Joff Wild

A worrying story has emerged out of China in the last 24 hours. As reported by multiple sources – including Reuters, Bloomberg and CNET - senior executives from InterDigital have indefinitely postponed visits to the country because they have been threatened with possible arrest should they set foot there. They had been due to visit this week to hold talks with the National Development and Reform Commission (NDRC) over allegations that InterDigital has violated the China’s anti-monopoly law with regard to royalty rates it is seeking; this follows a complaint that the NPE had filed at the ITC against a selection of Chinese companies, including Huawei and ZTE.

The NDRC had asked InterDigital’s CEO to attend the meeting, but he stated he was unavailable and suggested that other senior executives go in his place. According to Reuters InterDigital claims that its lawyer in China was then told by the commission “that it would not ensure the safety of executives it planned to send to China in place of Merritt and they may be arrested or detained”. This was confirmed by InterDigital in an email to CNET. A spokesman stated:

Our company received, proactively and without being prompted by an inquiry of ours, a communication from the NDRC that said that our US counsel's safety could not be guaranteed if he were to accompany our CEO to China, and that similarly our executives' safety could not be guaranteed if they travelled to China to represent the company without the CEO accompanying. The meeting, scheduled by the NDRC for December 18 (one day before the ITC is scheduled to rule on our patent case against Huawei and ZTE), was intended by the NDRC to force a "confession" of monopolistic activities on the part of our CEO.

The spokesman went on to say: “At this point we're unwilling to make any commitments whatsoever about future travel to China on the part of our executives.”

As far as I am aware, the NDRC has made no comment on InterDigital’s claims and it could well be that its side of the story is very different. I am sure that everyone would hope that this is all some kind of misunderstanding. If it is not, then it is very bad news – not only for foreigners that want to do business in China, but for the Chinese themselves.

Over the last couple of years authorities in the country have made it clear that they are very keen to attract top level IP expertise from abroad. In late 2011, intellectual property consultancy was added to the list of encouraged industries in the Catalogue for Guidance for Foreign Investors, so opening up practitioners in relevant disciplines to incentives such as possible tax breaks; while in May 2012 SIPO’s fourth annual Promotion Plan for the Implementation of the National Intellectual Property Strategy spoke of introducing measures that will “highlight the introduction of high-end overseas talents who are essential for the implementation of IP strategy but in short supply.”

While there are undoubtedly huge opportunities in the Chinese market for top class IP strategists, these individuals already make very good livings elsewhere. Stories such as this one will do nothing to persuade them that making a move to what remains a country in which the state either directly or indirectly controls all the levers of power is a good idea.