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Mr. Qiu Shanqin: CSIP Launched Defense Patent Base to Cater for Integrated Circuit Patent Challenges

Over two hundred years ago, patent protection mechanism was launched, for purpose of encouraging creative inventions and promoting social innovation. However, in recent years, the increasing number of patent lawsuits suggests that patent protection mechanism has become a edge tool to maintain one’s benefit by fighting the rivals. With the rising of IC companies in China, the risk of patent lawsuits becomes higher. At the China Integrated Circuit Industry Promotion Conference 2013 held yesterday, Mr. Qiu Shanqin, Director of CSIP, pointed out that local IC design was also confronted with high risk in patent lawsuits. How should we cater for the risk?

What is patent? According to reasonable explanation, patent is a kind of legal monopoly right that guarantees the inventor to recover development cost in certain time and gain premium. It is a measure taken for encouraging innovation. It is explicitly specified in Article 1(8) of U.S. Constitution that, to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. In 1790, President George Washington signed his name on Patent Law which marks formulation of American patent system. In January 1980, Chinese Government formulated its patent system, and later established the Patent Office. In 1984, Patent Law of the People’s Republic of China was published, setting the foundation for Chinese patent system.

It can be seen from the definition that, the original intention of patent is to promote the progress of science and useful arts. However, increasing patent lawsuits have made patent go against the original intention but become a benefit protection tool, where those first enter certain field use patent to hinder others who may be incurred of economic loss or become bankrupt to give up.

In fact, a large number of patent lawsuits end in reconciliation, suggesting that it is not the lawsuit initiator’s intention to be trapped in. In the well-known lawsuit between Actions and Sigmatel, both parties were trapped in the lawsuit and missed the good development opportunity where Sigmatel was later acquired by Freescale.

Nevertheless, patent is the premise of reconciliation. As the history of local IC is rather short, our experience in circuit design is far from that of developed companies. Single company lacks sufficient power to challenge the rivals. What should we do? Qiu stated at the Conference that, CSIP had established a patent defense base of integrated circuit industry, where local IC patents were included to cope with the challenges. He said that the base had worked in lawsuit with Changhong. “We have used the patent base to successfully defend the rival for over one year.”

However, an intellectual property service provider pointed out that, to include local IC patents to cope with the challenges was not reasonable, for patent was private right where government shall not interfere benign competition between enterprises and that to cope with the challenges represented Populism and would harm industrial development.

He added that, “in terms of practice, since those enterprises involved in patent lawsuit often occupy large market shares, the patent base becomes a way to maintain large enterprises’ benefit with smaller one’s achievements. If SMEs are required to join in the base in a compulsory or similar manner, it is just like open robbery.”

Mr. Li Zijun, in charge of Standard Patent in Terminal Cloud Department of Huawei, held that, in practice, the base is used to force the rival to nolle prosequi or reduce premium in an indirect manner. However, he said, if the rival was an NPE, the base would not work. Nokia, after selling its mobile phone manufacture to Microsoft, became an NPE.

NPEs do not produce or sale product. They obtain patent by independent development or patent transfer, and charge for premium or compensation to producing or manufacturing company through authorization negotiation and patent lawsuit. In a word, their business revenue comes from patent. They are often called patent robber or patent troll.

To cope with NPEs, government shall work. As it is reported that, Korean Government plans to set up a patent foundation of 500 billion KRW (equal to about 38.5 billion USD) in five years to defend world patent trolls’ invasion to Korean industries. These patent trolls do not produce patent products or provide patent services, but charge for usage based on the patent. These enterprises are mostly located in Europe and America, totaling about 220. Their features include:

1. They purchase patent from a bankrupt company and prosecute another company for infringing the patent;

2. They do not intend to execute the patent or provide patent product;

3. The patent is executed, but they are not recorded for developing the patent or are just engaged in authorizing the patent;

4. They tend to prosecute large companies. Many renowned companies, including Apple, Google, Motorola, and Microsoft, have been drawn into lawsuit. Europe, America, and Asia are all covered.

It is necessary to plan ahead for the booming local integrated circuit industry. It is said that several potential IC companies in China have been threatened for patent lawsuit from European and American companies, where CSIP have made beneficial efforts. More positive results are expected.