Protection and compliance

By Peter Su, Tsinghua Tongfang

We asked intellectual property inhouse counsel about the challenges in their work and what they see as the most significant legal developments

Tsinghua Tongfang is engaged in a great deal of business involving intellectual property (IP). In the past few years, as it has progressively internationalized (its overseas business revenue exceeded 48% in 2017, and is likely to exceed 50% in 2018), patent litigation and protection of rights has become a relatively large challenge for Tsinghua Tongfang.

Peter Su
President Assistant and General Counsel
Tsinghua Tongfang

Taking the overseas patent litigation in which we have been involved as an example, on the one hand, I will assemble an internationalized Tsinghua Tongfang in-house team and recruit graduates from well-known overseas law schools to join the legal team of the Tongfang company in the country where they are located (e.g., Tongfang’s companies in the US have alumni from Columbia University and UCLA); on the other hand, we will also work and closely co-operate with well-known law firms in China and abroad, responding together to overseas IP disputes.

Based on Tongfang’s experience in competing in international markets, from the macro perspective, firstly, enterprises need to stress the management and protection of patents. For the past five years in a row, China has ranked first in the world in the number of patent filings, with technology-intensive enterprises in particular holding a large number of patents.

Patent compliance work cannot rely solely on the efforts of the legal department, but also requires the co-operation of other departments, particularly the business department. In routine work, attention needs to be paid to fostering patent awareness in the business department, so that it consciously guards against the occurrence of litigation risks.

Furthermore, the work of managing patents should not simply halt at passive preventive work, such as the control of legal risks, but should also involve a certain quantity of application done in light of the enterprise’s own business strategy, so as to earn profits.

For example, although Qualcomm has been lambasted by all countries for its high patent royalties, and been subjected to antitrust investigations, forcing it to lower its royalties, nevertheless, its 2018 financial report shows that its patent revenues reached US$5.16 billion. An enterprise’s patents are a weapon, which, in combination with the geographical distribution of its business, can assist it in “expanding its empire”.

With respect to a detail issue, I would argue that the anti-monopoly issue in the patent field is in need of close attention. Article 55 of the Anti-Monopoly Law sets out a provision of principle on the issue of IP-based monopolies, specifying that where a business operator abuses its IP to eliminate or restrict competition, it will be subject to the Anti-Monopoly Law.

However, in recent years, with the emergence of major cases, such as Huawei v IDC, the market needs legal provisions that are more in tune with the characteristics of IP, and are more detailed. With a view to resolving this issue, the Anti-Monopoly Committee of the State Council formulated the Guidelines on Anti-Monopoly in the Intellectual Property Field and the State Council, at a press conference in November 2018, announced that these regulations would be issued soon, something that we high-tech enterprises need to pay close attention to.

Viewed from the perspective of practice, cases involving patent-based monopolies usually occur in high-tech enterprises. In its routine operations, a high-tech enterprise should remain sensitive to this issue, being careful not to violate the above-mentioned law and thereby give rise to a patent-based monopoly, on the one hand, while on the other hand, timely realizing that it has become the victim of a patent-based monopoly and taking up the cudgel of the law to protect its rights.

For example, in practice, enterprises can mutually integrate and complement each other’s patents, eliminating the obstacles to using the different patents together, giving rise to a “patent pool”. However, once a patent pool contains mutually substitutable patents, such a patent pool could be deemed a disguised horizontal price agreement, and could constitute a monopoly.