Tokyo treat for IP pros
IPBC Asia 2017 took place at the Palace Hotel in Tokyo from October 29 to 31. Over 530 delegates – a new record – were in attendance, contributing to what was a fascinating and insightful three days. Issues such as IP strategy in the age of convergence and the state of the global patent transactions market were central themes, with the perspective of senior IP leaders from the region forming the basis of discussions. By the end one thing had become abundantly clear: change is in the air and Asia is at the heart of the developing world of intellectual property
On a wet and windy Tokyo Sunday evening the opening reception of IPBC Asia 2017 took place at the Wadakura Fountain Park Restaurant
‘Convergence’ and ‘connectivity’ are two words seared into the minds of anyone working in patents these days and they were a major theme throughout IPBC Asia 2017, nowhere more so than during the opening plenary “Meet the deal makers”. In particular, panellists discussed how assets created to underpin technologies in one sector are now being applied in industries far beyond the core experiences and knowledge of their owners.
Yet as Avanci’s Kasim Alfalahi observed: if you think that connectivity is making things complicated, you have seen nothing yet. He warned that IP professionals cannot just sit back and let things play out; they need to find solutions to the challenges of convergence now. Leaving it until later will only make problem solving harder.
Fellow panellist Eeva Hakoranta, head of patent licensing at Nokia, was in full agreement. Her worry was that if rights holders themselves do not confront the issues posed by licensing outside their comfort zones, regulators will come in and set the rules for them – and these are bound to be sub-optimal, at best. The key, she stated, is to encourage constructive, friendly dialogue between stakeholders in different industries. It is only when patent owners are clear about the dynamics of a sector that they can set royalty rates and conduct negotiations on fair, reasonable and non-discriminatory terms.
Nokia, Hakoranta stated, is keen to talk to companies operating outside the telecoms space in order to better understand their needs and strategies; that will then allow it to develop appropriate solutions, which will be global not jurisdictional. Alfalahi believes that the alternative to this kind of conversation is the type of litigation that characterised the emergence of the mass mobile communication market – and no company in the world wants to be spending good time and money in the courts if it can avoid doing so.
Japan Patent Office Commissioner Naoko Munakata delivering the keynote speech on day three of the event
The general manager of Nissan’s IP department, Tomonori Bekku, provided an implementer’s view of convergence. Japan’s automakers, he said, are embracing new patent strategies and described the changes to the sector as “huge and unprecedented”, adding that issues such as standardisation “cannot be avoided”.
The basic model of automakers buying parts from suppliers and assembling them will not change even as telecoms technologies become one of those parts, he predicted, but acknowledged that those who can show an appropriate valuation should be licensed. However, Bekku questioned whether patents are being used in a way that is constructive for the industry overall.
For Brian Selby, vice president of licensing and technology of GE Ventures, it is crucial that companies at risk of disruption rapidly transform themselves internally, because the market is fast and brutal. How will an automaker be able to differentiate itself, he wondered, when 50 different Chinese companies are expected to release an electric vehicle in the coming years? The answer that GE arrived at when assessing its own competitive position was that it needed to focus on how it can collect and analyse data. Ultimately, he advised: “You need to roll with the changes, or they’ll roll over you.”
A packed room for the “Deal breakers” session on Tuesday afternoon
Guest of honour Takayuki Sumita, secretary general, IP Strategy Headquarters Cabinet Office, speaking to delegates
Selby also described the licensing revolution that has taken place at GE over the last four years. He detailed how a move to become a digital industrial company had led to a major rethink around sharing the intellectual property created by the corporate giant’s multiple businesses.
First off, Selby explained, there was a decision to shift licensing activity to the Venture operation, which is based in Menlo Park. The emphasis then shifted from the licensing of non-core assets to ensuring that everything was up for discussion. What is more, GE is now interested in much more than just straight licensing: it is open to IP-enabled joint ventures, co-investment in the creation of new technologies, working with licensees to help them build new products and services using GE IP and on finding partners who can accelerate the arrival of GE technologies into new markets.
Selby’s theme throughout was speed: things change so quickly these days and you have to be sufficiently flexible to operate to timelines that are far more demanding than they may have been in the past. You must also accept that you cannot do it all yourself; others may be better placed to use your intellectual property than you are.
Kenichi Nagasawa, managing executive officer and group executive, corporate intellectual property and legal at Canon, makes a point during the “What success looks like” plenary. To his right, TSMC’s associate general counsel and chief IP counsel, Billie Chen; to his left, Maki Ohmizu, deputy chief legal officer, intellectual property, Fujitsu; Tomonori Okuwaki, senior general manager, SONY; and Mingyan Sun, head of intellectual property, Midea
Buying and selling
At any IPBC event, the state of play in the transactions market is never far from discussions, and Tokyo was no exception to this. Intel sells a lot of patents, giving Greg Sato – managing counsel in the company’s patent sales group – an excellent view of how things stand. Speaking in a Monday afternoon breakout, Sato said that the present trend is an increased number of patents available for sale on the market but fewer actual deals being completed. Prices, he noted, are pretty stable.
What Sato hears from buyers is that it is hard for them to find high-quality patents that match their specific technology needs. From the sell-side, Sato explained that his team try to focus on customers and mine the Intel portfolio for assets which match what the market is looking for. Asked what assets are on and off limits during this process, he pointed out that: “We’re willing to consider selling any patent, but we’re not going to sell every patent.”
One of the major factors in deal making is the state of play in the United States. What many members of the patent community have become only too well aware of in recent years is that the attractions of the United States as a venue for patent litigation lawsuits has declined greatly thanks to numerous court decisions, as well as the intervention of Congress via the America Invents Act. The implications of this for the United States’ position in relation to Europe and Asia as a venue for dispute resolution has been much discussed.
Kenji Kondo, president of Japan Intellectual Property Association and general manager of the IP division at Toyota Motor Corporation, was the keynote speaker on day two
During the situation room breakout on “Global litigation trends”, Nikon’s chief IP counsel Eric Kirsch was in no doubt. “As the United States declines in importance then people become more interested in Europe and Asia,” he insisted. This means that many plaintiffs have turned to courts such as those in Germany, where the promise of speedy resolution of a case and the possibility of an injunction hold considerable appeal. Kirsch predicted that interest in courts in Asia and Europe will only continue to grow.
Returning to the United States, not everyone agreed that there has been a lot of change. Talking during Monday’s “Big challenge” breakout Yuji Toda, the general manager of the IP department at Hitachi, said he did not believe that the non-practising entity (NPE) threat had altered much. A look at the litigation record shows that Hitachi and its subsidiaries have faced about five patent lawsuits a year in the United States in recent years, almost all of which appear to be initiated by NPEs. It was a good reminder that macro-level trends which look seismic on the aggregate level can feel marginal from the perspective of an in-house IP counsel.
Making new contacts at the opening reception
Toda explained that Hitachi is considering joining defensive groups such as the Open Invention Network and will continue to pursue invalidation where possible. The company’s Maxell subsidiary has also become more active on the plaintiff side of late – perhaps reflecting Hitachi’s view that reports of the demise of US patent enforcement are somewhat exaggerated.
Although NPEs did not feature as strongly as they have in previous IPBC Asia meetings – another indication of changing dynamics in the global patent market – they were not entirely absent. One of the questions in the “Moderating the market” plenary on Monday morning was addressed to Conversant’s chief IP officer Scott Burt. He was asked whether separate rules apply to NPE standard-essential patent (SEP) licensing negotiations. “I think there can be a different treatment,” Burt commented. “It’s often a result of a lack of education and understanding. One of the things I’ve done and had to do in the United States is to explain the licensing business to regulators and members of Congress.”
Something that has helped Burt and others from the NPE community is the report from the Federal Trade Commission on patent assertion entities, published in Autumn 2016. That distinguished between litigation NPEs, which file a high volume of lawsuits in order to drive settlements and licensing NPEs, which often own portfolios of higher quality assets and litigate relatively rarely. “We act more like the licensing arm of a manufacturing business,” Burt said of Conversant, before adding: “There’s a lot of misunderstanding out there about the diversity in licensing businesses.”
There were plenty of opportunities to exchange business cards with speakers at the end of sessions
View from Japan
Of course, there was also a great deal of Asia-specific content over the course of the event. In a well-received keynote presentation at the start of Tuesday’s proceedings, Naoko Munakata, who took up the commissioner’s role at the Japan Patent Office (JPO) in July, signalled that the Internet of Things (IoT) and its implications for SEP licensing will be one of her top priorities.
The JPO, Munakata explained, has formed cross-disciplinary teams to examine IoT-related inventions as technology becomes more complex. It has also released a commentary on 23 hypothetical cases in Japanese and English, which clarifies the level of detail needed in patent claims.
Another issue on the commissioner’s radar is how technological convergence is making it more difficult to resolve patent disputes through cross-licensing. Munakata encouraged industry to participate in the JPO’s ongoing public consultation as it prepares to issue SEP guidelines. The commissioner clarified that these will be voluntary but warned that the office hopes to narrow the gap between parties in royalty negotiations and to forestall or quickly resolve disputes. The JPO is also planning to provide advisory opinions on essentiality in the near future.
The closing reception took place as the sun went down and Tokyo began to celebrate Halloween
Munakata also shared her views on the state of the global IP market and how Japan has long engaged actively with smaller IP offices, especially in Southeast Asia. “Emerging countries may be reluctant to make formal commitments, but when it comes to domestic policy they are becoming pro-patent,” she added.
The commissioner may also have been thinking of China when she stated: “Systems that distort competition by seeking to accelerate technology transfer will… hamper the development of an innovation friendly environment.” When it comes to the United States, Munakata acknowledged concerns that Alice and inter partes reviews could have been over corrections, later adding that globally: “The problem of patent trolls has created some scepticism in IP rights, but it is actually not so fundamental as to shake the entire IP system.”
China, too, loomed large and the growing attractions of the country’s court system was a major theme. It is not uncommon to hear foreign observers continue to talk sceptically about whether they will receive a fair hearing in a Chinese lawsuit, particularly when asserting against a local company. However, in Tuesday’s “Stress point strategies” plenary, Ant Financial’s Benjamin Bai made the case for how far the Chinese system has evolved. “I have not seen a situation where IP enforcement in China by multinational company has ruined relationships in the country,” he asserted.
A great turnout for the opening reception
First and second-tier Chinese companies, Bai continued, have developed a healthy respect for patents and other forms of intellectual property, and will avoid situations in which they might be aiding infringements (though he added that third and fourth-tier businesses may be less picky). What is more, compared to the United States, which has become an increasingly tough jurisdiction for patent owners thanks to the decline of injunctive relief and the ability to challenge validity through inter partes reviews, China is a pro-patent jurisdiction – with high plaintiff win rates and the strong probability of obtaining injunctions, even at the preliminary stage.
The United States still has the edge when it comes to damages, though. Typical awards there far outstrip those in China. However, Bai observed that the Chinese average had grown from around $50,000 a few years ago to somewhere between $100,000 and $200,000 today: “It’s still low, compared with the millions of dollars you see in the United States, but the trend is upwards.”
The “Meet the deal makers” plenary session in full swing. Panel from left to right: Richard Lloyd, North America editor of IAM; Kasim Alfalahi, CEO of Avanci; Eeva Hakoranta, head of licensing at Nokia; Tomonori Bekku, general manager, IP department, Nissan Motor; Brian Selby, vice president, licensing and technology, GE Ventures; and Takahito Nakamura, managing director and head, corporate innovation consulting department, Nomura Securities
While this does not mean that infringement litigation in China has suddenly become a walk in the park for plaintiffs, these changes do show how much the system has evolved and has improved its relative standing. “It’s challenging to litigate anywhere, not only in China,” Bai pointed out. “It’s also difficult in the United States, even though most people would say that the system is well defined and is precedent based, which gives you a level of predictability.”
While some might respond by commenting that a Chinese lawyer such as Bai would say that, what was striking was the fact that his three co-panellists – Gustav Brismark of Ericsson, Heath Hoglund of Dolby and Panasonic’s Yoshiaki Tokuda – all agreed. The latter went so far as to predict the possible rise of a global IP transactions market worth trillions in the coming years, with China at its centre.
Given the size and scope of the Chinese market it is often easy to forget just how young many of its largest companies are in terms of the development of technology and IP strategy. That was on full display in Tuesday’s second plenary – “What success looks like” – as Midea’s IP head Mingyun Sun explained that given the relative youth of the company’s IP function it was too early to talk about the group’s success.
Midea’s recent transformation into a global business (it has been well established in the domestic market since the late 1960s) means that it has only just decided on the English pronunciation of the company’s name – which is ‘my-dea’. Perhaps the biggest challenge for Sun’s team is keeping pace with Midea’s growth. “The business is running so fast that everything else is trying to catch up with it,” he admitted. That means that Sun and his team often have to rethink priorities on a quarterly or even monthly basis. “We frequently change the IP strategy to match the changing business situation,” he revealed.
On the main theme of the “What success looks like” plenary, it comes as little surprise that IP executives all have different concepts of what makes a successful IP strategy. During the session, a diverse group of Asian corporate IP leaders gave delegates an insight into the metrics they use to judge the effectiveness – or lack thereof – of their teams’ performances. Among those mentioned were:
- The payments you do not make – minimising settlement costs is a key priority for Sony, said senior general manager Tomonori Okuwaki, who revealed that the company handed over cash in only six of its 29 litigation settlements during fiscal year 2016.
- The secrets you do not spill – multiple panellists stressed that patents are not the end of the story when it comes to how they measure success. Billie Chen, chief IP counsel of TSMC, noted that the company patents a small share of its total inventions, while Canon’s head of corporate IP Kenichi Nagasawa added data management as a core competency of his team.
- Inter partes review institution percentages – both Okuwaki and Chen highlighted their companies’ performance in inter partes review proceedings at the USPTO; TSMC has managed to get 88% of its petitions instituted and Sony 85% (both well above the industry average).
- Internal reputation – frequent meetings with the CEO and other corporate officers is one way to communicate success metrics within an organisation. It is also a good way to gain trust: Nagasawa said that after building a relationship with top Canon executives over many years, they trust his gut instincts when it comes to critical patent questions.
- Industry opinion – Okuwaki said that external voices are one way that Sony benchmarks its performance against competitors; he highlighted IAM’s most recent list of top 40 market makers (published in IAM 86) as an example (Sony corporate executive Toshimoto Mitomo is at number 14, a rise of six places on his previous position).
A big thank you to all IPBC Asia 2017 delegates, speakers and sponsors from the IAM team
Tokyo proved to be a fantastic host city for IPBC Asia 2017. This was down in no small part to the support it received from so many of Japan’s IP leaders in the corporate, regulatory and policy spheres. Over the three days it became apparent just how much Japan’s businesses and institutions have to offer as the IP world looks to develop solutions to the challenges posed by the rapidly changing global innovation economy. It is also clear they are keen to be at the heart of the conversation. For Japan and the wider world that can only be very good news.
IAM’s attention now turns to San Francisco, where the next IPBC Global will take place in 2018 from June 10 to 12. Look out, too, for a number of regional IPBC events in both Asia and Europe between now and then. Full details can be found on our website at www.IPBC.com.