Part 2: Exploitation of IP assets in China

This is a follow-up article to the blog posted two weeks ago which followed the week of the Business of Intellectual Property Asia Forum (BIP Asia) and continues the analysis of China’s progress with intellectual property.

Rome was not built in a day and the same is true of China’s progress with intellectual property. In terms of exploitation of IP assets it is abundantly clear that China is far behind the West. There are signs of development, however, and perhaps it is not too premature to say that China is beginning to wake up to exploit what it already has. The Americans have demonstrated to the Chinese how to exploit IP as China currently, according to America’s Bureau of Economic Analysis, pays a staggering $2 billion a year in licensing and royalties to American firms. This stranglehold is loosening though as Chinese companies, as the Economist observes, are now seeking to apply for patents abroad rather than license in technology with 1,225 Chinese patents granted in the USA in 2008 compared to just 90 in 1999. This is a clear sign of things to come as China becomes aware of the potential to dominate significant technological areas globally.

Until China has the right intermediaries to exploit what they have in terms of IP assets, however, then the country will be left short-changed in the knowledge economy. Companies such as Metis Partners, who are experts in the assessment, exploitation and monetisation of Intellectual Property, are required to tap into a growing asset class. To become a net-exporter of IP the model of Japan is one which is often cited as they acquired IP and technology in the short term in the 1960s and 1970s and went on to develop a strong IP foundation.

The tools to assess and monetise such transactions are, however, missing in China and it is telling that for IP rich companies there is no way of assessing just what their IP position is which inevitably results in further infringement and confusion. So how can China get this experience? The only viable way just now is to collaborate with Western intermediaries and perhaps franchise the knowledge which the West has accrued at such expense. Considering that the Communist Party did not allow patents until 1985 it is astonishing just how far they have come in 26 years and understandable that they lag behind.

Once China has the tools to properly exploit, assess and monetise their IP assets then perhaps we can speak of a date at which they will become the economic superpower. As noted in the previous blog entry, dates such as 2016 and 2019 have been asserted as the possible moments when China will surpass America as the world’s economic superpower. In light of their Intellectual Property situation, however, these dates seem artificial and are based on the tangible world of factories, employees and cash. As we have seen the global economy is shifting towards a knowledge-based economy and if China does not start to understand its IP better then the chance to become the world’s superpower may yet be lost. Only time will tell. As the Chinese might say, “A single day of sub-zero temperature is not enough to create three feet of ice.” In other words, Rome was not built in a day.

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