Today I attended CALOBA's presentation on how Chinese companies handle US patent litigation. I have not found the researchers' slides or data in public media at the time I wrote this article. The research concluded that Chinese companies get sued a lot and are prime targets for US patent trolls. The report's authors used Lex Machina to mine databases on patent lawsuits, so Big Data is finally transforming the legal field. The trends that CALOBA's invited panelists discussed made me think of how Chinese companies are vulnerable to deliberate lawfare tactics. I can summarize the Chinese vulnerabilities they identified, in the best non-lawyer way I can muster.
Vulnerability #1: Speak no evil. Chinese companies underestimate the amount of documentation they must provide during discovery in US-based litigation. They are unaccustomed to such extensive transparency. Their reluctance to disclose emails, meeting transcripts, and other records puts them at risk of losing cases in US courts.
Vulnerability #2: Lost in translation. Chinese companies rely too much on English language translation services. The panelists presented some anecdotal observations that engineering diagrams would have withstood cross-examination in a US patent hearing if they had been accompanied by original descriptions in English.
Vulnerability #3: What goes on in country doesn't stay in country. Chinese executives who are unwilling to travel to the US for a trial hurt their case. American juries want to hear the Chinese executives' side of the story. The panel recalled a funny story about a Chinese company that ignored a default judgment only to travel to the US for business afterwards and see their trade show exhibit seized. They must have assumed the court system would have a short memory. The long arm of US law has a very long memory.
Vulnerability #4: Not enough lawyer firepower. I'm not sure whether Chinese companies take their legal system as seriously as Americans take their own system or give their attorneys as much prestige. The panel implied that typical Chinese corporate in-house counsel either doesn't have enough rank within the company to be heard or has additional duties in low-level management. I should have asked the experts on hand to clarify the social standing of Chinese in-house counsel but it was hard to be heard over the silly questions some dingbats in the audience were asking.
The WIPO published China's own description of its utility model patent (UMP) system in September 2012. I read stuff like this all the time. The US Chamber of Commerce published a detailed description of China's UMP regime in November 2012. I like the US description better. I can't fully trust anything from the Chinese government until they complete their planned legal system reform. The US report clearly identifies that China's focus on pushing raw numbers of patent filings has driven a decline in patent quality. This decline has invited the attention of patent trolls whose legal tactics outwit Chinese companies in US courts. The US has begun fighting its own patent trolls while China remains vulnerable to its own trolls.
I'll offer some broad considerations for US public policymakers, business lobbyists, and entrepreneurs in light of the above conditions. US regulations and laws discouraging patent trolls may limit the ability of US firms to litigate Chinese IP theft. It is too early to tell whether Chinese legal reform will accommodate the kinds of multi-pronged IP strategies US companies are accustomed to using in the US. Patent claim strategies must account for prior art to avoid duplication. Startups have tighter budget constraints and shouldn't pursue expansive patent strategies; they can't afford to patent much besides their core tech. All of that wisdom is totally a stream of consciousness blast, but that's how Alfidi Capital does business. Take it or leave it.
The broad drafts of US patents and the inflexibility of Chinese patent appeals illustrate the asymmetric advantages the US possesses in any potential lawfare contest. The US's ability to conduct lawfare should be a source of national pride. This country graduates more lawyers every year than the rest of the world supposedly has in stock. God bless America for winning the lawfare arms race early.
Vulnerability #1: Speak no evil. Chinese companies underestimate the amount of documentation they must provide during discovery in US-based litigation. They are unaccustomed to such extensive transparency. Their reluctance to disclose emails, meeting transcripts, and other records puts them at risk of losing cases in US courts.
Vulnerability #2: Lost in translation. Chinese companies rely too much on English language translation services. The panelists presented some anecdotal observations that engineering diagrams would have withstood cross-examination in a US patent hearing if they had been accompanied by original descriptions in English.
Vulnerability #3: What goes on in country doesn't stay in country. Chinese executives who are unwilling to travel to the US for a trial hurt their case. American juries want to hear the Chinese executives' side of the story. The panel recalled a funny story about a Chinese company that ignored a default judgment only to travel to the US for business afterwards and see their trade show exhibit seized. They must have assumed the court system would have a short memory. The long arm of US law has a very long memory.
Vulnerability #4: Not enough lawyer firepower. I'm not sure whether Chinese companies take their legal system as seriously as Americans take their own system or give their attorneys as much prestige. The panel implied that typical Chinese corporate in-house counsel either doesn't have enough rank within the company to be heard or has additional duties in low-level management. I should have asked the experts on hand to clarify the social standing of Chinese in-house counsel but it was hard to be heard over the silly questions some dingbats in the audience were asking.
The WIPO published China's own description of its utility model patent (UMP) system in September 2012. I read stuff like this all the time. The US Chamber of Commerce published a detailed description of China's UMP regime in November 2012. I like the US description better. I can't fully trust anything from the Chinese government until they complete their planned legal system reform. The US report clearly identifies that China's focus on pushing raw numbers of patent filings has driven a decline in patent quality. This decline has invited the attention of patent trolls whose legal tactics outwit Chinese companies in US courts. The US has begun fighting its own patent trolls while China remains vulnerable to its own trolls.
I'll offer some broad considerations for US public policymakers, business lobbyists, and entrepreneurs in light of the above conditions. US regulations and laws discouraging patent trolls may limit the ability of US firms to litigate Chinese IP theft. It is too early to tell whether Chinese legal reform will accommodate the kinds of multi-pronged IP strategies US companies are accustomed to using in the US. Patent claim strategies must account for prior art to avoid duplication. Startups have tighter budget constraints and shouldn't pursue expansive patent strategies; they can't afford to patent much besides their core tech. All of that wisdom is totally a stream of consciousness blast, but that's how Alfidi Capital does business. Take it or leave it.
The broad drafts of US patents and the inflexibility of Chinese patent appeals illustrate the asymmetric advantages the US possesses in any potential lawfare contest. The US's ability to conduct lawfare should be a source of national pride. This country graduates more lawyers every year than the rest of the world supposedly has in stock. God bless America for winning the lawfare arms race early.
