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Bloomberg's Larson: Why Tech Companies Get Sued in China(Audio) · Bloomberg Intelligence

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  Speaker 1: Live from the First Breaking News Desk, I'm Bill Maloney,
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  Speaker 1: Charlie all righty, thank you very much, Bill Maloney, and
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  Speaker 1: Deaths a Bloomberg business flash. You're listening to Taking Stock
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  Speaker 1: with Kathleen and Pim Fox on Bloomberg Radio. China. The
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  Speaker 1: International World International Intellectual Property Organization says that patent offices
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  Speaker 1: in China received the most patent applications of any country.
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  Speaker 1: Based on information gleaned from two thousand fourteen filings, they
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  Speaker 1: filed nearly one million applications. Compare that to the nearly
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  Speaker 1: six hundred thousand applications in the United States, and there's
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  Speaker 1: something else happening in China. Patent law is exerting itself
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  Speaker 1: against US companies. Here to tell us more, Matt Lawson,
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  Speaker 1: litigation analyst Bloomberg Intelligence joining us from our Bloomberg studios
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  Speaker 1: in Washington, d C. Matt Larson. I understand it's fairly
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  Speaker 1: commonplace to hear about American companies suing Chinese companies over
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  Speaker 1: patent and trademark theft. But the other way around that
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  Speaker 1: seems rare. What's happening. Yeah, it is rare, And I
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  Speaker 1: think if if this story had come up, you know,
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  Speaker 1: ten years ago, or people looked at the trends, it
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  Speaker 1: would be to be somewhat unbelievable. A lot of people
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  Speaker 1: viewed China as um as somewhere where I P rights
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  Speaker 1: weren't necessarily well protected. It was a little bit of
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  Speaker 1: a of a no man's land. I think was the
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  Speaker 1: was the perception, and that's really turned around over the
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  Speaker 1: last uh six seven years, and you're seeing a um
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  Speaker 1: kind of an outgrowth. China has made some efforts to
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  Speaker 1: revamp its patent litigation system. They have developed some specialized
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  Speaker 1: IP courts and as a result, you've seen some pretty
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  Speaker 1: sophisticated litigation tactics where both Chinese companies are asserting their patents,
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  Speaker 1: and some US companies, Qualcom being the main example, is
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  Speaker 1: starting to really test out the Chinese court system and see, um,
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  Speaker 1: see how they can assert their rights and see kind
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  Speaker 1: of how good the courts are. What are some of
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  Speaker 1: the differences to the Chinese patent litigation process compared to
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  Speaker 1: the United States. Yeah, well, China offers a couple advantages.
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  Speaker 1: One is that the disputes are much quicker. UM. It's
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  Speaker 1: about a little under a year from the time you
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  Speaker 1: file a lawsuit to when the final decision comes out. UM.
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  Speaker 1: Even the fastest courts here in the US are a
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  Speaker 1: little over a year, and the average patent case takes
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  Speaker 1: two and a half to three years UM from filing
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  Speaker 1: through a final decision. So you get a decision very
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  Speaker 1: fast in China. UM. And the other advantage is um
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  Speaker 1: you get a vision on infringement, but the other side
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  Speaker 1: can't raise typical defenses like claiming the patent is invalid
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  Speaker 1: or not enforceable as part of the court proceeding. They
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  Speaker 1: have to raise those defenses in separate administrative proceedings before
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  Speaker 1: China's State Intellectual Property Office, and those can take eighteen months.
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  Speaker 1: So if you're a patent owner you can assert your
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  Speaker 1: patent to get a decision within a year or so,
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  Speaker 1: and then in order for uh, for the other side
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  Speaker 1: to knock out that judgment, it's going to be another
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  Speaker 1: half year minimum. So you get you get a strategic advantage.
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  Speaker 1: And in that respect, patents that cover aesthetic or structural features,
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  Speaker 1: how did they differ from patents that involve inventions. Yeah,
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  Speaker 1: that's a good question you mentioned. There's there's significantly more
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  Speaker 1: patent filings people seeking patents in China, and a lot
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  Speaker 1: of those are due to different types of protection that
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  Speaker 1: they offer. China's patent system is focused on design patents,
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  Speaker 1: which are kind of just the aesthetic value. Then they
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  Speaker 1: have these things called utility model patents that look at
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  Speaker 1: the way things appear, but a little bit more of
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  Speaker 1: a of a technical structure, so um, maybe the way
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  Speaker 1: that the case that goes around your smartphone, um is formed. Um,
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  Speaker 1: And so it's a little bit more of an aesthetic
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  Speaker 1: or a design as opposed to an invention patent, which
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  Speaker 1: is what you think of when you come up with
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  Speaker 1: a new manufacturing process or new chemical compounds, something that's
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  Speaker 1: really kind of high tech versus versus just structural in nature.
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  Speaker 1: One of the most recent examples I believe of a
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  Speaker 1: Chinese company suing a US company for patent infringement. Is
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  Speaker 1: the razor the kind of hoverboard I understand that the
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  Speaker 1: lawsuit alleges that razors hovered tracks infringes on a patent
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  Speaker 1: from a Chinese company hang Ju Cheek intelligent. Is that?
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  Speaker 1: Is that something we're going to see more of? Yeah,
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  Speaker 1: I think that, you know, that's a good example. There's
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  Speaker 1: there's that example. There's the case of Apple recently got
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  Speaker 1: hit by by a similar UM type of lit gation
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  Speaker 1: in China where there was an injunction issued on old
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  Speaker 1: models of the of the iPhone. UM. I think you're
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  Speaker 1: going to see an increase in these types of of lawsuits,
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  Speaker 1: and they're going to be increasingly complicated. As you know,
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  Speaker 1: if you file a patent in the United States, he
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  Speaker 1: might file a similar patent in China, UM in Europe.
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  Speaker 1: UM seeking protection multiple jurisdictions, and so I think you're
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  Speaker 1: gonna see companies, especially global tech companies, taking advantage of
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  Speaker 1: multiple jurisdictions and filing lawsuits in the courts that are
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  Speaker 1: that are best suited to hear the case, like here
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  Speaker 1: in the US, the Eastern district of Texas is notorious
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  Speaker 1: as a place where people will go to file patent
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  Speaker 1: suits because uh they're high wind rates and big damages amounts.
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  Speaker 1: And China is starting to develop as a place where
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  Speaker 1: you can get a fast judgment and they're very plaintive
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  Speaker 1: friendly or people are are frequently able to succeed um
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  Speaker 1: in those courts. So I think you'll you'll start to
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  Speaker 1: see uh more patent suits because it's just a favorable
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  Speaker 1: jurisdiction to bring a lawsuit. And just quickly you say
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  Speaker 1: that the Chinese courts offer lower damage awards despite higher
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  Speaker 1: win rates. Yeah, and it's it's interesting. I'm curious to
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  Speaker 1: see how those statistics develop. It may be because of
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  Speaker 1: the nature of patents. We mentioned that the Chinese system
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  Speaker 1: has a lot more focus on design and aesthetic features
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  Speaker 1: and those may not garner as many as many dollars,
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  Speaker 1: But we'll see as it continues. Thank you very much.
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  Speaker 1: Thank you for bringing this to our attention and giving
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  Speaker 1: us more details. Matt Lawson, litigation analyst of Bloomberg Intelligence,
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  Speaker 1: joining us from our Bloomberg studio in Washington, d C.
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  Speaker 1: All about Chinese patent law. You're listening to taking stock
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  Speaker 1: I'm pim Fox, and this is Bloomberg. Bloomberg Taking Stock
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