Opportunities in the Chinese market: Strategy, Tactics and Practical Tips Sunday, January 24, 2010

1. From ABC to IPC
The Rapidly and Significantly Changing
Intellectual Property Scene in China
Dr. Ilan Cohn
Patent Attorney, Senior Partner
Reinhold Cohn Group
ilcohn@rcip.co.il

2. China: Facts*
• Population: ~ 1.4B people
– > 20% of World population
• GDP ~ $7.3Trillion (2007 est.)
– No. 3 in the World in absolute terms
– Per capita ~ $6,000 (2008 est.)
• Foreign reserves – > 2 trillion
– Largest in the World
• Major exporting country
– Exports - $1.435 trillion (2008 est.)
– Imports – $1.074 trillion (2008 est.)
– Annual surplus ~ $400B
* Data from CIA’s “The World Factbook”

3. China
• The fasted growing economy in the world
– 10.7% annualized growth rate in Q4/09
– 8.7% growth rate throughout 2009
• Country in transition
– Social changes
– Urbanization
– Industrialization
– Globalization
– Value-added industries increase in importance
– Change into an Intellectual Property (IP)-based economy
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4. IP: Universal Truth
• The only remaining legal monopoly
• A major business asset
• 70-80% of all industrial assets are IP
assets
• Exclusivity over such assets – a key value
driver
4

5. Patents: Key Messages
• Key business asset
• Key business tool
• Key for
– Partnering
– Strategic deals
– Financing (private or public)
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6. Patents: Key Messages
• Patents – key player in the modern
technology driven world
– Integral part of any technology based deal
(investment, tech transfer, M&A)
• Usually a main value driver
6

7. Case for Patents
• Patents are business assets
– They serve business goals
– They serve to leverage deals and build a
business
– They serve to preserve a competitive edge
• Patents: essential business tools for
building and growing a technology-based
business
7

8. Contrary to Misconceptions
Same Rules Apply
to
CHINA
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9. China: IP in Numbers
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10. China: IP in Numbers
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11. China IP: 2009
• Patent applications 2009: almost 1 million
(976,686)
• Patents for Invention (regular patents): 229,096
• Patents for Utility Model: 308,861
• Patents for Design: 339,654
– ~ 90% domestic applicants
– ~10% foreign applicants (mostly patents for inventions)
• Patents granted in 2009: ~ 600,000 (581,992)
– ~85% to domestic entities
– ~15% to foreigners (mostly patent for inventions)
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12. China IP: Future
• Number of patent applications in China is
forecasted to:
– Surpass Japan in 2011-12
– Surpass the USA in 2012-13
• 2014: China is expected to become
– No. 1 in number of filed patent applications
• No. 2: US
• No. 3: Japan
– No. 1 or No. 2 destination for international filing programs
12

13. China & IP
• Member of TRIPS since 2001
– TRIPS
• Trade-related aspects of intellectual property rights
• Part of WTO
• Since 2001: China has been implementing many
measure to strengthen IP Rights (IPRs) in China
– Changes in law
– Education of the Public
– Education of Judges
13

14. China & IP
• New amendment of Chinese Patent Law came into
effect on 1 October 2009.
• Purpose:
– “create a favorable legal environment, market
environment and cultural environment for the
development of intellectual property in order to greatly
improve China's capacity to create, utilize, protect and
administer intellectual property. This will provide strong
support for the effort to make China an innovative
country and develop a moderately prosperous society in
all respects.“
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15. China & IP
• “Operation Blue Sky”
– In effect since May 29, 2006
– The purpose: “upgrade China's IPR protection at trade
shows”
– IPR desks in trade shows
• EXPO 2010 in Shanghai
– Prosecution of IP violators
– Special EXPO IP Court
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16. China: IP Litigation
Illustrative Example
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17. IP Litigation: Recent Examples
• 2008: > 20,000 IP litigations
– 35% increase over 2007
• 12% of litigation involving foreigners
– As either a plaintiff or defendant
• IPR holders won in 70% of case
– No differences in winning rate between Chinese and
foreigners
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18. China: IP Litigation
• Viagra case
– Challenge by 12 generic companies to Pfizer’s use patent
– Pfizer eventually prevailed
• Neoplan vs. Zonda Industrial Group
– At issue: Neoplan’s industrial design for a bus
– 2 year long battle
– Neoplan eventually awarded $3M
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19. China: IP Litigation
• Chint vs. Schneider
– At issue: Chint’s utility model
– Schneider was found to infringe
– Original damage award: ~ $48M
– Eventual settlement upon appeal: ~$23M
• Microsoft vs. Tomato Garden
– At issue: copyright violation in software
– TG: offered for sale pirated software
– TG controller received jail sentence (3½ years) + fine (~
$147,000)
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20. China’s IP Future
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21. China IP: View to the World
• Major Investments in R&D
• Establishing of Hi-Tech Parks
• Government R&D sponsoring
• Chinese government goal – to turn China into an
innovation (=IP) based country by 2020
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22. China IP: View to the World
• PCT filing 2008: 6,089
– Israel: 1,882
• However:
– World No. 1 PCT filer – Huawei
• > 3,000 applications
• No of PCT filings is expected to rise to > 50,000 over
the next 4-5 years
– Comparable to that of the USA
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23. China IP: View to the World
• Subsidies to SMEs
– Program announced in September 2009
– Purpose: advance Chinese innovation worldwide
– ~$15,000 for filing PCT application
– ~$15,000 for each national application based on a Sino-PCT
– For selective cases: even larger subsidies
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24. Conclusion
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25. China IP: View to the World
• Rapid economic development in China parallels
increase importance in IP
• Dramatic rise in IP-related activity
• Measure intended to place Chinese innovation “on
the map”
• China: on its way to becoming a world hot spot of
innovation and generation of IP
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26. A Message to Innovators
• Make sure to protect your IP in China
• It is a major market in almost every field
• Protection of IP in China:
– Can open many business opportunities
• There may also be IP opportunities there
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27. Thank You
Dr. Ilan Cohn
Patent Attorney, Senior Partner
Reinhold Cohn Group
ilcohn@rcip.co.il