Parts Unknown: Global IP in an Increasingly Connected Yet Foreign World
A company’s ability to compete and grow depends greatly on its ability to protect its intellectual property.
By Sandy Chan | April 29, 2019
The knowledge economy has given rise to a new landscape in which a company’s intellectual assets, rather than physical assets, are its main source of wealth and competitive advantage. Today’s nations and their companies increasingly compete for the right to innovate and present the next generation of drugs and technologies, such as the 5G wireless network. Against this backdrop, a company’s ability to compete and grow depends greatly on its ability to protect its intellectual property (IP).
However, the ability to protect IP is increasingly challenged as companies reap the many benefits of globalization. In one sense, the world feels smaller and more connected because companies can tap vast supplies of talent, resources, and customers in markets all around the world. In another sense, this increased international interaction makes it glaringly obvious that the world is vast and unfamiliar, rendering companies vulnerable to conditions beyond their control such as government regulatory scrutiny, IP theft in foreign territories, shifting markets, competing political forces, and new cultural norms.
Last spring at IP Counsel Café’s annual Palo Alto meeting, U.S. District Court Judge James Robart stated, “There is no area where nationalism takes more precedence than the pride in everybody’s patent system.” Different countries are jockeying for top positions in IP filings, deeming this a proxy for being the most innovative. Similarly, countries are competing to be most favorable IP litigation jurisdictions to foster and attract innovation.
Export control is also increasingly targeting technology and data, the weapons of our times. Collaborating with inventors in different countries poses a host of patenting and export control challenges. Different countries have their own rules and nationalist policies that dictate an invention’s country of origin and hinder the free movement of innovation across borders. These rules and policies often complicate the ways in which today’s companies conduct business, including cross-border collaborations to innovate and introduce new products. In order to compete and grow, global companies must learn to navigate the multitude of legal differences among competing nations.
The borderless aspects of our modern economy, while rich in opportunities, also pose new risk. Partnering with manufacturers in other countries can reduce cost, but protecting against IP theft in unfamiliar territories is a constant challenge. While companies can obtain IP rights in these jurisdictions, their manufacturing partners can easily pack up and move their shops to other jurisdictions where IP rights have not been acquired.
Similarly, some countries have introduced economic development initiatives that place our IP at risk in unanticipated regions. For example, China has announced its Belt and Road Initiative, a development strategy involving infrastructure development and investments in 152 countries throughout Europe, Asia, the Middle East, Latin America, and Africa. For companies that partner with Chinese manufacturers and have obtained IP protection in China, this initiative is a cause for concern. As their Chinese partners begin to spread to other regions, companies may need to obtain IP protection in these other regions as well.
Market volatility is yet another serious consideration. Today’s tertiary markets can quickly become tomorrow’s primary markets. Developments such as Brexit can change markets very swiftly. IP filings in Ireland have reportedly increased as the status of the U.K. is in doubt and American companies scramble for haven in other English-speaking countries. These potentially swift market changes cause companies to wonder if they should be filing in secondary and tertiary markets now, before they become primary markets.
IP protection in China is a clear example of the consequences of overlooking a changing market. For years, companies were advised against filing for protection in China where enforcement was deemed non-existent. The tides have turned; statistics show China is increasingly patent holder friendly, and litigation filings have increased. In 2017, there were 16,000 Chinese patent litigation filings versus 4,000 patent litigation filings in the U.S. Furthermore, portfolios lacking Chinese assets are now reportedly unattractive to portfolio buyers, yet obtaining new Chinese patent rights is often difficult because many technologies have already been patented. This teaches us that overlooking IP protection in once-thought secondary and tertiary markets can be damaging in the long run, but there is no crystal ball for forecasting how markets will shift.
Navigating the laws, policies, and shifting economic realities of different regions is further challenged by language barriers and cultural differences. One company reported that its South American outside counsel firm disappeared completely; their website vanished, and their lawyers stopped replying to emails. Some Asian law firms will nod in agreement when receiving instructions from American clients, but then proceed to perform the task their own way, ignoring those instructions. In our increasingly connected world, companies must find a way to conduct business despite these differences that can lead to misunderstanding or fraudulent behavior.
In order to survive, companies need to find trustworthy legal partners in different regions who understand the local laws, cultures, and economic climates; actively reevaluate their domestic and global IP strategies and filing decisions; and when possible, enter formal agreements in order to avoid the pitfalls of government regulations. While nations are vying for economic dominance, the reality is that today’s companies operate on an increasingly global scale and collaborate with foreign partners. Their business prospects are brighter if they choose to build bridges and work together rather than fight among themselves.
Sandy Chan is executive director and general counsel of IP Counsel Café, a 3,000+ member organization that empowers the IP Counsel community by creating a safe place for knowledge and information sharing. The IP Counsel Café Annual Meeting in Silicon Valley will be held May 6-9 in Palo Alto. For more information, visit www.ipcounselcafe.com.
Reprinted with permission from the April 29, 2019 edition of Corporate Counsel ©2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.