In one of yesterday’s postings, I made reference to possible use of patent laws by Chinese companies against US companies. Today’s entrepreneurship column in the Wall Street Journal – “Small Talk” by Kelly Spors – tells the following story about Chinese patents:
The big risk: If another company patents your idea first, it can turn around and sue you for infringement. It isn’t as much about “getting a patent in China as preventing other people from getting one,” says Siva Yam, president of the U.S.-China Chamber of Commerce, a Chicago-based organization that helps businesses navigate China. Mr. Yam says the Chinese government is trying to better enforce patents, so having a Chinese patent may be worth more in the future.
Mr. Yam recalls a few years back when a Pennsylvania company decided not to seek a patent in China since it was already selling the technology there. But a Chinese company later sought and received a patent on a similar technology and then sued the U.S. company, along with writing letters to its customers threatening to sue if they continued doing business with the firm. The Chinese company eventually backed down, but not before the U.S. company had spent ample time and money fending off the claims.
Oh, you say, but that is all about patents in China – not US patents law. True, but it illustrates my point that the Chinese clearly understand how to use patents as a defensive weapon.
And there is this Financial Times story, which ran last October – China asserts patent rights in US courts:
Chinese companies have begun to defend their patent rights increasingly aggressively in US courts, legal experts say.
“Within the past year or two, the Chinese have begun standing up for themselves and testing the limits of intellectual property rights that are asserted against them,” says Mark Hogge, a patent attorney at the law firm Greenberg Traurig. “They are learning the rules of engagement in the US marketplace and that includes intellectual property litigation.”
Some Chinese companies are even going on the offensive in the US for the first time, and filing their own patent lawsuits against US competitors.
This year, Netac, a manufacturer of computer flash memory products based in Shenzhen, China, brought a patent suit against a New Jersey rival in a federal court in Texas, in what is believed to be the first time that a mainland Chinese company has sued an American one for patent infringement.
“This could be a harbinger of things to come,” says Tony Chen, a US-trained patent attorney in the Shanghai office of the US law firm, Jones Day. “Chinese companies are treating intellectual property lawsuits as an effective competition tool in the marketplace.”
As a March 2007 story in EuroBiz Magazine – “Home and Way” put it:
As for the Netac case, it is uncertain how and when it will be resolved, but it does represent an important shift in the IP debate. With Chinese firms making more an effort to stand for their brainwork, multinationals will need to keep their guard up.
So, tell me once again how defending the current patent system (which is set up to encourage defensive patenting and litigation as a business strategy) is going to help US competitiveness?
Don’t say you haven’t been warned.