Jacob Schindler

The Chinese Academy of Sciences (CAS) has taken what appears to be its highest profile step yet into the world of patent enforcement. Significantly, it is a US company, Cree, that will have to respond to the sprawling government R&D body's infringement complaints in two Chinese courts.

China’s ScienceNet first reported the infringement complaints yesterday. The public database of the Shenzhen Intermediate People’s Court confirms that a lawsuit was filed on 20th January by an entity called “Shenzhen Chinese Academy of Sciences Intellectual Property Investment Co Ltd”. The defendant is Durham, North Carolina-based LED manufacturer Cree Inc. Also named are Cree’s Huizhou-based Chinese subsidiary and what appears to be a Chinese wholesale distributor. ScienceNet says there is also a case before the Guangzhou IP Court.

According to the ScienceNet article, there are two patents-in-suit covering LED products sold in China, and the organisation has asked for a permanent injunction as well as damages. CAS, it’s said, has around 1,000 patents in the LED field covering packaging, lighting and chip applications of LED technology. A CAS official pointed toward the huge amount of R&D spending undertaken by the organisation and called on Cree to stop infringing and work together with CAS to “promote industrial progress” and establish a more “fair and reasonable” market.

CAS is a huge organisation which acts as a national think tank and academic governing body for the natural sciences in China. Two universities and over 100 research institutions across the country fall under the CAS umbrella, and it has produced hundreds of commercial spin-offs, the most famous of which is Lenovo. CAS is essentially a government body; just like SIPO, it falls directly under China’s State Council, the nation’s top administrative authority. It is, therefore, not an ideal litigation opponent for a US company.

Cree has fought numerous patent battles with Taiwan-based rivals, including in mainland China where Taiwanese LED makers have significant operations. But these efforts have also raised the alarm of smaller mainland Chinese players. In 2015, a spokesman for the country’s LED Patent Association said the group was “very worried” about Cree’s patent activity in China, and the potential for Chinese manufacturers to be frozen out of the market by an alliance of big players like Cree, Philips and Osram. It was said that the Association was working with the Guangdong IP Office to plan potential responses.

Perhaps the Cree lawsuit is a shot across the bow at a US company that has troubled the domestic LED industry with its patent actions. I have not turned up any indication that this particular CAS subsidiary in Shenzhen has been involved in patent litigation before. A contact in Beijing tells IAM that CAS affiliates have a history of involvement in IP invalidation cases and other rights disputes. The huge number of entities that fall within the CAS network make it somewhat difficult to tell exactly how active it has been.

If CAS does begin to wield its IP portfolio more aggressively, it could be a formidable player. Its Institute of Microelectronics, for example, is among the country’s top domestic filers of semiconductor patents – and that is just one of over 100 CAS research institutes. Taiwan’s ITRI and South Korea’s ETRI have created successful IP value creation programmes with far smaller numbers of research staffers, although both jurisdictions have a longer tradition of patent activity. ETRI and ITRI have often relied on US courts to enforce their rights, which is not necessarily a winning proposition these days. But with China’s emergence as an important patent disputes venue, CAS could operate largely in its own favourable environment.

More than half of Cree’s workforce is based in China, where it operates a major production facility. The prospect of a patent battle with CAS on its home turf might not fill its executive team with confidence. If more foreign companies find themselves in similar positions, expect alarm bells to start ringing.