03.03.18

China’s Patent System is a Trade Barrier and a Legal Wall Preventing Fair Competition With the Communist Party of China (CPC)

Posted in America, Asia, Patents at 4:25 pm by Dr. Roy Schestowitz

Giant Chinese corporations are connected to the government (CPC) and are guarded by patent thickets and platoons of lawyers

Panorama

Summary: With over 200,000 lawsuits per year (a 40% jump in just one year) and millions of patents of questionable value/validity China is becoming an assembly line of lawsuits that favour large domestic firms which are connected to the government

THE Chinese patent office, SIPO, is harvesting patents for China. Almost all the patents in there are from Chinese firms. So are the lawsuits. Who is targeted by these patents and the lawsuits? Sometimes foreign companies. It seems as though the goal of SIPO is to drive out competition from abroad. The EPO and USPTO are nothing like that. In fact, many patents there are not domestic; the same is true in India.

Danny Friedmann is attempting to make sense of China’s strategy, but it’s behind a paywall (in spite of the .org domain suffix). We too have our theories, which we have put forth over the years. IAM has just said that the “Chinese cabinet body under leadership of President Xi plans major changes to IP litigation: * Higher damages * Reforms to evidence collection regime * More specialist courts * Tech-savvy, “politically determined” (!) judges…”

Maybe politically-motivated is what they meant. It’s all about politics. Pooh the Bear (Xi) and the misguided CPC that kills (e.g. works to death) people under the guise of “People’s [Communist] Republic” (for enrichment of CPC-connected capitalist oligarchs) now realises that its patent strategy is reducible to a legal mess. As IAM noted, litigation has skyrocketed (up 40% in just one year). To quote:

At a press conference on Wednesday, China’s leading IP jurist, Supreme People’s Court vice-president Tao Kaiyuan, announced that 2017 saw a 40% jump in IP-related litigation in the country. The figure for new first-instance cases for all categories of rights nationwide was 213,480. Justice Tao also made the first public comments on a new roadmap for IP reforms unveiled this week by the very highest level of the Chinese state.

Surging past the 200,000 mark for the first time, Chinese IP cases have more than doubled in four years. That is about 18 times greater than the total figure for new patent, trademark and copyright cases in US federal courts during 2017, which according to Lex Machina was 11,602.

“IP suits in China in 2017 came in at over 200,000,” IAM added. “That’s 18 times greater than the total in the US.”

Tian Lu wrote about the opening of another court because China seems to actually believe that more and more patent lawsuits would do its overwhelmingly producing economy any good. “Since 24 February 2018,” Lu wrote, “the Xi’an Intellectual Property (IP) Tribunal has officially come into operation. Located in Xi’an International Trade & Logistics Park, it is the first specialized IP tribunal in Northwest China, and is considered to be a major development in the National IP Strategy, in terms of promoting the judicial system reform, and fully implementing the ongoing Belt and Road Initiative.”

Unsurprisingly, this judicial system reform mostly benefits friends and allies of the government, not ordinary Chinese businesses.

These 200,000+ lawsuits per year are affordable for large companies, not for small ones.

This comes to show how out-of-touch China is. Not the US. If the goal is to become a litigation hub, then they sure are succeeding. IAM is loving it because it fronts for the litigation ‘industry’. A few days earlier IAM attempted to shame Korea into the same thing. “Korea’s IP royalty deficit grew last year,” it said, “thanks largely to big payouts to US companies.”

As if the solution to patents (or patent litigation) is yet more of them. This pure nonsense is promoted by those who fail — or simply refuse — to understand that Korea rejects patent maximalism including patents on software. The US is in fact becoming more like Korea and IAM has just pointed out this amicable resolution. IAM’s Zhao is merely describing how China (with its patent trolls epidemic) hammers away at LG and Samsung — showing, if anything, China’s insanity, not Korea’s weakness. LG has quit China and it’s actually China’s loss. It might result in fewer manufacturing contracts. To quote Zhao: “Although data shows Korea has continued to achieve IP surplus with China, big Korean companies seem to be going through a rough patch in the country. Most recently, this blog reported Huawei’s victories in Chinese IP office and courts against Samsung Electronics, as well as LG Chem’s difficulty in licensing battery to Chinese companies. There are few examples of Korean companies asserting patents in China.”

They would need actual Chinese patents. It’s unfortunate that the general tone at IAM is, “get lots and lots of patents and then file lots and lots of lawsuits.” That makes sense when one considers the firms IAM fronts for. Later this month IAM will attempt to disclose its bias by differentiating “News” and “Analysis”; it will still be lobbying for those who are paying e.g, Battistelli and the lawyers, patent trolls etc.

“Sisvel and Via launch mobile technology patent pools on the same day in anticipation of 5G roll-out,” IAM wrote some days ago regarding this blog post about patent parasites going east (it’s a real problem for China because they prey on Chinese companies).

IAM got some quotes too:

Speaking to the IAM blog Via President Joe Siino commened: “Given the direction of technology in mobile and certain fields like automotive, there’s an increasing need to license multiple standards at the same time and so having a multi-generational option available is very important and that’s only going to increase as 5G rolls out.” As the fifth generation of mobile technology starts to be implemented Via will launch both a standalone pool but also combine the new innovations into its new combined mobile platform.

Sisvel’s move should also help simplify things for the growing band of manufacturers which are including mobile technology in their products. “With the mobile communication program, Sisvel makes the implementation of the enabling technologies simpler, giving implementers yet another level of peace-of-mind,” David Muus, program manager of the new platform commented in the press release Sisvel issued about its launch.

Sisvel’s new press release can be in a patent troll’s site.

“Chinese patent market may not be as unpredictable as you think,” IAM said, “based on findings from new study” it wrote about earlier on. This says China is not the “Wild East many patent owners believe it to be”; they want patent chaos, so some of them relocate. “The research,” IAM said, “finds that although better patent quality generally leads to a higher likelihood of an invention patent sale, both lower and higher quality patents are less likely to be licensed out than medium-quality patents. Meanwhile, quality had no effect on the transaction of utility model patents. It should be noted, though, that quality here is defined broadly, as the study uses the R&D cost of patents reported by companies that have participated in the Chinese Inventor Survey as a proxy.”

China is where patent lawsuits now crush competitors that are small or foreign; the ultimate winners are large firms. Here’s Taiwan’s Foxconn suing smaller firms:

Major Taiwanese liquid crystal display panel maker Innolux is suing two affiliates of its mainland Chinese rival HKC for infringing on 17 of its intellectual property rights.

The move by the subsidiary of Hon Hai Precision Industry, better known as Foxconn, is believed to have been led by its Chairman Terry Gou, who is trying to bolster the group’s display panel business.

Foxconn is a gigantic company; although it is Taiwanese, a lot of its workers and production are in mainland China. It’s not hard to imagine Foxconn getting its way because is has deeper pockets and more patents. The Chinese patent system is now tilted in favour of such corporations.

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