In the era of the knowledge economy, innovation represents the core competitiveness of enterprises and the chief driving force behind both technological and economic progress. Little surprise that IP rights, being the definitive recognition for innovative achievements, have become indispensable for the safeguarding of legitimate business interests.
During the burgeoning economic globalisation, a growing number of Chinese enterprises opted to venture into the international markets. They soon learned that adapting to and incorporating the rules of international patent protection is nothing short of a “mandatory course” in order to survive the fierce competition.
WHERE WE STAND
Our firm, BGI Genomics, is driven by technological innovation. Relying on multi-omic big data technologies such as genetic testing, mass spectrometry testing and bioinformatics analysis, it provides research services and integrated solutions for precision medical testing to clients across more than 100 countries and regions.
Led by the IP sector under the legal department, the company has been granted more than 600 patents, more than 900 registered trademarks and nearly 800 software copyrights, with several core patents recipients of the China Patent Award. To support international business development, more than 100 core patents have been granted in countries where we conduct business, as we rapidly accumulate related patents, both upstream and downstream, through mergers, acquisitions and licensing. When faced with overseas patent litigations, we have co-operated with world-renowned patent firms and law firms and successfully defused the situation on numerous occasions.
ANALYSIS OF MOTIVE
In recent years, Chinese enterprises, particularly high-tech players engaged in the mobile communications, biomedicine and similar industries, have frequently been involved in patent litigations, which appear to have become a go-to method for foreign competitors to maliciously exclude Chinese enterprises from their markets. In some cases, foreign firms singled out critical junctures to file patent lawsuits against Chinese tech companies, such as immediately before their IPOs, clearly demonstrating an intent to suppress. In these circumstances, patent litigation is wielded more as a weapon for business competition, than a means of safeguarding rights.
That said, it cannot be denied that some overseas patent litigations are indeed the result of poor awareness of overseas patent risk infringement when initially going out. These enterprises failed to conduct the necessary risk screening before sending their products to overseas buyers or exhibitions, neither formulating a game plan to avoid infringements, nor securing licences from patent holders. This often results in “temporary injunctions” during exhibitions or patent infringement litigations, causing much damage to their brands.
STRATEGIES OF RESPONSE
Respecting and protecting IP rights are not only basic rules that all market players should observe, but also the driving force behind the upgrade from “made in China” to “created in China”. At present, more Chinese enterprises than ever are considering IP a central part of their corporate strategies, insisting on innovation from the outset and promoting the assembly of patent portfolios to actively respond to overseas patent litigations.
Guard against infringement risks from the beginning. From the earliest step of product R&D, enterprises should insist on independent innovation and avoid the risks of patent infringement. The IP department should be actively involved in the R&D process, assist in patent mining, and conduct freedom-to-operate (FTO) analysis for technical solutions. Patent barriers and potential infringement risks should be probed, and by mapping out the current state and future trends of technological development, one can grasp the overall situation of patent portfolios in the industry. Once a high-risk patent has been identified, the first consideration may be to improve the product design in order to skirt the scope of protection. If the target patent is questionable to begin with, one may also consider filing a petition for invalidation.
Furthermore, taking a business perspective, one may take the initiative by contacting the patent holder for negotiation, and achieve the objective of lawful application of the patent through licensing or acquisition.
Let patents lead the charge into overseas markets. Patents are territorial, as their scope of protection is limited to the countries or regions in which they have been granted. In addition to preventing infringement risks, enterprises, when expanding into an overseas market, must attach equal importance to filing for overseas patents for its core technologies and secure foreign patent protection, so as to create competitive advantages and accumulate bargaining chips for potential patent litigations. Furthermore, when an enterprise achieves a technological breakthrough in its industry, it is advisable to build an overseas patent portfolio as early as possible so that it can profit through patent licensing or transfers in the future.
Filing for overseas patents can incur relatively high costs, but there is no need to do so in every country and region. An international patent portfolio should focus on the existing and potential markets for the enterprise’s products, taking into account objective factors such as competitors and regulations in the target countries/regions. To secure protection for a certain patent in multiple countries, the Patent Co-operation Treaty (PCT) may be an economical and efficient route. Furthermore, overseas patents are granted for only a period of time, which means that enterprises should strategically plan out its future presence in the international market and consider mobilising its patent, trademark and copyright portfolios to achieve comprehensive IP protection.
Actively respond to overseas patent litigations. Even when adequate arrangements have been made for all eventualities, and the best efforts have been spent to guard against patent infringement risks and establish solid international market presence, it remains difficult to stave off overseas patent litigations entirely. In the world of business competition, overseas patent litigation is often not initiated to secure victory in the case, but rather to inhibit a Chinese enterprise from entering an overseas market or to exert pressure and extort patent licence royalties.
When faced with malicious patent litigations, one should rationally analyse the other party’s intention and respond in diverse ways to seek a reasonable resolution. Particularly when an enterprise owns a patent portfolio spanning many countries and regions, it may use this as a bargaining chip to actively negotiate with the other party and achieve a win-win scenario through cross-licensing or other such means. In recent years, many Chinese enterprises have emerged victorious in overseas patent litigations, which have in no small way boosted the confidence of all others entertaining an ambition of “going out”.
Xu Qian is deputy general manager, general counsel and secretary of the board at BGI Genomics
