What impact have the most recent round of FRAND/SEP judgments had on the market?
The Chinese Supreme Court IP tribunal issued a decision in Oppo v Nokia on 7 September 2022, reaffirming the jurisdiction of the Chinese court over a global licensing-fee dispute following its similar decision in OPPO v Sharp in 2021. According to the decision, China is a major location for licensing activities relating to 5G, such as the negotiation, authorisation and implementation of licences. Therefore, Chinese courts have undisputable jurisdiction over disputes. In addition, Chinese courts have issued several high-profile anti-suit injunction orders in 2020 in cases related to the global FRAND rate, such as Huawei v Conversant, Xiaomi v IDS and Samsung v Ericsson. These decisions show that Chinese courts are now joining global competition for jurisdiction over the global rate of 5G licensing and are becoming more confident in seizing opportunities to have their voices heard in parallel SEP litigations for determining the global rate, especially in 5G technologies. Some of the recent decisions have prompted concern from the West because they are not fully published by the courts even though they will affect the market profoundly. This non-publication is common practice for first-instance decisions from Chinese courts, since the case is still pending in the appeal process.
First, Chinese litigation is typically faster, therefore Chinese companies who are still often on the licensee side of the deal are more likely to sue in China during licence negotiations in an effort to get more leverage to lower their royalties. In the meantime, the Chinese courts also encourage both parties to keep negotiations open during the legal proceeding and to keep good faith. Therefore, both parties in the IP deal should be diligent in keeping a good record of negotiations in order to have a solid footing in any accompanying litigation.
Further, we will probably see more contradictory decisions from different jurisdictions in the future regarding global licensing rates, with Western courts in favour of licensors and Chinese courts in favour of licensees. This might further complicate the licensing practice and increase the possibility of the reduction of licensing fees in China. We suggest that both parties in a deal should stay patient and creative to eventually achieve a win-win situation.
If you could make one change to the IP deals market in China, what would it be and do you think that it is likely to happen?
Due to the increasing awareness of IP value in China and lingering reluctance to pay reasonable prices for IP licences, it would be hard to convince a potential licensee in China to accept a reasonable deal unless the licensor could show the value of their intellectual property. Therefore, in my opinion, IP due diligence work before a deal has increasing value to facilitate any eventual agreement. We might see more stakeholders willing to chip in for the cost of due diligence before a deal, including licensors, dealers and platforms with public funding. This might happen if more public funding is involved, since Chinese administrations are now shifting their focus towards utilising IP rights and prompting a more active IP market.
What are your top tips for developing a truly world-class patent strategy?
A world-class patent strategy requires a worldwide view on the IP trends in major jurisdictions, as well as a keen business understanding of the IP market. So, my first suggestion is to stay up to date by gleaning information from a reliable source such as IAM. My second suggestion is to keep talking with investors and entrepreneurs, since they are often the most knowledgeable people in the market.
You are a member of the All-China Lawyers Association and the All-China Patent Agents Association. What are the benefits of these for practitioners?
Both memberships offer basic qualifications for practitioners in China, especially those who want to engage in litigation works. It would be particularly helpful for practitioners to be members of both in a hard IP field such as patents. Since membership with the All-China Patent Agents Association often requires an engineering or science degree, it is a clear signal to clients that a member has a technical background. In addition, membership for the All-China Lawyers Association also requires passing a bar exam, showing that members have a legal background. Therefore, having both credentials will allow litigators like me to more readily gain trust from new customers. In addition, both associations offer training courses – mostly online given the covid situation in China – which also helps practitioners to grow and develop.
How has the Chinese licensing landscape evolved in the past decade?
The Chinese licensing landscape is growing quickly with continuous support from the Chinese administration. According to data published by the China National Intellectual Property Agency on 9 October 2022, there are now 33 IP operating platforms in China. There are about 422,000 patent licensing deals, which is 4.8 times higher than in 2012. In new strategic industries (eg, alternative-energy fuelled cars, digital creation and high-end equipment manufacturing), patent licensing is more active and is now 10.1, 9.7 and 6.5 times higher respectively compared to 2012. In addition, the government also supports 20 IP operating funds. The scale of IP pledge financing reached RmB309.8 billion in 2021. Therefore, we believe the Chinese licensing market will continue to grow in the future.
Which aspect of your work do you enjoy most and why?
As a patent attorney, the work I enjoy the most is the interaction with people with different educational background and life experience. For example, as a patent prosecutor, I relish the chance to talk with inventors who are really smart engineers with ingenious ideas for solving problems. I am often in awe at their creativity. As a patent litigator, I also cherish the opportunity to meet business leaders and experienced IP inhouse counsel to gain their insights on different aspects of the litigation with respect to their business plans. Therefore, human interaction is the most fascinating aspect of the attorney work, and maybe is also the reason that attorneys will not be replaced by AI in the future.
What, for you, are the most crucial steps of any IP monetisation process?
In China, I still think that securing and maintaining good intellectual property covering the interests and potential of the market is the most important step in the IP monetisation process. This lays a solid foundation for any effective monetisation process turning the intangible property into a goldmine in reality. In addition, with intellectual property often being a cross-border asset, unification of IP rights in different jurisdictions can be key.
How do you measure the success of an IP strategy?
For me, the success of an IP strategy should be in line with the success of a client’s business interests. As our global economy has evolved around information and knowledge, IP strategy has become an indispensable part of the intricate business strategy of a company. If an IP strategy can serve to achieve the business goals of the company, whether it is aggressive or proactive one, it will help it to grow by maximising IP value and minimising IP risks.
Jun Qiu’s practice includes IP litigation, patent prosecution, invalidation and dispute resolutions before the China National IP Administration and the courts, as well as counselling on IP strategies, patent licensing, IP-related contracts and patent due diligence work. Mr Qiu specialises in semiconductor processing and devices including memory technology, optical engineering, including microlithography, virtual reality and display technology, material and mechanical engineering. He also provides patent training and mining for his clients’ R&D personnel.