Chinese high-tech companies on the IPR counterattack

Chinese high-tech companies are on the counterattack regarding intellectual property rights (IPR), which used to be very much a soft spot.

Beijing's Zhongguancun, China's "Silicon Valley", has witnessed the birth of the country's first funds dedicated to IPR trading and technology industrialization.

Ruichuan IPR Funds, which is soon expected to have 100 million yuan (about 15.99 million U.S. dollars) worth of funding, has attracted several domestic technology firms such as smartphone maker Xiaomi and electric appliance producer TCL.

These companies, mostly in smart terminal and mobile Internet, are the first batch of strategic investors of the funds, said Zhi Binwei, deputy director with the innovation promotion department of the management committee of Zhongguancun.

"It creates an entirely new business model, with enterprises being the main body of market-oriented funds on IPR business," said Zhi.

China has become the world's largest smart terminal producer, while the industry has to pay about five to 10 percent of output value to foreign companies in royalties.

Ruichuan IPR Funds will help Chinese high-tech companies to gain core IPR effectively and legally, said Zhang Hongjiang, CEO of Beijing Z-good Sci-tech Co. Ltd., which operates the funds.

"We will strive to help them grasp their rights and avoid pain from IPR conflicts," said Zhang.

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Chinese domestic companies have increasingly invested in international intellectual property through mergers and acquisitions.

Lenovo, the world's biggest PC maker, has just purchased a portfolio of patents from Unwired Planet Inc, an intellectual property and technology licensing company, for 100 million U.S. dollars.

The 21 patent groups included 3G and LTE (long-term evolution) and other ones covering mobile Internet.

It is a major step for Lenovo in its push into the smartphone market as the desktop PC market shrinks.

In January 2013, Lenovo bought Motorola Mobility's handset unit for 2.91 billion U.S. dollars.

"Lenovo has made intellectual property its enterprise strategy. The change started in 2010 and caught the world's attention last year because of our acquisition," said Li Xin, a senior executive at Lenovo.

In 2010, Lenovo set up a special team to analyze mobile Internet business and formulate an intellectual property plan.

"Lenovo has converted its previous defense strategy into a defense plus attack strategy," said Li.

The firm has also carried out detailed work on patent litigation and licensing as part of its overseas development strategy.

The company plans to invest heavily in patents and strengthen its IPR operation, said Li.

High-tech Chinese companies, such as Xiaomi, Huawei and ZTE, are also grasping share of the global market.

"Fast movers will take their positions and finally challenge overseas giants," said Lei Jun, CEO and founder of Xiaomi Tech.

As of April 25, Xiaomi had applied for 1,000 patents and expects to double the figure by the end of the year.

FAST TRACK

"Patent management has been important for Chinese high-tech companies in their overseas development," said Lin Peng, president of Z-good Sci-tech Co. Ltd.

Lin is optimistic about China's technical innovation. He quit his position as a senior executive in a U.S patent management company and returned to China and established Z-good.

The company has recruited staff with overseas high-tech or patent management background.

High-tech companies are striving to break away from "copycat", "piracy" and "plagiary" criticism.

"What concerns my high-tech company clients most are IPR strategy and early warning," said Li Lei, manager of Hui Zhijia Intellectual Property Management Consulting Co. Ltd. in Beijing.

Li said his role is "IPR counsellor" or "interpreter" for companies. Previously, his clients mainly asked him for help in getting rid of IPR litigation.

He helped one pharmaceutical company in Beijing to slash 50 percent off the asking price in an overseas acquisition thanks to an evaluation on IPR.

In 2013, The State Intellectual Property Office accepted more than 2.37 million patent applications, a 15.9 year-on-year increase. It accepted more than 22,924 international applications, a 15 percent year-on-year rise.

"Chinese high-tech companies are moving away from a bad reputation to a fast track on innovation and IPR protection," said Liu Haibo, researcher with the Institute of Policy and Management of Chinese Academy of Social Sciences.