Patent war looming large in China: experts

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Last updated at: (Beijing Time) Thursday, October 09, 2003

Patent war looming large in China: experts

Multinationals are expected to begin waging a patent war in China against local companies later this year or next year, intellectual property rights (IPR) experts have warned.

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Multinationals are expected to begin waging a patent war in China against local companies later this year or next year, intellectual property rights (IPR) experts have warned.

Chinese firms that adopt mainstream technology and have a big share of the market but few patents of their own will be targeted in the imminent war.

At a just-concluded intellectual property seminar in northeast China's port city of Dalian, Yuan Jianzhong, head of the IPR task force with a Taiwan-based institute of information industry, said that Chinese firms have few patents in some manufacturing areas, which will be the focal point of overseas-funded firms in the war.

Multinationals, such as Matsushita, IBM and Nokia, have been stepping up their patent rights arrangements on the Chinese mainland since 1999 in such areas as wireless telecommunications, photoelectricity, information technology and bio-engineering, he said.

The patent war is on the verge of breaking out as some of the multinationals have basically completed their arrangements, said Yuan.

Wei Jun, chief counsel of the US Hogan & Hartson L.L.P. Beijing Office,, said "a growing number of enterprises on the Chinese mainland have been the target of IPR investigations launched by the United States in recent years."

A Chinese machinery company was sued by a US firm for patent infringement in Chicago earlier this year when the Chinese firm participated in an exhibition there, Wei said.

Chinese manufacturers of DVD players have paid a total of threebillion yuan (nearly 363 million US dollars) in patent licensing fees, or 4.5 US dollars for each DVD player they manufactured, to Hitachi, Matsushita, Toshiba and some other Western firms, who own key patent rights over DVD technology.

Such payment for the use of licensed technology to overseas firms totaled 10 billion yuan (nearly 1.21 billion US dollars), experts said.

To make matters worse, many Chinese firms are resigned to the challenges of their overseas counterparts in intellectual property lawsuits. They adopt the attitude of "burying their heads in the sand" by doing nothing except seeking compromises through payments of large sums of licensing fees when facing intellectual property infringement charges from overseas companies, said the experts.

That was exactly the attitude adopted by some Japanese firms inthe 1980s, which led to payments worth billions of US dollars in licensing fees to US firms over intellectual property infringement charges.

About 71 percent of China's export companies came across technological trade barriers, resulting in 17 billion US dollars in economic losses.

In an exclusive interview with Xinhua, Zhang Qin, vice director of the State Intellectual Property Office, said the situation of China's independently owned intellectual rights allows no room for optimism.

Official statistics show the number of China's patents for inventions peaked at 6,177 in 2000, or only 5.5 percent of that of Japan and 7.2 percent that of the United States in the same year.

In 2002, China applied for 2,415 patents in foreign countries, among which only 192 were awarded, fewer than the number awarded to NEC, a Japanese company, by the United States.

Zhang said China should increase the awareness of intellectual property in the whole society, and improve law enforcement in protecting the legal interests and rights of IP owners, while encouraging independent innovation and applying for patents of their own at home and abroad.

China should also train more professionals specializing in IPR in colleges and universities, offer other forms of training on IPR, such as on-the-job training and long-distance training, said the vice-director.

New laws are needed on intellectual property obtained by professionals as employees, and on abuse of IPR by overseas firms attempting to seek monopoly, said Zhang.

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