China claimed that it has lost US$1 billion in disputes over
intellectual property (IP) rights since it joined the World Trade
Organization (WTO) in 2001.
Science and Technology Minister Xu Guanhua told the state-run
Xinhua News Agency Thursday that IP disputes have been a
"devastating blow" to parts of the Chinese economy. Disputes have
involved products including televisions, MP3 players and digital
cameras, he said.
Xu claimed that 99 percent of Chinese companies don't apply for
patents for their inventions, according to the report. As a result,
"Chinese firms have to pay 20 to 40 percent of the price of every
mobile phone or computer to an overseas patent holder," he
said.
The statement may be an exaggeration. Mobile phone manufacturing
royalties typically run 5 percent to 7 percent of the wholesale
price.
Xu's remarks represent the Chinese government's first attempt to
make a public case for encouraging "independent innovation," or the
development of products that do not depend on technologies from
foreign companies, said David Wolf, chief executive officer of Wolf
Group Asia Ltd., a Beijing-based technology consulting firm.
The call for independent innovation is included in the latest
Five-Year Plan, in which China's government outlines its goals for
the coming years.
"Minister Xu is outlining China's IPR strategy in the coming
five years: research heavily, patent aggressively, use local
innovations when you can, and foreign innovation only when there is
no other choice," Wolf said.
The new strategy has implications for foreign businesses. China
has attempted to introduce its own technology standards in order to
avoid paying royalties for foreign patent holders, including WLAN
(wireless LAN), optical disc formats, and mobile phone systems.
So far these efforts have been largely unsuccessful, although
the TD-SCDMA (Time Division Synchronous Code Division Multiple
Access) mobile system is still under consideration for adoption as
a 3G (third generation) technology in some markets.
"Foreign IPR holders are facing a new battle, one where they
will be forced to fight harder for mere adoption of their
technology," Wolf said.
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