On Monday and Tuesday this week, I was at the IP Dealmakers Forum in New York. The collection of talented and intelligent individuals both speaking and attending was incredible. Unfortunately, like everyone supporting innovation in the US these days, most people at the conference were quite down. Although consensus seems to be that the market seems to be at or near the bottom in the US, most believe that the best opportunities for innovation now reside outside the United States.
Most seem to think that Germany is the best place to enforce patents these days. I think China is even better. Certainly the German court system is well-tested and efficient. And most importantly, patentees can obtain injunctive relief. However, the drawback of Germany is that injunction is for… Germany. Germany is an important market, but pales in comparison to China. For instance, China is the world’s largest smartphone market. My former employer, Qualcomm, derived more revenue from China than any other country.
But the value of China as a patent litigation forum does not reside in the size of its sales market, as important as that is. The true magic of China is that virtually all electronics are, in whole or in part, made in China. This means that an injunction obtained in China (that generally takes less than a year to obtain) can not only stop sales in China, but also stop manufacturing in and export from China. This means that within 6-12 months, a patent owner can ban worldwide sales. OUCH!
But don’t listen to me. Listen to what Apple says about it.
Apple was sued in China several months ago for patent infringement by BYD Company Limited. BYD is largely known as the largest selling car manufacturer in China. The suit accuses Apple and five of its Chinese suppliers and distributors of infringing the patentee’s technology involving super-energy beam induced deposition (SBID) technology which is used in mobile antennas, laptop antennas, car watch key antennas, and electronic connectors. The accused products include both the iPhone 6 Plus and IPAD Mini WLAN cellular (IPAD mini3). The lawsuit seeks “all six defendants to both cease allegedly infringing conduct and destroy allegedly infringing products.”
As the case has moved forward, so has the the draconian penalty of Apple not being able to either sell its products in China or ship its products from China for sales around the world. As a result, on October 29, Apple filed a petition in the Northern District of California to compel arbitration and require BYD to halt the litigation in China. Apple claims that BYD is prevented from asserting any IP against Apple or its suppliers by a “Master Development and Supply Agreement.” It is not clear whether BYD actually signed such the agreement, but that is not the point. Neither is the fact that even if Apple wins its petition in San Francisco, a Shenzhen court is not likely to listen to a California court. The point is that Apple sees what many people at the top of the IP field in the US do not yet realize: China is a powerful weapon in patent litigation.
According to Apple, “Apple and Apple's supply chain may suffer serious disruption. Such disruption will irreparably harm Apple, Apple's reputation and goodwill, and the millions of consumers and businesses who demand Apple's high-end innovative products.”
So if a Chinese company can hold a gun to the head of Apple, what prevents a US company from doing so? What about, God forbid, an NPE? Whether good or bad, the answer is “nothing.” It is going to happen frequently. And soon. But don’t take my word for it. Take Apple’s.
It is a brave, new world. Welcome to China.
Welcome to the China Patent Blog by Erick Robinson. Erick Robinson's China Patent Blog discusses China's patent system and China's surprisingly effective procedures for enforcing patents. China is leading the world in growth in many areas. Patents are among them. So come along with Erick Robinson while he provides a map to the complicated and mysterious world of patents and patent litigation in China.
Erick Robinson is an experienced American trial lawyer and U.S. patent attorney based in Beijing. He is a Partner at Porter Hedges LLP, where he manages patent litigation, licensing, and prosecution in China and the US.
The ideas and opinions at ChinaPatentBlog.com are my own as of the time of posting, have not been vetted with my firm or its clients, and do not necessarily represent the positions of the firm, its lawyers, or any of its clients. None of these posts is intended as legal advice and if you need a lawyer, you should hire one. Nothing in this blog creates an attorney-client relationship. If you make a comment on the post, the comment will become public and beyond your control to change or remove it.