Highlights from Day One of this year’s IPBC Asia

Time for some serious thinking - The keynote speech and welcoming address for IPBC Asia 2019 was given by Hiroki Mitsumata, Secretary General of the Secretariat of IP Strategy Headquarters of the Japanese Cabinet Office. In a wide-ranging presentation, Mitsumata talked delegates through ambitious plans to put IP at the heart of strategic decision-making in Japanese companies of all sizes. One of the challenges in doing this, he observed, is that currently there is only a limited pool of advisers in the country that know both IP and business. Japan lags other countries in this regard, he said. Perhaps that is correct, but my sense is that he was actually describing a situation that applies in most parts of the world. Patent lawyers and attorneys know the law, but how many of them are truly comfortable in giving their clients counsel that goes beyond that? Indeed, how many have really had to? After all, while there has been good money to be had prosecuting and litigating patents and other forms of IP, why bother seeking to provide further services? However, as IPBC Asia delegates know for sure, times are changing. Not only are major offices such as the USPTO and the JPO seeing falls in the number of applications they receive, while even in China the rate of growth is slowing, but on top of that the rise of AI is on the cusp of fundamentally reshaping the prosecution process. Work that was once done by humans will soon be done by machines working at a much quicker rate that deliver results which will probably lead to even fewer applications. While drafting high quality patents will doubtless remain the preserve of high quality patent attorneys for the foreseeable future, a lot of the work that is currently being charged for will no longer be there; while, for litigators, higher quality, more targeted applications may well mean fewer cases to try. So, what then? If you are not able to provide value-added, strategic advice, then you could very quickly discover you are excess to requirements. And to make matters worse, there are others who are now looking to get in on the act. Take IPBC Asia country host Nomura, for example. It is one of Japan’s major financial holding companies and is currently investing heavily in developing a strategic IP play. Earlier this year, meanwhile, we reported on Deloitte buying out top UK IP consultancy ClearView; and then there is Aon, which has only been seriously involved in IP for a couple of years but is already building a sizeable presence. Where these big-name trailblazers lead, others are bound to follow. All of which leaves the traditional players – who have done so much to help the market get to where it is today - with some serious thinking to do. If they don’t engage with what is happening, they are likely to find themselves left behind. JW

Building an ecosystem for 5G - Given that the topic of the first plenary session was confronting global uncertainty, it was not surprising that the conversation turned at one point to the promise of 5G. While the technological potential of the latest generation of wireless appears considerable there’s still much to unfold in terms of how it is applied across a range of sectors, and how the underlying IP is licensed. Session moderator Taraneh Maghamé of Via Licensing noted that the roll-out of 4G had happened so fast and without anyone taking the time to work out what royalties would look like or how they would be collected. This led to a lot of products coming onto the market that had not had such payments built into their pricing, which in turn had led to a lot of litigation – in particular, the smartphone wars. With 5G, she said, there is still a chance to avoid such a scenario. ZTE’s Marco Tong made the point that while 5G is going to make the world’s smartphones far quicker in terms of connectivity, there question marks remain over the application of the technology beyond traditional use cases. The emphasis, he insisted, should be on creating a “real 5G commercial world” cutting across other industries. While that is being built, Tong argued, “it is still too early to say what should be the best 5G licensing strategy”. The theme then developed following a question from the audience. Tong once again stressed that the over-riding aim for all in the wireless sector should be to help other industry participants get involved in the commercialisation of 5G technology rather than haggling over licensing rates. Former Ericsson chief IP officer Gustav Brismark did not agree. It is important that the licensing world “is proactive and really creating solutions”, he argued. The technology is happening, Brismark said, and there is a huge market out there. The good news, he concluded, is that many people are thinking about the licensing solutions that will be needed to accommodate the host of businesses of all sizes and in all industries that will be using 5G - and the sooner these are created, the better it will be. RL

Foundry war ends before it begins - The big breaking news as the IPBC Asia 2019 sessions got underway was that the nascent foundry patent war between GlobalFoundries and TSMC had been settled before it really got underway. Originally launched by the US company towards the end of August, and involving suits in US and German courts, as well as the ITC, the assertion drew an almost immediate response from its Taiwanese rival, which filed countersuits in the US, Germany and Singapore in September. Now, just a few weeks later, it’s all over. Today the companies issued a joint statement saying they will cross-license each other’s patents as well as those that they file over the next 10 years. No other terms, if any, were made public. Inevitably, the chatter among delegates was what had brought a conflict that had the potential to create huge uncertainties for both businesses, as well as their multiple customers, to such a quick end. The speed of the settlement – just over two months from the initial litigation to conclusion - may well indicate that there is a definite winner and loser. The really interesting bit would be to know who is who. Without information on the full terms of the settlement, though, no-one was prepared to make that call. However, it could just be that those customers – who include many of the biggest names in tech – made it very clear that they were not happy with the dispute and wanted it to end as quickly as possible. If that is the case, there looks to be only one winner to me. JW

India’s next big SEP decision? – In this afternoon’s Succeeding in Asia’s Growth Markets breakout, there was extensive focus on India, which has become an important, if somewhat niche, market for patent litigation. There was discussion of the country’s first SEP decision last year in a case involving the DVD standard brought by Philips. As the technology suggests, it was a long-running dispute, with the final judgment coming after 10 years of litigation. But Craig Burnett of Dolby, which brought several Indian infringement suits in 2016, sees litigation processes in the country becoming significantly more efficient. He noted that his company has received expedited trial schedules and one of its most important cases is now at the final hearing stage, making it possible that it could receive a verdict during 2020. Dolby currently appears to have active suits against Chinese smartphone maker Vivo and Indian conglomerate Videocon in the Delhi High Court. With Ericsson recently having settled the 2014 suit it launched against Xiaomi, Dolby could be the patent owner behind the country’s next major SEP ruling. JS

Staking your claims - The state of the secondary patent transactions market is always a big topic of conversation at IPBC events, with delegates regularly representing the cream of the dealmaking world. The subject was tackled head on during the IP Equals Money breakout session this afternoon. Kent Richardson from Richardson Oliver Insights led a group of panellists from the advisory, investment and operating company worlds who have vast experience of getting deals done. According to NXP’s Changhae Park, one of the big shifts in the market from the last IP boom is that buyers have become far more selective. This, from a seller’s point of view, means “we have to do a lot more homework upfront”, he said. Park added that while the market has become tougher, the value of each patent has increased, even though overall deal size has typically gone down as buyers become pickier.  According to Houlihan Lokey’s Ed Fish that means there is now a premium on assets that come complete with evidence of use charts, with associated overhead going up as companies do their homework on assets. “As there has been a movement to quality rather than quantity we see that deal costs have become very high for companies,” he revealed. “There’s a substantial premium in the expected value of a deal when there’s a claim chart available,” Richardson concurred. That premium manifests itself in two ways, he explained: “One there’s typically a higher price; and two, the expectation that the deal closes increases substantially. It works out to be about a 150% premium in the expected value of an asset.” RL

China goes global - In the opening Confronting Global Uncertainty plenary panel, Marco Tong of ZTE observed that the Chinese IP system is less than 40 years old, while those in the US and Europe have been established for many decades longer. He called on the audience, which consists primarily of Japanese and western delegates, to acknowledge the improvement in IP protection and creation in China over such a short time, as well as to have patience as it continues to develop. Tong noted that improvements in the Chinese IP environment are not only being driven by the government, but also by the country’s corporates. These have made many contributions to 5G standards and technologies, Tong stated. It is something that demonstrates they are no longer traditional implementors but are also frontline inventors and rights owners who need protection, too. On the judicial front, the authorities continue to advance IP by proactively amending patent laws and establishing specialised IP courts, as well as a national IP appeals court. Such efforts will not only attract more IP disputes to China, Tong concluded, but more importantly will enable Chinese courts and companies to play an even bigger role in shaping the global IP landscape. BZ

Expectation versus reality – Many people share the belief that patent owners in the US have some sort of momentum, particularly on the policy front, as evidenced by Andrei Iancu’s USPTO agenda and a renewed push for patent legislation on Capitol Hill. But Kurt Brasch from Uber pointed out that this has not necessarily translated to the deals market yet. “Patent values haven’t gone up as much as people would like to see,” he observed during the morning’s Deal-making 2.0 plenary. Part of the reason why sentiments are outpacing prices in both the licensing and sale contexts, Brasch suggested, is the lack of transparency around most IP deals. This makes it a “trailing marketplace”. He also expressed scepticism that legislative changes are the best area for IP owners to focus on when patent office changes seem to be improving things already and there is much work to be done on creating a more fluid marketplace. Of course, there is a huge range of factors that are likely to be impacting patent value. Among these is the fact that, as one prominent broker told me last night, the Asian market remains sluggish. Whatever the precise reason, that is the reality dealmakers are faced with for now. JS

Keeping it confidential - Trade secrets never used to be a subject of conversation at IPBCs, but that has changed over the last two or three years. Two major developments have driven this: in the US patents have become much tougher to enforce, making them a less attractive protection option; while, at the same time, in both the US and the European Union major pieces of legislation have come into force that make focusing on trade secrets a much more viable option. In the Confronting Global Uncertainty plenary this morning, ex-Ericsson chief IP officer Gustav Brismark explained that he believed patents are still the only realistic option to protect standards-essential inventions, but that now there is a clearer regulatory regime he could see a case for trade secrets as a means to shield innovations that build on essentiality. The decision about which route to take, he said, boiled down to this: if you believe you will be able to prove infringement, then filing a patent usually delivers the most value; but if you believe infringement will be tough to establish for whatever reason, then trade secrets may be the best way to ensure a competitive position. InterDigital’s Kimberly Chotkowski put it slightly differently. If you want to protect yourself from IP theft, a strong trade secrets policy may well be your best bet. Sometimes it’s really as simple as that.  JW

Only one certainty – The theme for this morning’s opening panel was global uncertainty and its effect on the IP market. The first topic brought up was the ongoing US-China trade war, while legal and technological changes were also discussed at length. But Min-Sheo Choi of South Korean research lab ETRI had a slightly different take on the concept underlying the session. Things like legal and political developments are what he termed “temporal uncertainties”. But Choi pointed out that the patent world is also full of “generic uncertainties”, exemplified by the whole market being built on things like the examination of a patent in which IP owners actually have much less predictability than they might think. The fact that in our market it is routine for an analysis of 30 or so ‘representative’ patents to be extrapolated to a portfolio of thousands is another example of this. That, Choi said, is why there is so much promise in artificial intelligence technologies like natural language processing and their potential application to massive amounts of patent data. Uncertainties caused by trade and politics will always be beyond the control of IP practitioners. But if new technologies can greatly reduce that generic uncertainty inherent to dealing with large portfolios of complex patents, the market could begin to look a lot different. JS

Mobility futures - The afternoon’s Future of Mobility breakout saw panellists agree that patent and data are the keys to collaboration in the auto sector. While a patent is traditionally used for protecting businesses and enabling freedom to operate, they are developing a new value as a means to form partnerships in the mobility ecosystem. Beyond patents, data is becoming a new and powerful form of intellectual property. Mitsuru Araki from Bridgestone gave an example of this: a sensor generating data relating to temperature, safety, road condition and the like. The data the product creates will become a new kind of IP for the company that owns it to help build collaborative projects and alliances. What’s more, user data will be important in helping service providers to personalise and individualise services. However, one question remains unsolved: will there be a universal mobility system for the auto sector or will each country adopt its own? BZ

Top dealmaking tip - The ins and outs of dealmaking were put under the spotlight in the second plenary of the day with a stellar line-up of panellists that featured Microsoft’s Judy Yee, Stefan Tamme from Rambus, Kurt Brasch of Uber, Canon IP supremo Kenichi Nagasawa and IP Bridge’s Minoru Fujiki. Together they shared some of their top tips on getting transactions done, with Brasch divulging one of the key lessons he learned from the first IP deal he ever did when he was at Motorola. In the initial meeting he had with the other party in the transaction they quickly dealt with the cost component, potentially the thorniest part of the deal. This led Brasch to assume that the rest of the transaction would get done relatively quickly. “I thought great, this is going to be easy,” he recalled. After the next most complex part of the deal still hadn’t been agreed on six months later, despite multiple meetings, Brasch realised he needed to take a different approach in future agreements. “What I learned from that deal is that one of the first things you want to do at the start of a negotiation is build a relationship,” he reflected. To do that, as he approached his next transaction, Brasch drew up a list of the issues to be addressed and ranked them from the easiest to the hardest to solve. Then in the negotiation he started with the easiest ones. This, he said, “helped build a relationship and built equity in the deal”. Doing this meant that once the two sides got to the most complex issues there was a lot more willingness to work together to find solutions. No deal expert will ever tell you that closing an IP transaction is easy but adhering to Brasch’s tip might help make things a little less tough. RL

How Samsung ramped-up IP creation in India – Samsung is a top foreign filer in India, but its local R&D institute also qualifies as one of the country’s leading domestic applicants based on its homegrown output alone. It was not always so, though. Speaking in the Succeeding in Asia’s Growth Markets breakout, R Lakshminarayanan, who heads up that Bangalore-based unit, explained that within a two-year span, the institute was able to increase the number of engineers submitting at least one invention disclosure from 30 to 3,000. “Indian engineers are great thinkers,” Lakshmi explained. “But we needed the right ecosystem to harvest the inventions.” The first step in doing this was the creation of training programmes for engineers. Second, an office within the R&D function, which had often rejected invention disclosures before they reached the IP function, was abolished. That meant the five-person IP team was now receiving all the ideas from the thousands of engineers directly. They nevertheless committed to having a face to face discussion giving a reason for every rejection they had to make, in order to reverse what they believed had been demoralising experience for many of the company’s inventors. Eventually, this process yielded around 300 patent filings per year, but just 10% to 20% of these were considered suitable for applications overseas. That precipitated a shift in focus to quality and Lakshmi stated that today around 70% of the lab’s India patent output will be filed overseas and that some are even declared SEPs. The process Samsung went through goes a long way toward explaining why India remains a major research hub. “We’ve gained the ability to do end-to-end product development,” Lakshmi noted. “If it was purely about cost, lots of work would have moved elsewhere.” JS

Billion dollar fund 2.0 - For IP owners concerned with the value of their assets the IP = Money breakout session may have helped alleviate any thoughts of doom and gloom. Over the last few years, the Fortress IP group has been one of the most active acquirers of patents, picking up IP-rich companies or providing IP-backed debt financing to a host of businesses. In 2018 its record of success led to it raising a ten-figure fund. The firm’s Ami Patel Shah was clear that IP is now an asset class. “It’s a property right, it doesn’t matter who holds it, there’s value to it,” she said. Shah admitted, though, that IP assets have become devalued in the US, but insisted that other countries have taken steps to strengthen their systems and add value. “The US has dropped the ball and China has picked it up,” she commented. “We’ll probably raise another billion-dollar fund next year,” Shah added. Others will presumably he hoping to follow Fortress’s lead. RL

The horror - Phones off or switched to mute is a strict IPBC rule for the rooms in which sessions are taking place. Delegates are told that anyone who fails to do this and then inflicts a loud ring tone on other attendees is liable to buy everyone a drink in the hotel bar at the close of the day. Given there are over 530 people registered for this event, and given it is happening in a five-star hotel in the middle of Tokyo, that could prove expensive. Imagine, then, the horror experienced by one of the speakers in the Confronting Global Uncertainty plenary when their phone rang as they were in the process of answering a question from the floor. We won’t name names, or make them buy those drinks, that fearful look on their face showed that a lesson had been learned! JW