A company starts creating intellectual property and before you know it, someone starts ripping it off, so they decide to protect it. What a concept.
The Chinese, recently (in)famous for most gratuitously disregarding other people's patents, trademarks and copyrights, have found religion when it comes to intellectual property. And as so many conversions on the proverbial road to Damascus (or Dalian) are wont to have done, this one was inspired by self-interest. Namely, that as the Chinese increasingly believe they can compete on the global stage, they understand that protecting whatever value they are creating is essential to realizing future returns.
The world's largest country has long intended to evolve from a 'brawn' nation to a 'brain' nation. It was the messy details of how they were going to get there that remained unclear. But as Apple, Google, IBM, Facebook and a host of other tech companies - many co-founded by Chinese ex-patriots - have demonstrated, intangible ideas may matter more than tangible manufacturing plants.
And Chinese companies understood all too well the urgency of that protection regimen, because the most fearsome violators of their IP were their own countrymen. Having grown up fast in a tough neighborhood, Chinese companies are now working the system to protect the value they are creating. To do so, they are being pro-active in two ways; defending what they have actually created, and artfully using the IP laws to challenge others' IP rights in China and elsewhere to try to gain competitive advantage. Or, at the very least, a settlement that gives them access to something that might be useful.
No foreign business hoping to enter the Chinese market can expect to do so without trading some of their knowledge for the privilege of access. But the larger lesson is that as in so many other corners of the economic sphere, the Chinese have learned how to extract value by learning from the example of others. JL
Jia Lynn Yang reports in the Washington Post:
U.S. companies have long accused the Chinese of stealing their intellectual property. But now some in China are pointing the finger back.
In recent months, Apple has been slapped with lawsuits in China alleging that the most valuable company in U.S. history is infringing on patents and trademarks with a range of its products, from the iPhone voice assistant Siri to the Snow Leopard operating system.
Many U.S. firms are used to accusing the Chinese of mimicking their products. But the lawsuits being filed in Chinese courts are evidence of a growing awareness in this country that intellectual property can be a valuable tool — for protecting your ideas and for squeezing money out of other companies, too.
Analysts say foreign firms can expect to see many more lawsuits coming from China, turning the country into a new front in the global patent wars.
“Think about a U.S. firm that produces all its products in China,” said Peter Yu, a professor at Drake University Law School who has also taught intellectual property law in China. “If a Chinese firm is able to get an injunction over the production of that U.S. firm, the firm would all of a sudden no longer have any products.”
China’s central patent office has quickly become the busiest in the world. Last year, for the first time, there were more domestic patent applications filed in China than in any other country, including Japan and the United States.
Patents are a key part of the government’s plan to make the economy less dependent on manufacturing and more driven by homegrown ingenuity. The Chinese government has set a goal of 2 million patent applications per year by 2015. (By comparison, the U.S. Patent and Trademark Office received about 530,000 patent applications in 2011.)
But experts warn that the quality of the patents is often low, giving Chinese firms easy legal ammunition to go after domestic rivals and, increasingly, foreign firms. A recent report by the European Union Chamber of Commerce called China’s level of innovation “overhyped,” concluding that many of the patents being approved did not represent true innovations.
“It’s really a numbers game,” said Chris Bailey, an executive at the intellectual property law firm Rouse.
One type of patent in China, called a utility model, can be approved automatically by regulators without a formal review. Germany and Australia also have this kind of patent, which is meant to encourage small inventors. But the number of utility model patents is growing especially fast in China because the government wants to meet its quotas.
Along with more patents has come more litigation. Intellectual property lawsuits nearly doubled from 2009 to 2011, according to Rouse. Observers say that many of the claims are dubious.
Small companies that take on bigger firms in questionable patent cases have become known here as “patent cockroaches,” a play off the U.S. term “patent trolls,” used to describe companies that make money primarily by hoarding flimsy patents and suing others.
So far in China, most patent infringement disputes have been between Chinese companies. But a few firms have been bold enough to take on foreign multinationals far greater in size.
“Our case is the first real patent infringement case against Apple,” said Yuan Hui, founder and chief executive of Zhizhen Network Technology, which last month sued Apple for infringing on a patent his company uses in its Xiao-i-Bot voice assistant program.
Yuan says that Apple’s voice assistant program, Siri, violates a patent he received in 2004.
“I have to say that Xiao-i-Bot is far better than Siri in the Chinese language and in the Chinese market,” said Yuan. “People say I copied Siri, but with 100 million customers . . . I can’t help but say that Siri needs to copy us in the Chinese market.”
The disputes have extended to trademarks, too. Last month, Apple paid Chinese company Proview $60 million in a dispute over who owned the trademark for the iPad name. Also in July, a chemical company whose Chinese name translates to “snow leopard” said Apple’s Snow Leopard operating system violated its company trademark.
Apple, which did not respond to a request for comment, recently won a major patent suit against Samsung, maker of the Android smartphone. Chinese firms launching the patent lawsuits say they followed the case and want the same rights as Apple.
“It doesn’t matter the size of the company; we should all have the right to protect our rights,” Yuan said.
But Ma Yide, an intellectual property attorney in Beijing, said the lawsuits against Apple seemed frivolous. “A good patent will reflect its value in its commercialization, not from lawsuits,” said Ma. “The low quality patents are really harmful. The increasing quantity will stop businesses from innovating.”
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