IP strategist: Where to file for big results

Why would Apple, NEC, AstraZeneca, GSK, Samsung and others file 500-plus patent applications in Hong Kong (the HK IP Department database provides only a maximum of 500 search results), a city of just 7.5 million people? Why would Philips file over 500, GSK file over 300 and Novartis file over 100 patent applications in Ireland, a country of 4.8 million people? Why would IBM and NEC file over 1,500 patent applications each, and AstraZeneca, GSK and Samsung over 750 patent applications each, in Singapore, a city of 5.5 million people? The number of patent filings in these jurisdictions by certain companies seems disproportionate to their respective populations.

Multinational corporations are (for the most part) rational actors and thus there must be a reason. I would posit that patent (and other IP) filings in these and a growing number of other jurisdictions are being driven by non-traditional IP concerns, from industry-specific trends to global business realities. Nonetheless, the implication is clear – today’s multinational corporation cannot be content to file only in the largest 10 markets and where they and their competitors manufacture. Modern multinationals consider a broader range of inputs when determining their worldwide filing strategies. Consequently, the rise of, for example, China-plus-one strategies, medical tourism, international transshipment ports and tax-related transfer pricing is having a profound impact on IP filings around the world. If you have not yet considered such factors, it is time to catch up.

While China is still the manufacturer for the world, multinationals and their suppliers are increasingly concerned about its economic and political rise, and the risks inherent in having a single supplier, even if that supplier is a country. Companies are therefore adopting a China-plus-one strategy, by developing an additional supply chain to make them less dependent on Chinese manufacturing. Vietnam, Malaysia, Thailand and Indonesia have been major beneficiaries of this diversification, which will only increase as industry-specific infrastructure becomes more established in these countries. Expect IP filings in these countries to gain further momentum.

While Ireland is relatively new to medical tourism, Thailand, Hong Kong and Singapore are well known throughout Asia and the world for their world-class doctors and hospitals. Many hospitals have the newest equipment and luxurious rooms for special patients. Many of the doctors there were educated at the top institutions in the world. Some hospitals combine traditional medicines with Western drugs and surgery. An increasing number of UK citizens are reportedly travelling to Thailand on a few months’ notice for medical treatments for which they would otherwise have to wait years in the United Kingdom.

Affluent patients from Asia and the Middle East travel to Hong Kong and Singapore for medical treatments ranging from Stage III cancer therapy to cosmetic surgery. It is said that Hong Kong and Singapore use enough cancer drugs, anti-rejection drugs and antibiotics for cities three times their size. So while a pharmaceutical company might not normally consider patent protection in a country of 7.5 million people, the economics start to make sense when this is equivalent to a city of between 11 million and 23 million people.

For decades, shoppers from around the world travelled to Hong Kong to purchase consumer electronics at its various markets. By the time the Apple Store in Hong Kong celebrated its first anniversary, Apple had reportedly sold enough products from it that each Hong Kong citizen should have possessed at least seven of its products. The reality is that Hong Kong iPhones and 3G iPads are unlocked and cheaper than those in China, so foreign consumers – especially those from China – purchased multiple products and took them home. Such trends argue for greater filing of consumer electronics-related intellectual property in Hong Kong than would otherwise be expected.

Global logistics also affect IP filings. If you are supplying to or from Asia, then your logistics chain probably flows through one of the following ports: Shanghai, Shenzhen, Guangzhou or Nanjing in China, Singapore, Hong Kong and/or Busan in South Korea. Everyone already files their intellectual property in South Korea and China, but why file in the small cities of Hong Kong and Singapore?

In addition to ports where large numbers of international transshipments take place, Singapore and Hong Kong have well-respected, efficient and IP-savvy courts. The ability to disrupt or even threaten to disrupt a competitor’s supply chain because it happens to transship is excellent leverage in global litigation.

Singapore, Ireland and Hong Kong are also classic low-tax jurisdictions where transfer pricing is extremely common. The argument follows that if there is sufficient economic activity in a tax haven such that the transfer pricing profit is taken, then that same economic activity justifies IP enforcement over the same affected products or services. The intersection of tax havens and logistics creates a double threat of logistics disruption and the prevention of transfer pricing activities, which potentially hits companies where it really hurts – on their customers’ shelves and on their bottom line.

Thus, it is obvious that filing intellectual property where you and your competition make and sell is no longer enough for the modern multinational corporation. As global business changes and adapts, rights holders need to adjust their strategies too. As specific industry trends emerge, they may need further readjustment. The smart IP strategist will read the geographical convergences in order to recognise cost-effective opportunities. The implication and reality will be that intellectual property filed in such well-placed jurisdictions will punch far above its weight.