The perils of launching in the Chinese market have stymied even the most powerful technology companies as well as some of the most well-funded Cleantech companies, such as Venrock’s American Superconductor. However, patent theft from Western companies operating in China is only half of the story. Growth of Chinese patents is dwarfing that of the rest of the world. Patents are the backbone of a water tech company, and the early leaders in water tech should watch the Chinese patent war unfold. As a follow up to the Artemis CEO Forum China session, research analyst Xiaoding Zhuo wrote this blog on the “junk patent” phenomena emerging from China.
China’s economic boom brought an acceleration in domestic technology R&D and patent filing. Now we are seeing the dawn of a “patent war.” Businesses in China, large and small, have been aggressively filing patents to compete with foreign companies as they export products outside of China. In 2011, China led the world in filing new patent applications, bypassing the United States by 20,000 according to the World Intellectual Property Organization. The Chinese government provides compelling financial incentives for small and medium sized firms to register patents. An increasing number of case studies show that Chinese companies are registering patents at the same time that they reverse-engineer competitive IP.
However, the threat of the Chinese patent explosion goes beyond the patents that are granted internationally, to patents that are not fully examined or certified: “junk patents”.
Around the world, today’s standard patent writing process includes searching for related patents that have already been granted, or prior art. However, these searches often miss prior art in other languages. Languages like Chinese do not lend themselves to Internet searches.
Experts predict that we are seeing the beginning of a major new force for intellectual property rights—patent trolling.
Foreign companies in a host of industries are being targeted by “patent trolls,” that are to patent law what ambulance chasers are to personal injury law. High profile IP lawsuits by little known Chinese companies against some of the largest technology companies are the tip of the iceberg. foreign prior art has often invalidated U.S. patents. For example, BlackBerry device maker Research in Motion, paid $612 million to patent holder NTP in 2006 to settle an infringement case.
Apple was sued by Chinese Zhi Zhen Network Technology over its Siri system in earlier 2013, not long after it paid out $60 million to another small company over the rights of iPad. As a result, the major players in cell phones are investing in a circular firing squad of patent suits against one another. Apple and Google, the world’s two top innovators, now spend more on patents and patent litigation than on research and development. New research by Colleen Chien at the University of Santa Clara School of Law finds that small and midsize companies with less than $1 billion in revenues now constitute 90% of the unique defendants in patent troll suits. Firms with less than $100 million in revenue represent 66% of the defendants.
Although a majority of these “junk patents” are not certified, they still pose a legal threat to non-Chinese companies aiming to design similar products.