Nearly every week there is a new development somewhere in the world on IP and standards. China has been no exception. I already blogged about several of them of them, including EIPC MIIT’s recent program in Beijing, EIPC MIIT’s Template for IP Policies in Industry Standards Organizations,. and most recently the JCCT in Chicago. The JCCT covered many standards-related issues, including licensing, antimonopoly law, and judicial practices in IP. The fact sheet for the JCCT described the specific bilateral commitment on standards and IPR as follows:
China and the United States recognize that standards setting can promote innovation, competition and consumer welfare. They also reaffirm that IPR protection and enforcement is critical to promote innovation, including when companies voluntarily agree to incorporate patents protecting technologies into a standard. Both sides recognize that specific concerns may exist relating to the licensing of standard essential patents that are subject to licensing agreements. China and the United States commit to continue engaging in discussion of these issues.
We might expect continuing interest by MofCOM on these important topics of standards and IP, as Dr. ZHANG Xiangchen, who currently serves as Assistant Minister and principal negotiating partner on the JCCT with DOC and USTR, also played an active role in the debates over standards and IP when he was Director General in charge of WTO affairs in Geneva. Those debates date back to at least as early as 2005, when China proposed that the WTO TBT Committee look at the issues posed by IP in standardization.
What else is new?
On December 15, the Information Technology and Innovation Foundation released a report: The Middle Kingdom Galapagos Island Syndrome: The Cul-De-Sac of Chinese Technology Standards, by Stephen J. Ezell and Robert D. Atkinson. This document is the latest in several reports over the years that have highlighted China’s “techno-nationalist” approach to standards and IP. The central thesis of this report is that China’s focus on the development of indigenous technology standards, particularly for ICT products, risks engendering a “Galapagos Island” effect, isolating its ICT technologies and markets from global norms and creating a recipe for failure. Taking a page from similar Japanese efforts and recent Chinese failures in the ICT sector (p. 15), the report argues that even the size of China’s domestic market by itself will not achieve the economies of global scale that are necessary to survive in today’s integrated global ICT economy. This report also identifies the important linkage of these policies with China’s IP plans. As the report notes, “a core component of China’s strategy is to remove or change key portions of international standards for the purpose of creating China-unique standards. Why does China do this? … The answer in many cases is that China is essentially trying to strip others intellectual property from these standards in order to avoid paying royalties.” (p. 14).
Meanwhile on December 15, China’s Caixin published a revealing article on the waste incurred by these “galapagos standards.” The article, “China Mobile’s Dead End on the 3G Highway,” describes a wasted effort involving about 2 billion RMB to develop TD-SCDMA.
In the continuing SEP litigation wars, China’s Xiaomi in December was reportedly banned from selling its smart phones in India after a court issued an injunction in favor of Ericcson by reason of Xiaomi’s unwillingness to take a license for Ericsson’s standards essential patents. Ericcson’s spokesperson described this as a classic patent hold out situation:
“It is unfair for Xiaomi to benefit from our substantial R&D investment without paying a reasonable licensee fee for our technology. After more than 3 years of attempts to engage in a licensing conversation in good faith, for products compliant with the GSM, EDGE, and UMTS/WCDMA standards Xiaomi continues to refuse to respond in any way regarding a fair license to Ericsson’s intellectual property on fair, reasonable and non-discriminatory (FRAND) terms. Ericsson, as a last resort, had to take legal action”
Of course there are also other battles brewing. Most notably, NDRC’s investigation of Qualcomm, according to various press reports, appears to be continuing.
It will certainly be a busy 2015 in this important area.
Update: For an update on Xiaomi’s patent portfolio in 2016, see this article from December 9, 2016 in IP Analytics.