Dueling Software Data in the Spring and A Changing Tech Environment

夜来风雨声, 花落知多少? (At night the sound of wind and rain; Who knows how many flowers have fallen?; Poet Meng Haoran, 689-740, “Spring Dawn”)

cherryblossoms

It is almost April, which means it is not only time for cherry blossoms in Washington, but, as we approaching IP Week in China (April 26),  — dueling software data.

Here’s a digest of how China’s recently released data compares to BSA data.

According an article published in SIPO’s newspaper, which reported on a press conference on March 20,  New Progress in China’s  Promotion of Software Legalization, in 2014,  83% of Central and State organs promote their institutions have completed software legalization;   826,700 were procured, operating systems, Office, antivirus software, with a purchase amount of 461 million RMB. A total of 4,112 firms included in the annual software legalization work; 3,715 enterprises completed software legalization through inspection and acceptance.   The most critical datapoint: at the end of December 2014, new computer pre-installed genuine operating system software pre-installed rates continue to move up for 8 consecutive years, to a rate in 2013 at 98.42%.

The data from the Busines Software Alliance, released in the June 2014 BSA Global Software Survey, tells a different story. According to BSA, China has an unlinced PC software rate of 74%, with an unlicensed value of $8.767 billion. This reflected a decline from 82 percent in 2007.  The commercial value of unlicensed software dropped from 8.702 to 8.767 billion from 2011 to 2013.

The good news is that both sides appear to degree that software piracy is declining. The bad news is that the Chinese view the glass as nearly full.  BSA views the glass as more than 2/3 empty.

There may be any number of reasons for the differences in data, including sampling and analytical differences, but also including the type of software under consideration (package/embedded/cloud-based, commercial/non-commercial, etc.), and the impact of technological changes on these differences.   The migration to smart phone, tablet and cloud platforms and increasing competition may also be affecting package software sales.

In an apparently unrelated development, Microsoft announced March 18, 2015, that it is offering Windows 10 upgrades to both licensed and unlicensed users in China.   Microsoft said that its plan is to  “re-engage” with the hundreds of millions of users of Windows in China.  Microsoft is also working with Lenovo Group, to help roll out Windows 10 in China to current Windows users, and it also is offering Windows 10 through security company Qihoo 360 Technology Co and Tencent Holdings Ltd, China’s biggest social networking company.

Based on the press release one additional positive outcome of the plan may be that this free upgrade (or, indeed, legalization) is intended to help with adoption of Microsoft’s Windows Mobile platform,  which reportedly will provide a universal app platform across a range of devices including Microsoft’s mobile platform.

Standards and IP – December Updates

cellphones

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.

galapagos island

Update: For an update on Xiaomi’s patent portfolio in 2016, see this  article from December 9, 2016 in IP Analytics.