In the past decade or so, Chinese home appliance and mobile phone enterprises have begun stepping out onto the world stage, gradually expanding their global market share. This can be attributed to the fact that these industries possess numerous advantages including local policy support, labour and material cost advantages, efficient supply chain systems, successful brand-building effects, and self-researched innovative technologies.
Since 2014, guided by state policies, the alternate energy vehicle industry has also given birth to a significant number of outstanding emerging vehicle enterprises that are competing against traditional vehicle enterprises in the midst of transformation. The Chinese alternate energy vehicle enterprises that have survived the competition have also gradually established advantages in terms of human talent, efficient supply chain systems and successful brand building, and have accumulated a large quantity of self-researched innovative technologies. All of these have been beneficial in helping them to make inroads into foreign markets.
Meanwhile, in those foreign markets, the consensus on the need to pursue environmental protection, energy saving and emission reduction means countries and regions have been actively issuing relevant policies to support the development of alternate energy vehicles.
For example, on 30 November 2022, the California Office of Administrative Law approved the entry into effect of a new regulation (ACC II) adopted by the California Air Resources Board, which will completely ban the sale of new internal combustion vehicles from 2035 onwards.
Similarly, on 14 February 2023, the European Parliament in Strasbourg adopted the 2035 Zero-emission Agreement for Newly-sold Fuel Cars and Minivans in Europe. The agreement aims to halt the sale across the 27 members of the EU of new internal combustion cars and minivans that contribute to carbon emissions by that date, although new internal combustion cars and minivans using carbon-neutral fuels are expected to continue to be sold after 2035.
This trend has presented new opportunities for the development abroad of Chinese home-grown brands.
In terms of internal combustion vehicles, China’s technology still trails that of the traditional industrial powerhouses of Germany, the US and Japan, but in terms of alternate energy vehicles, China’s considerable outlays in recent years have brought certain competitive advantages in technology.
Compared to traditional internal combustion vehicles, alternate energy vehicles – when excluding the innovation in fuel type and in matching drive systems – essentially fall into the category of intelligent vehicles, providing a more convenient and intelligent human-vehicle interaction. Accordingly, alternate energy vehicles are usually equipped with three electric and three intelligent technologies, namely electric battery packs; drives and controls; and intelligent cabins, gateways and driving.
For Chinese enterprises, compared to the familiar domestic market, legal systems governing intellectual property abroad generate exponentially greater operating licence revenues, and risk avoidance effects. As a contributor to IP rules, the author presents here some thoughts from the perspectives of market orientation, industrialisation, globalisation, proactivity and antecedence on how to duly manage IP matters in the course of brands going global.
OVERSEAS PATENT PORTFOLIOS
The key components of an alternate energy vehicle enterprise are products, technologies, brands and business model.
The building of an overseas patent portfolio is a key stage in establishing a technology. As an enterprise that fixed its eyes on international markets from the outset, Nio began considering the globalisation of its patent portfolio in 2015, picking out the relevant core patents – from such segments as the three electric technologies, three intelligent technologies, traditional vehicle technologies, innovative service technologies (such as swapping technology and driver/charging station/cloud interconnection), innovative design, etc. – and carrying out a strategic distribution in China, Europe and the US.
As the criteria for selecting core patents, the author recommends considering both the traditional idea of patent inventiveness, as well as technological market value and industrial value, from a more commercial perspective.
Additionally, attention should be focused on revisions made to legal systems with changes made to one’s patent portfolio strategy as appropriate. For example, with the rollout of the European Unitary Patent and Unified Patent Court (UPC), companies should make flexible trade-offs between effective unitary patents and traditional European patents.
As a further example, as US compliance reviews have become ever more stringent, companies should review the compliance of the technologies involved in their patents and prepare domestic priority texts. Preliminary research work resulted in higher input-output ratios for our patent assets disposed overseas.
As early as 2015, when the brand was initially established, Nio began to build its trademark portfolio in key overseas markets and countries around China’s periphery, extending to more than 80 countries and regions. Pursuant to the trademark law of each country or region, we carried out secondary supplemental registrations in markets where our products had yet to officially enter, to ensure that our important trademarks would not be preemptively registered.
With such foresight, Nio successfully avoided the preemptive registration of its trademarks in those countries that represented potential overseas markets. As an example, on 21 June 2022, the Overseas Trademark Rights Protection Working Committee of the China Trademark Association issued a warning stating that an enterprise in Manila had registered, in one fell swoop, 21 English trademarks in the Philippines in January 2022, involving 18 well-known Chinese brands in the alternate energy sector, including BYD Auto, Great Wall Motor, Li Auto and XPeng Motors.
Nio had already made its trademark preparations in the Philippines some time before, and as a result it did not suffer the preemptive registration of its trademarks.
OVERSEAS LITIGATION STRATEGY
There is a saying that goes: “One can walk fast when travelling alone, and walk far when travelling with others.” When we think about Chinese alternate energy vehicle enterprises going out into the wider world, we think not only about the enterprises themselves, but the issue of the whole Chinese alternate energy vehicle industry chain going global.
As everyone knows, an assembled vehicle involves a large number of parts and components, and intelligent vehicles additionally include patent-intensive parts and components required for electrification and intelligence that are not found in traditional vehicles.
Notwithstanding the fact that it is possible to provide by way of a contract that a parts or component partner (supplier) is the ultimate bearer of patent infringement risks (as caused by the parts or components it provides), as an assembled vehicle manufacturer we actively empower the industry chain and, together with it, enhance the IP management level of each partner.
Only after each partner (supplier) has enhanced its overall IP awareness and capabilities can the IP risks to the entire industry chain be minimised. The vehicle enterprise itself is also sure to benefit from the enhancement of the IP capabilities of the industry chain, reducing the patent risks to the assembled vehicle to a minimum: the so-called “walking far when travelling with others”.
When the upstream and downstream partners in the industry chain act together, they can support each other and jointly respond to any issue.
When managing overseas market IP matters, the importance of risk management is even more critical. As a Chinese enterprise in the course of going global, Nio, before stepping a foot outside China, first put a lot of time into studying the patent risks, overseas judicial environments and litigation in the industry, during the past 10 or so years, as well as preparing detailed litigation strategy rehearsals.
Based on its familiarity with overseas judicial practice, Nio conducted a further patent risk analysis in respect of the automotive industry chain of greatest concern, which included:
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- Reviewing patent infringement cases in the automotive sector in target overseas markets;
- Analysing the technology segments of the patents in question to understand the litigation risks in each;
- Compiling statistics on the different types of patents involved to formulate appropriate litigation response strategies; and
- Screening out the high-risk patents among them to formulate response strategies, including invalidation preparation and avoidance design on a case-by-case basis.
OVERSEAS RIGHTS DEFENCE STRATEGY
In the course of entering foreign markets, we have to consider how to strengthen our capacity to apply IP and reasonably use our portfolio of high-quality IP to safeguard the lawful rights and interests of the company, in addition to carrying out IP risk screening. Here, the author shares a real case concerning rights protection abroad.
In May 2021, a local enterprise in the United Arab Emirates (UAE) preemptively registered Nio’s trademark, comprised of English text and a device in class 12 motor vehicles and related goods, with the domain name www.nio.ae.
Although Nio’s trademark had yet to be put to use in the UAE, the court ultimately upheld all of Nio’s claims and declared the trademark and domain name preemptively registered by the defendant invalid based on the international notoriety of Nio’s trademark and corporate goodwill, and by taking into consideration the bad faith and deceptive nature of the defendant’s preemptive registrations.
CONCLUSION
With the rapid rise of technological innovation in China, enterprises in the course of expansion into foreign markets are advised to carry out in-depth and comprehensive IP preparation work from the perspectives of opportunity management and risk management.
IP practitioners should not be satisfied with just being business partners, but should truly become part of the business, think longer term and carry out IP disposition in advance in service of future business strategies.
Tony Liu is senior IP director of NIO
