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Better Chinese IP Protection as an Incentive for Innovation
Posted on August 18th, 2016 by Dr. Kai Pflug in Chemical R&D
A few weeks ago, polymer and intermediate producer Invista issued a press release stating “Improved enforcement of IP [Intellectual Property] laws in China encourages world-class technologies”, announcing that “Invista confidently pursues licensing activities after resolving trade secret cases.” The company indeed recently resolved arbitration against a Chinese producer for use of Invista´s PTA production technology.
This is not the first time Invista has successfully protected its IP in China. Previous favorable rulings for the company were obtained not only in overseas courts but also at the China International Economic Trade Arbitration Commission, the Supreme People’s Court of China and the Beijing Intermediate People’s Court. Other companies have had similar experiences – for example, in 2014 metal and ceramics producer HC Starck reached a favorable agreement with Ningxia Orient Tantalum Industry, which allegedly had infringed a Starck patent. And in 2015, the Chinese companies Hebei Sannong Agrochemical and Nanjing Heyuan accepted the litigation filed by Bayer CropScience at the Shijazhuang Intermediate People´s Court for infringement of Spirotetramat patents and agreed to pay financial compensation. While this goes somewhat against conventional wisdom among foreign companies in China – the general perception is that it is very difficult to successfully protect patents – a paper published by the American Bar Association shows that already in 2010, about 60% of the patent cases involving a foreign and a local company were won by the foreign party.
After having lived in China for 12 years now, it is my general belief that intellectual property protection in China is improving. Several factors have led to this development. Chinese chemical companies themselves have become more active in filing for patents and investing in R&D, creating local stakeholders in IP protection. This local interest in IP protection will grow further as local companies keep expanding their R&D and add to their patent portfolio via acquisition of foreign companies. In addition, the government focus on innovation also requires a legal environment in which this innovation is rewarded financially – a key goal of IP protection. Finally, China´s government is aware of the fragmentation and low technological level of large chemical segments – protecting IP should contribute to the goal of industry consolidation and upgrading as it favors larger, more innovative players over small and low-cost “Me-too” producers.
All this should make Western chemical companies more willing to establish high-end production and also R&D in China – as in the case of Invista (from their press release): “The government’s increased enforcement of [IP]] … allows INVISTA to confidently continue developing and licensing leading-edge technology in China.” Multinational chemical companies should also pay attention to formally protecting their IP locally by filing Chinese patents, as foreign patents generally do not receive protection in China. For example, Bayer files several hundred patents per year in China. Smaller foreign chemical companies should examine whether some of their inventions merit the same approach.
All opinions shared in this post are the author’s own.
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Dr. Kai Pflug
CEO, Management Consulting – Chemicals
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