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11.21.17

Chinese Patent Policy Continues to Mimic All the Worst Elements of the American System

Posted in America, Asia, Patents at 11:38 am by Dr. Roy Schestowitz

This will crush Chinese innovation

Chinese flag

Summary: China is becoming what the United States used to be in terms of patents, whereas the American system is adopting saner patent policies that foster real innovation whilst curtailing mass litigation

THE USPTO, together with US courts, may have done what’s necessary to stave off at least some patent trolls. With software patents on the rocks, venue-shifting becoming tough and various other notable factors, patent trolls either go out of business [sic] or move somewhere else. Some of them go to China.

Even China, based on yesterday’s blog post, is lost in an appalling trap of a patent gold rush. The Chinese government now signals that competing/emergent players (those which compete against state-connected giants) are to be banned. From the blog: “While many past customs enforcement campaigns have focused on foreign rights owners (often big international brands), this one was carried out on behalf of domestic tech companies. China Daily explains that it is part of the government’s plan to “nurture Chinese companies with IP advantages in their exported goods”. In planning the “Soaring Dragon” operation, the Shenzhen authorities selected patent owners that were deemed “capable of independent innovation” – Huawei and ZTE chief among them.”

“The Chinese government now signals that competing/emergent players (those which compete against state-connected giants) are to be banned.”So put another way, a quarter million products were denied access to the market. Who exactly benefits from that? “Whatever the details behind the numbers GACC is publicly promoting,” it concludes, “the message is clear: if you’re an innovative Chinese company and your patents are being infringed, the customs services is one of the tools at your disposal. The more proactive they become, the more potent a remedy this will be, especially for the likes of Huawei and ZTE.”

Those are massive corporations. They now shield themselves with a massive number of low-quality patents, just like in the US. This actually suppresses innovation and reduces competition. It’s like ITC in the US.

Earlier today Watchtroll wrote about ITC action against Apple — action which, as we explained before, would likely go nowhere. ITC, like the above Chinese equivalent, guards the domestic giants.

China will never admit anything like that and with tight control over the media it’s already perfuming the above action. Watch how the Chinese official news site (government site in English) calls embargoes “Reforms open up fair playing field” (a euphemisms salad). “Officials said such ordinances,” the short report says, “meant to encourage enterprises to increase their brand-building awareness and improve product quality, had partly played a positive role.”

“Those are massive corporations. They now shield themselves with a massive number of low-quality patents, just like in the US.”In whose favour? Giants such as Huawei and ZTE? They basically use government-enforced protectionism in the same way Apple tried to guard itself from devices imported from China, Taiwan and Korea. Apple is still stockpiling patents and as we explained a couple of days ago, we expect it to become the next BlackBerry in the sense that it will litigate when little/no market is left for "i" devices. The Microsoft-connected patent troll Finjan already does exactly that (except it was never successful) and it’s is still at it, based on today’s press release. The good news is, victims of this troll are fighting back and challenging the patents. As for BlackBerry, in the absence of Kokes it carries on chasing companies with legal actions, albeit it looks like it explores doing so via intermediaries. As IAM explained yesterday:

Teletry is described as “an independent operating company with expertise in building relationships between patent holders and licensees in the wireless technology industry”. It is headed up by Kasim Alfalahi, who will be known to just about everyone who reads this blog as the former chief IP officer of Ericsson and the current CEO of Avanci, the IoT licensing platform.

Avanci is one of several businesses that sit within the Marconi Group, which was created earlier this year. Another is PanOptis, the NPE which, among other assets, owns a number of patents previously held by Ericsson. Although it is not entirely clear, it looks as if Teletry has been specifically created for the BlackBerry venture – it does not have its own website as far as I can tell and the only mention of it on the Marconi website is the press release announcing the BlackBerry deal.

Aside from Alfalahi, there are a number of other very well-known patent deal makers on the Marconi roster, including: former Google and Motorola Mobility patent transactions rainmaker Kirk Dailey; Eric Reifschneider, previously with Qualcomm; and Fred Telecky, once of Texas Instruments and most recently head of the licensing operation at PanOptis.

[...]

For the following ones, though, both parties will be expecting a return. If Kokes was right about the strength and breadth of the BlackBerry portfolio, outsourcing a large part of the smartphone licensing business to Teletry will free internal deal makers at the company to chase businesses in other verticals. That, in turn, should hasten the arrival of royalties into the company’s coffers – something that will undoubtedly please investors. The hook-up with Teletry may not have been a move that BlackBerry entered into entirely willingly, but it could be one that bears significant fruit.

Stick a fork in BlackBerry. It’s a patent troll by proxy now, for the actual business is just virtually dead. Now that we know what Teletry actually is, our predictions turn out to have been accurate all along. They’re just “managing” “portfolios” of patents (as per this press release from yesterday) and doing so by aggressive/proactive means, notably lawsuits. But will they succeed in the current atmosphere in the US?

“Stick a fork in BlackBerry. It’s a patent troll by proxy now, for the actual business is just virtually dead. Now that we know what Teletry actually is, our predictions turn out to have been accurate all along. “Today’s post from IAM, regarding RPX, says it’s a “tough market reality” and RPX is therefore moving to China. Many patent trolls are moving to China (good riddance!) and the only ones who complain about it are the patent ‘industry’. Technology companies are vastly relieved that all this nuisance is moving as far away as possible.

As a reminder, RPX was imploding somewhat earlier this year. Here’s the latest:

On a recent quarterly earnings call, RPX CEO Marty Roberts told analysts that the firm is looking to expand its presence in China in 2018. The exact dimensions of the aggregator’s planned investment aren’t known as of yet, but when you speak with senior IP executives inside Chinese companies one thing becomes clear very quickly: saying you want to be in China and actually being there are two very different things. If RPX really does want to take advantage of the opportunities the country presents it will need to be very serious about building a long-term project that may not immediately bear fruit.

We don’t yet know whether RPX plans to expand the coverage of its existing defensive aggregation model to China (perhaps by targeting more Chinese patents for acquisition), or whether it might seek to provide some different services designed specifically for Chinese clients. As a service provider with a defensive mission and a large portfolio, it could potentially provide a tailored service that helps Chinese entities gain freedom to operate in overseas markets and defends them against NPEs. However, the decrease of the NPE threat in the US, together with the emergence of the IPR system, have already brought down the costs of defence there – this is something that impacts Chinese companies as much as it does anyone else.

That last sentence is pretty revealing. RPX was directly profiting from a lot of troll activity (IAM uses the euphemism “NPE”) and now that trolls are ebbing away (or moving to China) those who offered a so-called ‘solution’ to it (for large corporations) fail to find themselves.

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