Tag Archives: Japan

Can the U.S. compete with China without a focused innovation policy?

More nations today have an innovation policy than do not – that is except for the U.S. 

The U.S. not only has no centralized innovation and intellectual property policy, it has no real strategy for making IP rights more meaningful and American businesses more competitive in the wake of initiatives from China.

Some believe it is not the job of policymakers to tinker with free-markets or favor certain industries. Well, that may have worked in the past, but with China committed to dominating global innovation – and with unlimited capital – the U.S. must reexamine its strategies.

What it is not supposed to do is assume that it is business as usual.

The United States has a tendency to repeat past mistakes, such as in the case of so-called “Japan, Inc.,” which devastated the auto and electronics industries with more advanced products. It is currently contending with China, which has approximately ten times the population of Japan and has quadrupled its investment in technology over the past decade.

“US innovation policy: Time for a makeover,” a fresh take on dealing with competition in the Intangible Investor, can be found in the July IAM magazine, out this week, here.

Innovation policy in the United States is mostly a series of suggested strategies and directives from several government agencies and industry organisations primarily designed to address foreign IP infringement (i.e., theft). It is often tied to science and economic policy, and is typically reactive – not proactive.

“Better innovation policy not only permits established industries to compete,” says the Intangible Investor, “it facilitates success for the next generation of inventors, authors, designers and software developers. It also helps to supply context for a confused and wary public susceptible to false media narratives – intellectual property is not the enemy, nor are rights holders and lawyers.”

Enforcement is Not Policy

Trump’s anger about China IP violations, justified or not, does not constitute an innovation policy. Innovation policy is not just about enforcement or supporting the science, technology, engineering and math (STEM) curriculum for the next generation of inventors. It is about understanding the current economic and political context and responding as a nation.

“The FAANGs, and others, who dominate the competition and monetize their customers’ information, often without permission, realize they are increasingly symbols of bad business behavior,” Bruce Berman wrote recently in IP Watchdog. “The heat they feel from regulators in Europe and the U.S. will continue to rise.

“IP infringement will come to be seen as an increasingly important part of their bad behavior. The timing is perfect for them to step back and step up and show the leadership they heretofore have ignored regarding IP rights. Movement toward a responsible IP middle ground – a less entrenched position that recognizes others’ rights and actively conveys a greater willingness to share successes, not only defend them, will help to inform a meaningful IP policy.”

Quick-Reading Guide

For further background on U.S. innovation policy, read a timely and insightful perspective on U.S. innovation policy from James Goh, a young Wharton student from Singapore, “Primer: Innovation Policy in the United States.” 

For a linked quick-reading list about innovation and IP policy from the Center for IP Understanding, go to page 4.

Image source: q3research.com; breakinggap.com

 

 

China’s growth in European patent apps was three times the U.S. in 2017

The European Patent Office (EPO) 2017 annual report, recently published, revealed several surprising patent filing trends, including the rapid growth of China .

The People’s Republic of China filed 16.6% more applications last year than in 2016, three times more than the U.S., which filed 5.8% more.

The five most active patent filing companies were Huawei (China), Siemens (Germany), LG (Korea), Samsung (Korea) and Qualcomm (U.S.).

The U.S. comprised 26% of all European applications submitted in 2017; Japan 13%. German was the lead European filer with 15% of those coming from Europe and about 7% overall.

2017 European Patent Office Annual Report

Infographic with highlights of the EPO Annual Report 2017

 

After European patent filings dropped slightly in 2016 from 2015, they were up overall by 3.9% in 2017.

Top fields were Medical Technology, up 6.2%, and Digital Communication, up 5.7%. Transport was down 4.2%.

SMEs, individual inventors, universities and research institutions, comprised 31% of applications; larger enterprises 69%. Grants were up 10.1%. Among European nations, Denmark experience the greatest application growth, 13.1%

For the full 2017 EPO Annual Report, go here.

Image source: epo.org 

44% of top U.S. patentees for 2017 are U.S. companies; 50% are Asian

Many companies received more U.S. patents in 2017; IBM, the perennial leader, was number one for the 25th year. However, there were some notable declines in patent grants.

Canon, Qualcomm and Google were down 10%, 9% and 13% respectively. It is difficult to determine if it is as a result of poor company performance or a shift toward higher quality. Toshiba 20%, Philips 15% and Brother Industries 24%. The grant results were provided by IFI Claims. They also were reported in Law 360. Facebook at number 50 was up 49%, but on a much lower base; Toyota was up 36%, an indication that the automobile companies may be positioning themselves in autonomous vehicles and batteries for electric cars.

(Click on image for the entire list or go to IFI Claims at the link above.)

What does it mean?

Interpreting this data is not simple. Clearly, more is not necessarily better, and some patent recipients, like IBM, up 12% in 2017, frequently do not hold their grants to term. (Samsung, the largest U.S. patent holder, is a much larger active holder than IBM.)

But being able to afford patents and obtaining them with a purpose is typically a positive among information technology companies. Only 22 of the top 50 U.S. patent recipients are U.S. companies, down from a decade or more ago. Fifteen are Japanese, five Korean and four Chinese. (One is from Taiwan.) European businesses accounted for four companies on the 2017 list – the same as the number as China without Taiwan, and one fewer than Korea.

Image source: Law360.com; IFI Claims

China is poised to overtake the U.S. as the leading patent system

A few years ago a company whose patents were violated in China had little or no chance of defending its rights. 

Determined to move beyond its role as a low-cost provider of look-alike consumer products, and establish itself as an innovation leader, China has learned from the successes – and mistakes – of other intellectual property systems, especially the U.S. The nation of 1.4 billion inhabitants has rapidly emerged as what is currently among the fairest and most patent holder-friendly systems in the world.

Chinese patent courts second only, perhaps, to Germany in quickly and fairly adjudicating disputes.

A fascinating article in the current IAM magazine, “Defending a patent case in the brave new world of Chinese patent litigation,” details China’s rapid rise from low-cost copier to a patent power, and a nation that has caught the attention of major global technology powers who are often defendants.

Damages awards are relatively small in China, with median awards currently around 35,000 Renminbi or about $5,000, but injunctions, the power to stop a likely infringing product from being sold, are now issued over 99% of the time to winning parties. NPEs, what some U.S. companies refer to as patent “trolls,” are treated fairly as long as they their patents are of sufficient quality and are the companies are generally supportive of Chinese welfare.

__________

Patent litigation win rates, according to the article, average around 80%. Startlingly, foreign plaintiffs fare better statistically than Chinese. 

__________

The U.S. effectively ended the granting of patent injunctions in 2006 with EBay v. MercExchange. Now, only operating companies can obtain them in rare circumstances. This removes most of the leverage afforded patent holders. Granted, injunction abuses are a fact of life, and dubious patents have at times been used to enjoin products, costing companies time and money. But without the power to stop a product from being sold, patents have little meaning.

Race to the Bottom

“Largely as a result of the United States’ race to the bottom in terms of patent enforcement, Germany has emerged as a go-to patent jurisdiction, with virtually guaranteed injunctions, quick time to trial and no discovery resulting in a highly efficient system,” writes Beijing-based Erick Robinson, chief patent counsel, Asia-Pacific for Rouse, a global IP strategy firm.

Patent-holder Win-Rates and Median Damages Awards 

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“Enter China. For years the laughing-stock of all things IP related, the Middle Kingdom was ridiculed for the easy availability of counterfeit handbags, software and DVDs. However, over the last 15 years, and especially in the last two to three, China has put together an extremely effective patent enforcement system. Based largely on the German system and all of its advantages, but with selected portions from US law, China has now become a top forum for patent litigation.”

Unlike most countries which enjoin making, using and selling allegedly infringed products in-country, as well as imports, Chinese law also bans infringing exports from leaving the country. So, for example, if the accused device is Apple’s iPhone, not only can sales of iPhones in China be enjoined, but also exports of the devices from China. This would enable a patent owner to achieve an effective worldwide ban, since iPhones are manufactured in China.

Slippery Slope

With U.S. patent protection significantly diminished over the past decade, and China’s on the rise, the U.S. is on a slippery slope when it comes to stimulating R&D, innovation and investment. It is well on its way to becoming a second-rate patent system, and a slip in disruptive innovation, necessary for the creation of new industries, difficult to measure in real-time, has probably started. Certainly, companies and their stakeholders are thinking twice before pursuing or relying upon USPTO-issued patent protection.

It remains to be seen if China, a continuing source of counterfeit goods that are shipped worldwide, is committed to providing its businesses, as well as those outside of the country, with a legal system that can meet the needs of all business holders, and permit fair and timely resolution of legitimate disputes.

High Win-Rates; Low Damages Awards

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China is now the second largest filer in the U.S. and, while its companies have rarely resorted to filing suits in the U.S. against U.S. companies, there is little doubt that it will do so in the future. Technology giants include Alibaba, Xiaomi, Huawei and Lenovo.

China is likely to be more aggressive enforcing its patents than U.S. frequent-filer Japan, which has been reluctant to engage in domestic or foreign patent disputes. (There are some signs that is changing.) Samsung, by far the largest holder of U.S. patents in the world, has shown a greater willingness use its patents for licensing and leverage.

China may or may not be deliberately attempting to embarrass U.S. and eventually surpass its moribund IP system, but the impact is the same. Continued lack of awareness of what IP rights achieve and for whom, and lobbying, has significantly compromised the once-exemplary U.S. patent system. The Chinese are not too new to capitalism not to see this as an opportunity to compete. For the U.S.’ sake, let’s hope it’s not too late to make invention rights a priority again.

“The brave new world of Chinese patent litigation” can be accessed here or here.

Image source: IAM magazine


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