Licensing: A Forthcoming Program and Some Historical Perspective

With recent antitrust investigations in China, as well as China’s design to have more market-oriented targets for IP, export growth in IP rights from China is slated to grow from 1.36 billion USD in 2013 to 8 billion USD in 2020, according to the Action Plan for the National IP Strategy.  Commercialization-related goals were also found in the Third Plenum, to increase IP utilization generally.

In this light, attached is the agenda for a forthcoming USPTO-SIPO program on licensing of intellectual property, which will take place April 15 in Beijing.  There is no fee for the program.  Seats are currenlty only available on a wait-list basis.   U.S. companies and their counsel can wait -ist for the program by contacting Ms. Liu Jia at the USPTO office in Beijing: jia.liu@trade.gov.

I also recently recovered from my own files an unpublished case on technology transfer from China to the United States, from over 10 years ago in the Eastern District of Texas.  The case involved a Chinese university professor that licensed his technology to a US company to collect revenue and litigate, as necessary.   I was an expert witness in that case, involving Infineon Technologies.  Although China’s tech transfer regime has since changed considerably, as I recall the case dealt with using US choice of law for the licensing of a Chinese-owned Chinese patent and US patent, including whether defects in Chinese ownership or regulatory approval for the license could be cured after the case was filed.

In a previous blog post, I noted that “choice of law in IP and technology transfer contracts is a “sleeper” issue – i.e., one that is too infrequently considered for all its strategic implications.  There may be situations where foreign law is preferred for a Chinese contract, or when Chinese law is preferred for a contract to be implemented overseas, or where choice of Chinese law brings some unhappy surprises.”  Although the choice of US law was ultimately sustained by the court, this decision demonstrated that there could be “unhappy surprises” in China’s then-existing over-regulation of technology contracts, including choosing United States law as a means to avoid these controls.

Since this case, China’s antitrust regime has interjected another level of uncertainty into licensing contracts for standards setting including by substituting Chinese law for a previously agreed choice of law.  .

Here’s a link to recent testimony I gave in an official capacity on licensing challenges in China. 

As always, this blog reflects my non-official, personal views.

Civil, Criminal and Administrative IP Litigation Continued in Climb in 2014

China’s Supreme People’s Court and Supreme People’s Procuratorate released a summary of their IP-related activities as part of their annual work report to the National People’s Congress.

As reported by the Beijing Intellectual Property Institute (www.bipi.org), here’s a quick summary of the numbers:

The total numbers of cases adjudicated by the SPC in 2014 was 9,882,000, an increase of 1.7% over 2013.  Amongst those cases there were 5,228,000 civil cases, with an overall increase of 5.7% from 2013.  There were also 131,000 administrative cases, with an increase of 8.3%.  The total number of IP cases of all types adjudicated by the SPC was about 110,000, an increase of 10 percent.

In a separate 2014 annual report, the SPC noted that there were 94,501 civil IP cases adjudicated in 2014 (about 1.8% of the civil case docket).  In addition, there were 10,303 IP adjudicated criminal cases (about .2% of the criminal docket), and 4,887 administrative cases (3.7% of the administrative docket).

The relatively low numbers of IP cases compared to China’s overall dockets and the changes that the IP system has brought to China’s judicial system in areas such as specialized IP courts and preliminary injunctions, demonstrates the out-sized influence on China’s judicial system.

The SPP’s report indicated that total prosecutions for trademark, patent, copyright, and trade secrets involved 9,427 people, an increase of 7.1% over last year.

More details should be available by the end of April, when numerous Chinese agencies release reports on their IP work for the year.

WIPO, SIPO and USPTO: US-China Patent Filing Trends

Chinese Activity at WIPO

A WIPO report released on March 19 noted that Huawei, with 3,442 published PCT applications, overtook Panasonic as the largest applicant in 2014. Qualcomm was the second largest applicant in 2014, with 2,409 published applications. ZTE Corp. took third place with 2,179 PCT applications.

These top three applicants have similar patent filing profiles, with digital communication accounting for the bulk of their total filings.

The report highlights some weakness amongst Chinese academic institutions: among the top 25 educational institution filers, there were only two Chinese academic institutions – Peking University (no. 19) and Tsinghua (no. 23).

United States Activity at SIPO

SIPO’s 2014 Statistical Report (no. 164), analyzes filing trends from foreign countries, including the United States that further underscores the competition amongst Qualcomm, Huawei and ZTE and in the ICT sectors.

United States China invention patent applications with SIPO amounted to 135,138 pieces over the previous five year period analyzed.   The annual growth rate during this period was 8.3%. In 2013 United States patent applications were 29,992, about 1.4 times 2009.

According to SIPO, the following companies from the United States filed more than 3,000 patents from 2009-2013: Qualcomm (6,029); GE (5,875); General Motors (5,697); Microsoft (3,957) and IBM (3,293). Also of note during this period, Apple’s patent filings have increased rapidly, while Microsoft’s decreased after 2011 to 327 in 2013, falling to 11th place among US applicants.

SIPO’s description of Qualcomm’s role in communication technologies underscores highly competitive relationships in China:

Over the five year period of this survey, Qualcomm’s 5-year filings have ranked amongst the top three United States applicants. Chinese enterprises have also substantially increased their communication invention patents, and this substantial growth has a number of advantages. However, in key areas such as mobile phone chips, Qualcomm still owns core IP. It provides licenses to patented technology to Chinese communications equipment and consumer electronics equipment enterprises, and uses this technology to charge exorbitant license fees.

What about Chinese activity in the US?

USPTO’S Fiscal Year Report (ending September 30, 2014), provides partial data on Chinese filing trends in the United States. In 2013, there were 15,496 patent applications from China, having nearly doubled from 8,358 in 2010. Patent grants to Chinese residents more than doubled from 2010-2014 from 3,059 to 7,717.

Additional data is necessary to compare Huawei and ZTE’s filing trends in the United States and whether they reflect similar competitive trends in PCT filings and in China.