Hausse of Chinese Companies Protecting Their Inventions Overseas

+ 33.4 %
Some international patent filings statistics from Geneva. The amount of international patent filings of Chinese companies and educational institutions grew with a stunning 33,4 percent in 2011 to 16,406. This means that more and more Chinese companies and educational institutions value overseas patents to protect their inventions. The U.S. still leads the applications with 26.7 percent of the total share, followed by Japan (21.4 percent), Germany (10.2 percent) and China (9 percent).

Please note that there is no such thing as an international patent. Under the Patent Cooperation Treaty (PCT) you can file a standard national or regional patent application (international patent filing), and designate one or more countries. After that each jurisdiction decides whether or not to grant you a patent for that designated country. The moment of the international patent filing establishes the filing date for all designated countries. 18 months after the filing date or the priority date, the international application is published by the International Bureau at the World Intellectual Property Organization (WIPO) in one of ten languages, which includes Chinese. In case the international patent application only designates the U.S., this publication is not automatically published.

Since January 1, 1994 China is a member the PCT. China's State Intellectual Property Organization is one of 16 institutes which offers the services of the International Searching Authorities (ISA) and International Preliminary Examining Authorities (IPEA).

There are 4 Chinese companies in the top 100 of companies that filed the most PCT applications.
1. ZTE Corporation 2826 applications
3. Huawei Technologies Co. Ltd. 1831 applications
4. Huawei Device Co. Ltd. 327 applications
87. Alcatel Shanghai Bell Co. Ltd. 176 applications

Of the educational institutes there is only one Chinese institute that secured a position in the ranking. With 36 international patent applications Tsinghua University in Beijing landed a shared 493rd position with Korean institute Postech Foundation, University of Pittsburgh and Danmarks Tekniske Universitet.

See WIPO's press release here.

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Must Read Monday: Bye Bye Shanzhai, Hello Mainstream Smartphones

Photo: Close Encounters
To Migrate or not. A wildebeest's dilemma:
"Starvation if I stay,
or risk of being eaten by a crocodile if I go"

Shen Jingting wrote an excellent article for China Daily about the epic migration taking place within the Shenzhen mobile phone industry.

Shen is distinguishing three phases: 

• Production of Shanzhai phones and focus on emerging markets, such as India and Nigeria and delivering to the domestic market.
• Transform into a legitimate supplier with good relationships with operators in emerging markets, also because when a Shanzhai producer is acquiring a high profile it will be vulnerable for IP lawsuits (as happened to "G'Five International Ltd, a Shenzhen-based handset supplier that mainly sells phones in Asian and African countries, and was sued by Nokia in India for alleged infringement of intellectual property rights."). Or working for international brands such as Motorola or Samsung. 
• Follow the Taiwan-based HTC Corp. strategy, that has succeeded in entering profitable markets in Europe and North America. 

There is enough ambition to reach the third phase. Huawei even expects to be a top five global mobile phone supplier by 2014. And ZTE wants to become one of the world's top three mobile phone vendors by 2015.

Read Shen's article here.

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Shake or Crush Your Hand: Huawei versus ZTE versus Huawei

Photo: Danny Friedmann
Shake Or Crush Your Hand, you choose. 

What if you are developing a product but your competitor has patented some technology needed to achieve the technical result? And at the same time you have some patents that you know you competitor likes to use? You might consider to cross-license. However, from a patent strategy point of view, excluding your competitor from some crucial technology might be the best thing to do.

Bien Perez reports in the South China Morning Post (April 30, 2011): "Huawei had also invited ZTE on many occassions to enter into cross-patent licensing negotiations, but was unsuccessful."

Then April 28, Huawei sues ZTE in Germany, France and Hungary for alleged patent infringement related to its data card and Long Term Evolution standard (candidate for 4G mobile communication standard) technologies, and trademark infringement.

April 29, ZTE counter sues Huawei for alleged patent infringement on Long Term Evolution.

"Proxy PRC Courts" in Europe and now also China

China Hearsay's Stan Abrams is not surprised that the legal fight "in a most non-harmonious fashion" between two Chinese giants took place overseas, see here.

It is interesting that Chinese competitors fight some patent and trademark issues abroad. But I think it becomes really interesting now that ZTE has sued Huawei in China. ZTE also threaten to take a series of legal actions globally to protect its IPR rights.

UPDATE:  The Hungarian site Portfolio.hu has a picture provided by Huawei that it uses to proof that ZTE is infringing its trademark. See Porfolio.hu's article Huawei files patent, trademark lawsuits against ZTE, rival rejects charges.

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Should There Be Trade Barriers For Chinese Companies Buying Core Global Patent Portfolios in New Technology?

Lee Caffin, IP strategist and patent attorney specialist in lifesciences at Think IP Strategy, has an interesting post on China's National Patent Development Strategy (2011-2010), read here.

After a historical overview from 2006 to 2011, Mr Caffin is posing a question that some protectionist governments might ask:

"Should countries institute patent trade barriers or limit the scope of IP rights that may be transferred to a Chinese entity to protect local industry and access to technology?"

Chances are that the late Milton Friedman might have agreed with me that this, in the end, is not a good idea. Firstly the officials representing countries are often not in the best position to assess whether a patent portfolio is core, nor whether a new technology area will be promising. Businesses that have to make a profit are necessarily better in tune with the market and one can predict that they do a better job assessing what core patent portfolios are and what new technology areas will be promising.

Secondly the party that is willing to sell the core patent portfolio is not getting the real market value if the government is raising barriers, so as a retaliatory measure against China's discriminatory indigenous innovation policies it might hurt the one retaliating, and it might lock up resources that could be brought to better use.

I know that after the financial crisis the following words may sound harsh to your ears but this author believes it is best to eliminate the barriers and let the market do its work to avoid misallocation of resources.

Huawei, China's telecommunication equipment producer, might needs to sell the patents it bought from 3Leaf, because of national security concerns, or .... is it a trade barrier to buy a core patent portfolio? President Barack Obama might grant Huawei the right to keep them. According to people who work at 3Leaf the patents form no danger for national security. But Huawei is considered by some connected to the Chinese military, which it denies. Can American companies sell anything to the Chinese military, let's say non-military grade shoe laces? Read the Financial Times article by Stephanie Kirchgaessner about it here (free but registration is needed).

US-China Economic and Security Review Commission Staff Report of January 2011 is entitled

'The National Security Implications of Investments and Products from the People's Republic of China in the Telecommunications Sector' and has a wealth of information about deals with Chinese companies such as Huawei and ZTE wanting to do investments and sell their products in the U.S. Read here.

B. Raman of Global Geopolitics and Political Economy wrote a good article focused on security issues of Huawei in India, read here.

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IP Dragon's Book Review: Invisible Gold in Asia

Professor David Llewelyn (King's College London and IP Academy, Singapore) wrote an exceptional book that will appeal to both laypeople and IP professionals. Although Invisible Gold in Asia does not aim to be a scholarly book (for example there are no footnotes), the book could not be written by a non-scholar. For laypeople the book lays out the intricacies of intellectual property rights and their relationships to wealth creation, a topic incredibly comprehensive and therefore almost unmanageable, in digestible parts. For the IP professionals the book is a treasure of anecdotes worth knowing and sketches the whole field of IP in Asia, and thereby giving some crucial context even to IP professionals, since most of them cover only some part of intellectual property rights, and their focus is often geographically limited. Professor Llewelyn's educational capabilities are charged by years of teaching a critical mass of students. Therefore when he touches upon a complex subject, he goes just deep enough into the matter to convey the essence of the subject. When you read the easy flowing book, you will notice that Professor Llewelyn not only wants to illuminate the obscure world of IP, but he has a message as well: basically he wants to wake up everybody inside and outside of Asia that IP, will be of crucial importance for Asia in the coming years. Professor Llewelyn rightly divides two markets for the world of IP: the USA and the rest of the world. But the role of Asia and the role of IP in Asia will become ever more important. And he tries to make the reader aware that IP rights are not mere liabilities, but they could be valuable assets. The book is structured in two parts. In part I Professor Llewelyn is going on a tour de force as he gives an overview of all intellectual property rights and their different characteristics. He can do this like no other, see here. In part II he gives describes the Asian IP landscape: Japan, the Little Dragons/Tigers (Taiwan, Hong Kong, Republic of Korea and Singapore), China, India, Malaysia, Indonesia, the Philippines, Thailand, Sri Lanka, Pakistan and Vietnam, Bangladesh, Laos, Cambodia. My favorite chapters where about the Little Dragons (or Little Tigers) and China. Professor Llewelyn sketches in a few sentences a mini-biography of some highly interesting Chinese companies with iconic brands and IP, such as Li Ning, Haier Group, Mengniu, Huawei, ZTE etc. Before the text Professor Llewelyn put a great maxim: "Don't make the mistake of thinking something is valuable merely because you can measure it. It is far better to work out what you can value and then see if you can measure it." That same maxim could not only be applied to IP, but to reading a book such as Invisible Gold in Asia as well.

If you want to get an overview of IP in Asia, this is the book to read. If you are an IP professional the book is the perfect present to give to clients, so that they can learn about the importance of IP, or to give to your spouse, or friends, so that they can get a clue about what you are doing.

Invisible Gold in Asia, Creating Wealth Through Intellectual Property, can be bought at Marshall Cavendish Business.

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China Higher and Higher in PCT Applications' Heaven

The World Intellectual Property Organization (WIPO) published statistics of the number of Patent Convention Treaty (international patent) applications worldwide. China's PCT applications from 2008 to 2009 rose an estimated 29.7%, to 7,946 applications, estimated for 2009.




The top PCT applicants of 2009 include two Chinese providers of telecommunication and network solutions:


Rank 2: Huawei Technologies Co., Ltd.: 1,847 PCT applications published in 2009
Rank 23: ZTE Corporation: 502 PCT applications published in 2009



The Economist made a nice visual representation of those WIPO statistics, see here. You see that China ranks fifth, just behind the US, Japan, Germany and South Korea and before France, Britain and the Netherlands. The Economist wrote: "Since 2005 applications from China have grown by 210% as the country has developed a home-grown high-tech sector."

Domestic patent applications: According to WIPO statistics of 2008, China is after the US and Japan the third biggest receiver of domestic patent applications. Read more here.

The statistics of the number of PCT or domestic patent applications are interesting, but of course the number of patent grants are more interesting.

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Haier Files 2.6 Patent Applications Per Day

Gao Hucheng, the Vice-Minister of Commerce, wrote an article about the need for China to improve its brands and IPRs in order to become internationally more competitive.

Haier, the Chinese posterchild that is taking its brand very serious, "put[s] forth 2.6 patents each day on average and takes the lead among all household appliance enterprises in China with it total 6,189 patents."

Other Chinese companies include: "Shanghai Zhenhua Port Machinery Co., Ltd. [which] has obtained over 20 world leading key technologies for container cranes and the Dual 40 Feet Containers' Quayside Container Crane invented by the company can improve the efficiency of handling containers by over 60 percent. Relying on the globally exclusive technology, Shanghai Zhenhua Port Machinery Co., Ltd. has seized 50 percent of the world's port machinery market. A second example is that Chery Automobile Co., Ltd. has jointly developed 18 kinds of worldly leading gasoline and diesel engines with its partners and exported such engines to various countries, and it is expected that it will export 13,000 engines to the USA this year. The sales of other products with independent brands of Huawei Technologies Ltd, ZTE Corp., and Kangnai Group Co., Ltd. in the international markets are also increasing steadily."

It's interesting to glance over these sites, since they give you an impression of the aspirations each of these mentioned brands have.

Read the translation of Gao's article on China Economic Net here.

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