Tag Archives: patent disputes

Experts: Void from U.S. patent “train wreck” is being filled by China’s patent system

In a few short years China’s patent system has gone from an IP rights wannabe to one of the most responsive and patent-friendly systems in the world.

Leading U.S. IP experts say that underlying this rapid evolution is a desire for China to become a science and technology powerhouse, with the ability to create new and formidable industries that employ many of its 1.4 billion people.

“China wants to be an innovation leader for multiple reasons,” Irv Rappaport, former Chief Patent Counsel at Apple and National Semiconductor, who served on the Uruguay Round of GATT, told IP CloseUp recently. “It is fascinating to see how the U.S. patent system is imploding, while the Chinese system is exploding with activity and purpose.

“For more than a decade the U.S. has been emasculating its patent system, while the Chinese have been studying it and adopting the benefits of a well-coordinated and fast-moving one. The U.S. has gone from being on the global cutting edge in IP in the 1990s, to becoming a patent backwater, because of a well-heeled, anti-patent faction among technology companies that want to stifle competition.

“Train Wreck”

“China has watched the U.S. train wreck and is moving fast to fill the void,”continues Rappaport. “It wants to become the world’s ‘Eastern District of TX,’ that is, a fair and fast adjudicator of disputes that respects patent holders’ rights. China will soon be the world’s largest economy with the biggest population and a middle class the size of England, France and Germany combined. Their commitment to innovation can not be ignored.”


Peter Holden, CEO of ipCreate and former managing director with London-based Collar Capital and a founding executive with IP Value, has worked extensively with Asian companies and patents. He has traveled to Korea, China and Japan more than 100 times over the past twenty years. “The Chinese have learned from the U.S. and are sincere about making their IP system the best — one that will encourage innovation and help their nation to become the economic leader. It is not merely a thought. It’s an idea that they are dedicated to.

“China’s attitude towards foreign patent enforcement may not always be as generous as it is currently. It knows that it needs to bend over backwards to be fair if it is to be taken seriously on a global scale. To encourage competition there needs to be a level playing field.”

Counterfeits Still Rule

But China’s record on counterfeits is poor, with everything from luxury goods to pharmaceuticals sold domestically and exported globally. According the U.S. International Trade Commission, Chinese theft of U.S. IP in 2009 alone cost almost one million U.S. jobs and caused $48 billion in U.S. economic losses.

“Counterfeit goods are still an issue for China,” says Erick Robinson, a patent attorney in Beijing and author of Defending a patent case in the brave new world of Chinese patent litigation, in the current issue of IAM magazine. “However, sales of fake goods are no longer openly accepted and the government has been on the war path trying to stop them in different ways. Authorities know that in order to be taken seriously about IP rights, they cannot ignore the problem of counterfeit goods.”

For a prior IP CloseUp post summarizing the Robinson article, go here.

“Go-To” Jurisdiction

China is just beginning to build its giant tech companies. They have succeed with Alibaba and Huawei, and acquired Lenovo from IBM, which is now a $45 billion (USD) business. Their big businesses currently have less to lose from strong patents and quick dispute resolution than those in the U.S. and Europe. To create successful businesses and attract investment, incentives need to be provided, and strong patents and a reliable legal system for adjudicating disputes are great for encouraging that.

Perhaps when China has as many big tech players as the U.S. it will start to think more defensively, but for now it is the perfect setting for encouraging new ideas with strong patents and courts that make it easy to obtain injunctions.

“It’s interesting that the Chinese are encouraging large foreign corporations to sue non-Chinese companies in China,” opines Rappaport. “This suggests that they are looking to become the patent litigation go-to jurisdiction.” As their innovation grows and becomes more complex, I believe they will have less interest in exporting cheap knock-

offs.  Their IP path is similar to that followed by many of today’s developed economies, such as Japan and South Korea.  You start off copying others and gradually move to internal innovation.”

Despite China’s success in facilitating stronger patents and more decisive courts, a huge question is just how prominent a role will patents play in new companies in a data-driven information age.

“Given the accelerating pace of technology development and nature of discoveries, which are frequently software driven, it’s not clear whether existing patent systems can remain relevant in the longer term,” says Rappaport. ” This effect may partially explain why patents currently seem to be less relevant in the U.S.  It remains to be seen whether this is a longer term development. It is a development that needs to watched.”

“100% Win Rate”

“Trust the Chinese government to do what is best for the Chinese people,” reminds Beijing-based Robinson. “It’s less about assisting foreign patent holders than establishing a really viable IP system that encourages innovation and growth, and that attracts foreign investment. Forty-percent of the smart phones in India are currently manufactured by Chinese companies. Innovation coupled with enforcement will drive China’s new businesses and help them grow.”

As reported by Robinson in IAM, “foreign plaintiffs notched a 100% win rate [65 – 0] in civil cases heard by the Beijing IP Court last year, according to a judge who has been on its roster since it was established in 2014.”

Wake-Up Call

A decade of weakening has taken its toll on the U.S. patent system and patent holders. It will not be quick to recover unless a concerted effort can be made to take IP rights seriously. Allowing U.S. patent policy to be dictated by those with the greatest financial success and market share may be appealing to shareholders, but it is not necessarily what is needed for the nation to remain competitive in a global economy, and to generate new businesses and jobs.

Hopefully, the wake-up call comes soon for the U.S. and it can retain the title of innovation leader it has held since the 19th Century but is slipping away.

Image source: insideiim.com; chinapatentblog.com; wsj.com

“IP Business Outlook” to Explore Opportunities & Potential Impact of European Unitary Patent

Morning briefing to be held in NY’s financial district at One Broadway and cost just $99 to attend.

The European unitary patent and the unified patent court system are well on their way to creation. A briefing to be held near Wall Street in NY on November 13 and open to the public will feature the perspective of leading U.S. and European intellectual property experts regarding this and other IP business developments.

IP Business Outlook will also explore before an audience of IP professionals views about the benefits and risks of doing business in Europe under the protection of the future European unified patent system.

UPCC 2014 - carre web_2_250x250_141015-1700The briefing will be held at Kenyon & Kenyon’s offices at 1 Broadway. Reception and welcome coffee is at 8:00-8:30. For those wishing to register click here. For further information about IP Business Outlook, including topics, go here.

Approximately 100 attendees will include IP professionals, General Counsels, chief IP officers, government officials, IP associations and NPEs. Their primary interest will be opportunities associated with the future of the European patent system.

Confirmed Speakers

Philip Strassburger, Vice President, General Counsel, Purdue Pharma; Ivan Chperot, Finjan Holdings; John C. Lindgren, President & CEO, Conversant IP; Betty Ryberg, Novartis AG; James Baillargeon, Senior Corporate IP Counsel, Intellectual Property and Standards, Alcatel-Lucent; David Pridham, Chairman and CEO, Dominion Harbor Group; Aaron Slan, Vice President, Fortress Investment Group.

Closing remarks will be delivered by Priya Ayer, Chairman & Chief Executive Officer, Anaqua.

Clear Advantages

“The advantages of the unitary patent are clear,” says Alan Johnson, a partner at UK law firm Bristows. “It will be a single right which is more administratively simple to deal with.  It will cover the three largest economies in Europe (France, Germany and the UK), plus at least another nine and maybe up to 22 European countries.  It will be a cheaper option than obtaining and maintaining a series of ‘bundle’ patents covering the same geographic area.  Furthermore, it will be enforceable in a single court (the UPC).”

Image source: premiercercle.com

Patent System Proposals Show Promise But

The Devil is in the Details

A plan to resolve significant numbers of patent disputes quickly and cheaply, and another to use patents to create more U.S. jobs are the subject of the October-November Intangible Investor.

In an article, “Is the U.S. Finally Ready for a Patent Small Claims Court?,” by Robert P. Greenspoon, a Chicago patent attorney, he suggests that a court be set up to resolve less auspicious disputes quickly and for less cost.

Greenspoon has great ideas but implementing them may be another matter. The complexity of patent disputes may not lend themselves to rapid-fire adjudication.

*     *     *

In the column I also have a go at The New York Times op-ed, “Inventing Our Way Out of Joblessness.” It was written by Paul Michel, former Chief Judge for the Court of Appeals for the Federal Circuit, Henry Nothhaft, CEO of licensing company Tessera (NASDAQ: TRSA), and (un-credited) David Kline, co-author of “Rembrandts in the Attic” (with Kevin Rivette) and “The Burning of the Ships” (with Marshall Phelps).

These authors want the federal government to provide a $19,000 incentive for each patent an SME receives to defray the cost of obtaining them. They believe that more small company patents mean more innovation, and in turn, more jobs. Messrs. Michel, Nothhaft and Kline may be on to something. They point out that the U.S. was built on small company innovation.

But they are less clear on what might be done to prevent the inevitable feeding frenzy of patent filings that is likely to ensue or the timing of payments. If it’s upon issuance, filers could be waiting for five years or more.

“Patentomics” will run in the next issue of IAM, out next week.

Image source: climatechangecorp.com

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