thought the music and lyrics are not copyrighted (read more about Buddhism in relation to IP in Zen and the Art of Intellectual Property), the performance of the work is (article 7bis Taiwan's Copyright Law 2008).  

According to Wang Mei-hua, director general of the Taiwan government’s Intellectual Property Office these conflicts between studios and funeral companies signal that it is difficult to find a right compensation. She also pointed out that to collect copyright fees at the popular Karaoke bars is complex in Taiwan, because the island has five (I count 6) copyright collecting societies: 

• Music Copyright Association of Taiwan (MCAT); 
• Music Copyright Intermediary Society of Chinese Taipei (MUST); 
• Music Copyright Intermediary Society of Taiwan (TMCS); 
• Audiovisual Music Copyright Owner Association (AMCO); 
• Association of Recording Copyright Owners of ROC (ARCO); 
• Recording Copyright & Publications Administrative Society of Chinese Taipei (RPAT).  

This list I found in the interesting article that Professor Kung-Chung Liu wrote how the music CD business in Taiwan withered away and the online music industry in Taiwan flourished, and the rise and fall of P2P file-sharing services and how the copyright legislation responded to these developments. Read here.

Professor Kung-Chung Liu, who last year gave a speech at HKU on Cross-Strait Cooperation Agreement on Intellectual Property Rights (IPR) Protection, see here, is also a co-author of the excellent book called Intellectual Property Law in Taiwan which is edited by Christopher Heath, and part of the Max Planck Series on Asian Intellectual Property Law published by Kluwer Law International.