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Dr Qi Zhang
Dr Qi Zhang

A smart move for Australian IP holders in China IP age 2.0

I went to China last month attending IP conferences and meeting with Chinese associates there. Similar to other fast-changing aspects of Chinese society, the IP landscape in China has changed dramatically since 2010 when I worked in Beijing. I believe these changes have positively contributed to the unprecedented social and economic shifts in the second largest global economy. Apparently, I am not able to present a 360-degree view of the Chinese IP industry based on the 10-day trip, but there are indeed something Australian Small and Medium Enterprises (SME) IP holders and IP attorneys can think about when it comes to making a decision on whether to protect IP assets in China given they usually gain IP protection information about China from Australian news media due to lack of local connection.

1. An IP product consumer and IP value producer

China has been known for being a huge market that imports, manufactures and consumes high-tech products that require payment of IP royalties. According to International Monetary Fund (IMF), China spent US$ 13 billion but received only US$ 830 million in 2010 for use of IP. China did not stop paying for the use of on IP with the new record of US$ 28.6 billion in 2017, at the same time, the IP revenue in 2017 also reached a surprising new high of US$ 4.8 billion representing a 478% growth from 2010. This means Chinese IP quality is becoming more and more commercially competitive and IP commercialisation activities in China are able to convert IP right certificates to the bottom line. This trend has been confirmed by the increasing global influence of high-tech products designed and manufactured in China, represented by Huawei mobile phones and Dajiang drones. Having your IP assets protected in China now does indicate the quality of your IP and you can leverage the IP commercialisation capabilities in China to monetise commercial value of your IP assets.

2. IP enforcement

There are some concerns in Australian SME community about IP enforcement in China. However, the reality is quite the opposite and the voice of truth is just underheard among the Australian SMEs. As confirmed by Mr David Bennett (the IP Australia’s IP Counsellor to China) and Mr George Chan (the partner of the international law firm Simmons & Simmons) in a recent talk to Australian SME community at the Sydney Startup Hub, China has an effective IP protection system and foreign IP holders are actually very successful in enforcing their IP rights in China. The challenge facing the Australian IP holders is actually not the lack of IP enforcement in China but the Australian IP holders not taking necessary actions to register their IP rights in China. Alibaba.com, the largest Chinese e-Commerce platform has a very responsive IPR protection system in place to process IPR complaints submitted by IP holders if the IP holders have registered their IP rights in China.

It is also noteworthy that there were 161,512 patent applications (including invention patent applications, utility model patent applications and design patent applications) filed in China by non-Chinese applicants in 2017, 42,922 out of which came from the US applicants and 46,734 patent applications from Japan, while Australian applicants only filed 958 patent applications. The disproportionately low filing amount from Australia cannot be explained by the IP enforcement concerns. IP protection in any country is not perfect, but the market of 1.3 billion consumers does justify the IP investment risks.

3. New generation of Chinese patent attorney firms

In terms of Chinese IP service providers, there used to be only a limited number of patent attorney firms approved by Chinese government to provide IP service to foreign applicants, so the foreign applicants did not have many options in choosing a suitable IP service provider. However, the requirement for government approval was removed in 2010 in order to create a more competitive IP service market with a better quality of IP services. There have been more and more emerging patent attorney firms since then. The founders of the new generation of Chinese patent attorney firms are either extremely experienced practicing or in-house patent attorneys with international vision or former patent or trade mark examiners that are well trained in China, Europe or the US. Having been working with foreign IP applicants over the past eight years, they are now able to provide great IP services as provided by the traditional patent attorney firms with a lot more flexibilities in service customisation and service pricing.

Geographically, most of the traditional patent attorney firms are based in major cities like Beijing, Shanghai or Hong Kong serving big foreign corporate clients, while the new generation of patent attorney firms spread across the whole country from Beijing, Shanghai, Guangzhou, Shenzhen to smaller cities like Dalian, Xi’an, Chengdu, Shijiazhuang, Hangzhou, Ningbo, Dongguan, Wenzhou, Xiamen, etc. This means you can always find an IP service provider close to your market addressing your IP needs in a way that best suits the local market.

As we know, China is a fast-changing country with ambitious plans to keep up with or lead the world in many social and economic dimensions. Although the Chinese IP protection system is relatively new, it is indeed able to defend IP rights and generate economic return for IP holders with the assistance from Chinese IP professionals. There were over 3.5 million patent applications filed in China just last year, the huge amount of IP assets are expected to generate new and sustainable IP business models, for example, IP securitisation, IP alliance, IP auction, IP insurance, IP brokerage, etc. There will be many options for the Australian IP holders to monetise their IP rights. China has just started its IP age 2.0, it is wise for the Australian IP holders to take the opportunity and join the US and Japanese IP pioneers in China.

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About the author
Dr Qi Zhang
Principal, Patent & Trade Mark Attorney
Dr Qi Zhang is a patent and trade mark attorney specialising in mobile communications, electrical engineering and software. Qi is based at Baxter IP's Sydney Office.

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