ZTE Head of IP on Patent Monetization Practice in China

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Anita Li | IP Observer Reporter

China’s patent market is very complex. Different enterprises have different operating units and different operating conditions. “So what kind of IP policy should be implemented to enable a balance of profit between patent holders and patent implementers?” This is one of the major challenges facing Chinese policymakers and the IP directors of Chinese enterprises. It is also one of the key tasks of Inteq Technologies – a newly established subsidiary of ZTE.

As the number of patent applications continues to increase, “IP Monetization” has become a hot topic in China and around the world. Simply put, “IP monetization” is the process by which intellectual property rights are exploited for profit. Enterprises have to pay renewal fees on any patents they hold to maintain their validity, which means that IP department heads are interested in making intellectual property an asset for a company, rather than a liability. Marco Tong, ZTE senior licensing director and president of Inteq Technologies, shared his views on this topic in a speech entitled “Patent Monetization Practice in China” at a seminar in late March.

Although Tong stressed from the outset that the content of his speech should only be taken as his personal opinion, with years of experience working for ZTE and in the IP field, he had a lot of wisdom to offer up.

Tong suggested that there are two issues worth discussing:

(1) In China, what does “monetization” mean?

The narrow definition of “monetization” is “How can one make money?”, or, “How can one transform an IP division from a cost center to a profit center?”  This is the main task Tong undertakes at ZTE, including patent licensing and sales.
(2) What is the real situation of the patent market in China?

Tong indicated that the patent system in China is only 30 years old, dating it from the establishment of the patent law. Starting from nothing, China has now rocketed to the number one spot in terms of patent application filings, with many Chinese enterprises also filing patents around the globe. China’s patent market is very complex. Different enterprises have different operating units and different operating conditions. “So what kind of IP policy should be implemented to enable a balance of profit between patent holders and patent implementers?”  This is one of the major challenges facing Chinese policymakers and the IP directors of Chinese enterprises.

Tong explored these two issues from two perspectives: in terms of individual enterprises and in terms of the broader patent market in China.

The Outstanding Performance of ZTE in the IP Arena

ZTE has had comparative success in terms of IP and patent development and management, as the following data suggests:

  • 66,000 global patents and applications.
  • WIPO top-3 applicant 6 years in a row, ranking No.1 in 2011, 2012 and 2016.
  • ZTE has invested 10% of its annual revenue in R&D, in the top three Chinese companies and top 80 global public companies. Given that, according to company data, ZTE’s annual revenue stood at RMB¥101.23 billion in 2016, this suggests the firm will invest RMB¥10.12 billion in R&D in 2017.
  • ZTE has 20 global R&D centers located in the US, Canada, Japan, Sweden and France, offering support for customers buying the company’s products in those countries.

The above data suggests that ZTE is an innovator with a leading position in the global market. Tong indicated that since the company has devoted huge resources in its R&D and innovation,  ZTE understands that innovation is difficult and costly. He added that ZTE tries to make the most of its own intellectual property, as well as respecting that of other innovators.

Since ZTE is a key player in the communications equipment field, another important issue is SEPs (Standard Essential Patents).  Compatibility and interconnectivity is a must for communication devices, so standardization is very important. As a key player and patent owner in the communications field, ZTE is also an important member in many SSOs (Standard Setting Organizations). ZTE understands, respects and honors its FRAND licensing commitments and obligations with the expectation that all SSO members will do the same, according to Tong. The company holds membership seats in more than 70 international organizations and forums, has delivered more than 30,000 international standard proposals and more than 13,000 3GPP proposals.

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