How to find potential licensees, how to be more efficient in licensing, how to identify relevant royalties-these lingering problems will be gone after the landing of the patent open license system. In an effort to ensure the smooth and fast execution of the system, the China National Intellectual Property Administration (CNIPA) recently released the Trial Program on Patent Open License, a national document drafted based on the experience of local forerunners.
Since being added to the newly-revised Chinese Patent Law (Note: effective from June 1, 2021), the patent open license system has been in the spotlight. Patentees may publish a declaration to license their patents on CNIPA gazettes. Anyone willing to accord with the asking prices and terms may quickly acquire the relevant patent license. Different from the traditional mode in one v. one, the open license system adapts an impartial, easy and fast mode in one v. many, which bridges supply and demand, improves efficiency of negotiations and curbs systematic transaction cost.
Expand technology supply for SMEs
Zhejiang is one of the first provinces in trying their hand at the patent open license system. In October 2021, Zhejiang published information on 379 patents owned by the province's 24 universities and research institutes, inviting all companies in the province to acquire open licenses without paying a dime. Through an accurate matching system, Zhejiang IP Office pushed the information to a first batch of 6,365 companies, right now resulting in 306 patent license documents recorded.
"Our company's machines could only weave surface textiles with thickness between 2mm and 3mm. Though we had been trying to develop better machines for years, success was still elusive," says Ni Zhiqi, Vice General Manager of Huzhou Hyundai Textile Machinery Company. "Thanks to the pushed information, we found Professor Wu Zhenyu of Zhejiang Sci-Tech University, the first inventor of a patent titled 'A thread carrier and its feedback system for controlling 3D weaving and tying threads'. The patent, which we are licensed to use free of charge, could solve our technical problem effectively and is expected to generate 30% more in revenues for us."
"Chinese universities own a massive amount of quality patents. With the gap on the information of technologies, products and market demand not bridged, these patents are usually not commercialized in time," says Cao Xinming, Director of IP Research Center, Zhongnan University of Economics and Law. "The patent open license system accelerates patent commercialization, graduating rights to profits. SMEs have a broader technology supply channel, acquire new technologies at lower costs, which definitely could propel their quality development."
Based on the 'trial and error' attempted by some local authorities, the system is expected to arrive nationwide this year. Under the terms of the Program, by the end of 2022, over 100 universities, research institutes, state-owned enterprises will join the trial. More than 1,000 patent license agreements are expected to conclude.
Improve licensing efficiency of supplying and demanding parties
"The Program sets out the basic principles in following the market trend, strengthening service innovation, enhancing integrated working of different policies, which means respecting market rules, encouraging governments' assumption of leader role, stressing respective parties fully playing to their strength, coordinating moves with each other," says a principal of CNIPA's IP Use and Promotion Department. "To work with the implementation of the patent open license system, CNIPA, for the first time ever, released statistics on patent royalties of various sectors of the national economy last year, offering an important reference for reasonably identifying royalties. Currently, a pricing guideline specifically for open license scenarios is being drafted based on research findings on patent evaluation."
The Program has specific measures to ensure all details covered. For example, regarding bridging supply and demand, it encourages universities and research institutes to select only patented technologies with market potential, extensive range of use, practical, ideal for universal use geographically. In addition, the Program provides that participating local authorities shall define formats of patent licensing information, check to-be-published information and publish licensing information; be responsible for guiding pricing tactics, offer support for transactions, help seek better profits for licenses in a reasonable and effective fashion; improve incentive and regulating measures, mediate disputes by law.
The patent open license system is certainly welcomed by patentees right now. As we have learned, besides universities, a number of large companies have filed their declaration of patent open license. "This is a common practice in the international market. Large companies may use the open license system to improve negotiation efficiency as well as expand their reach in supply chain," says Cao.
The 14th Five-Year National Plan for IP Protection and Application requires the establishment and improvement of patent open license system and its operating mechanism. Currently the system is in an important transitional period before full operation as well as in a critical period for 'trial and error'. Local trial work will gather more practical experiences for the eventual operation.