WEBVTT - Bloomberg's Larson: Why Tech Companies Get Sued in China(Audio)

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<v Speaker 1>Live from the First Breaking News Desk, I'm Bill Maloney,

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<v Speaker 1>Charlie all righty, thank you very much, Bill Maloney, and

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<v Speaker 1>to hear live breaking news over your Bloomberg Time Squawk

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<v Speaker 1>Deaths a Bloomberg business flash. You're listening to Taking Stock

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<v Speaker 1>with Kathleen and Pim Fox on Bloomberg Radio. China. The

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<v Speaker 1>International World International Intellectual Property Organization says that patent offices

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<v Speaker 1>in China received the most patent applications of any country.

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<v Speaker 1>Based on information gleaned from two thousand fourteen filings, they

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<v Speaker 1>filed nearly one million applications. Compare that to the nearly

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<v Speaker 1>six hundred thousand applications in the United States, and there's

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<v Speaker 1>something else happening in China. Patent law is exerting itself

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<v Speaker 1>against US companies. Here to tell us more, Matt Lawson,

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<v Speaker 1>litigation analyst Bloomberg Intelligence joining us from our Bloomberg studios

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<v Speaker 1>in Washington, d C. Matt Larson. I understand it's fairly

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<v Speaker 1>commonplace to hear about American companies suing Chinese companies over

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<v Speaker 1>patent and trademark theft. But the other way around that

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<v Speaker 1>seems rare. What's happening. Yeah, it is rare, And I

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<v Speaker 1>think if if this story had come up, you know,

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<v Speaker 1>ten years ago, or people looked at the trends, it

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<v Speaker 1>would be to be somewhat unbelievable. A lot of people

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<v Speaker 1>viewed China as um as somewhere where I P rights

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<v Speaker 1>weren't necessarily well protected. It was a little bit of

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<v Speaker 1>a of a no man's land. I think was the

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<v Speaker 1>was the perception, and that's really turned around over the

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<v Speaker 1>last uh six seven years, and you're seeing a um

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<v Speaker 1>kind of an outgrowth. China has made some efforts to

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<v Speaker 1>revamp its patent litigation system. They have developed some specialized

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<v Speaker 1>IP courts and as a result, you've seen some pretty

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<v Speaker 1>sophisticated litigation tactics where both Chinese companies are asserting their patents,

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<v Speaker 1>and some US companies, Qualcom being the main example, is

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<v Speaker 1>starting to really test out the Chinese court system and see, um,

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<v Speaker 1>see how they can assert their rights and see kind

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<v Speaker 1>of how good the courts are. What are some of

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<v Speaker 1>the differences to the Chinese patent litigation process compared to

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<v Speaker 1>the United States. Yeah, well, China offers a couple advantages.

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<v Speaker 1>One is that the disputes are much quicker. UM. It's

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<v Speaker 1>about a little under a year from the time you

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<v Speaker 1>file a lawsuit to when the final decision comes out. UM.

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<v Speaker 1>Even the fastest courts here in the US are a

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<v Speaker 1>little over a year, and the average patent case takes

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<v Speaker 1>two and a half to three years UM from filing

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<v Speaker 1>through a final decision. So you get a decision very

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<v Speaker 1>fast in China. UM. And the other advantage is um

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<v Speaker 1>you get a vision on infringement, but the other side

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<v Speaker 1>can't raise typical defenses like claiming the patent is invalid

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<v Speaker 1>or not enforceable as part of the court proceeding. They

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<v Speaker 1>have to raise those defenses in separate administrative proceedings before

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<v Speaker 1>China's State Intellectual Property Office, and those can take eighteen months.

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<v Speaker 1>So if you're a patent owner you can assert your

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<v Speaker 1>patent to get a decision within a year or so,

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<v Speaker 1>and then in order for uh, for the other side

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<v Speaker 1>to knock out that judgment, it's going to be another

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<v Speaker 1>half year minimum. So you get you get a strategic advantage.

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<v Speaker 1>And in that respect, patents that cover aesthetic or structural features,

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<v Speaker 1>how did they differ from patents that involve inventions. Yeah,

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<v Speaker 1>that's a good question you mentioned. There's there's significantly more

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<v Speaker 1>patent filings people seeking patents in China, and a lot

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<v Speaker 1>of those are due to different types of protection that

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<v Speaker 1>they offer. China's patent system is focused on design patents,

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<v Speaker 1>which are kind of just the aesthetic value. Then they

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<v Speaker 1>have these things called utility model patents that look at

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<v Speaker 1>the way things appear, but a little bit more of

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<v Speaker 1>a of a technical structure, so um, maybe the way

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<v Speaker 1>that the case that goes around your smartphone, um is formed. Um,

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<v Speaker 1>And so it's a little bit more of an aesthetic

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<v Speaker 1>or a design as opposed to an invention patent, which

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<v Speaker 1>is what you think of when you come up with

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<v Speaker 1>a new manufacturing process or new chemical compounds, something that's

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<v Speaker 1>really kind of high tech versus versus just structural in nature.

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<v Speaker 1>One of the most recent examples I believe of a

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<v Speaker 1>Chinese company suing a US company for patent infringement. Is

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<v Speaker 1>the razor the kind of hoverboard I understand that the

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<v Speaker 1>lawsuit alleges that razors hovered tracks infringes on a patent

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<v Speaker 1>from a Chinese company hang Ju Cheek intelligent. Is that?

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<v Speaker 1>Is that something we're going to see more of? Yeah,

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<v Speaker 1>I think that, you know, that's a good example. There's

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<v Speaker 1>there's that example. There's the case of Apple recently got

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<v Speaker 1>hit by by a similar UM type of lit gation

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<v Speaker 1>in China where there was an injunction issued on old

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<v Speaker 1>models of the of the iPhone. UM. I think you're

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<v Speaker 1>going to see an increase in these types of of lawsuits,

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<v Speaker 1>and they're going to be increasingly complicated. As you know,

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<v Speaker 1>if you file a patent in the United States, he

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<v Speaker 1>might file a similar patent in China, UM in Europe.

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<v Speaker 1>UM seeking protection multiple jurisdictions, and so I think you're

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<v Speaker 1>gonna see companies, especially global tech companies, taking advantage of

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<v Speaker 1>multiple jurisdictions and filing lawsuits in the courts that are

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<v Speaker 1>that are best suited to hear the case, like here

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<v Speaker 1>in the US, the Eastern district of Texas is notorious

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<v Speaker 1>as a place where people will go to file patent

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<v Speaker 1>suits because uh they're high wind rates and big damages amounts.

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<v Speaker 1>And China is starting to develop as a place where

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<v Speaker 1>you can get a fast judgment and they're very plaintive

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<v Speaker 1>friendly or people are are frequently able to succeed um

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<v Speaker 1>in those courts. So I think you'll you'll start to

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<v Speaker 1>see uh more patent suits because it's just a favorable

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<v Speaker 1>jurisdiction to bring a lawsuit. And just quickly you say

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<v Speaker 1>that the Chinese courts offer lower damage awards despite higher

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<v Speaker 1>win rates. Yeah, and it's it's interesting. I'm curious to

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<v Speaker 1>see how those statistics develop. It may be because of

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<v Speaker 1>the nature of patents. We mentioned that the Chinese system

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<v Speaker 1>has a lot more focus on design and aesthetic features

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<v Speaker 1>and those may not garner as many as many dollars,

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<v Speaker 1>But we'll see as it continues. Thank you very much.

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<v Speaker 1>Thank you for bringing this to our attention and giving

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<v Speaker 1>us more details. Matt Lawson, litigation analyst of Bloomberg Intelligence,

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<v Speaker 1>joining us from our Bloomberg studio in Washington, d C.

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<v Speaker 1>All about Chinese patent law. You're listening to taking stock

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<v Speaker 1>I'm pim Fox, and this is Bloomberg. Bloomberg Taking Stock

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