Tuesday, February 15, 2011

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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