As the vice president of China's largest consumer appliance manufacturer Haier, Yu Zida has his own understanding of intellectual property rights (IPR) protection in enterprises.

"Different from most Chinese companies, which rely on IPR protection as a way to shield their products, Haier has made it an effective tool to increase its presence in the global market," he says.

In line with the company's entry into the global market, Haier set up its own IPR management department in 1992.

According to Yu, their measures in IPR protection can be roughly divided into three periods.

"When we entered the global market, in order to obtain our own brand we did a lot of work on trademark registration," he says. "So far we have applied for trademarks in over 130 countries."

For Haier, trademark registration was only the first part of IPR work. Since the company's products have penetrated the distribution network in many countries, Yu and his staff have paid more attention to patent protection.

"After we entered the world market with our own brands, we began to face competition with counterparts from all over the world, in which technology has played an important role," Yu says. "So the second period of our work mainly focused on the patent application for our advanced technologies."

"At present we invest more than 60 million yuan (US$7.6 million) in trademark registration and patent application annually."

Now, Haier has come to the third phase of its IPR work. As the company has developed into one of the top white goods maker in the world, it has started to stress setting standards in the industry.

The company has become the only company that owns two international standards in the world household appliance industry; and it has taken part in the formation of 86 standards in China's household appliance industry.

Patent work

Along with setting standards, Haier has quickened its pace in patent work. In 2005 it applied for 241 patents, which increased by over 100 per cent compared with the previous year.

Take the company's detergent-free washing machine, a high-tech product developed by Haier itself. The company has obtained 32 patents, and 17 are patents for invention.

Haier began to produce this kind of washing machine three years ago. In September it started a two-month marketing campaign in more than 100 cities in China to promote the concept of a detergent-free washer.

"Just like the washing machine, every new product of Haier will own one or even more patents," Yu says.

As a pioneer among Chinese companies, Haier's measures in IPR protection have set a good example for most domestic companies, says Pu Fang, director of the Department of Communication and Invention Examination of Patent Bureau, State Intellectual Property Office (SIPO).

Different from multinational companies, which often use IPR protection to attack their counterparts in order to extend their global market share, most domestic companies do not know how to use IPR protection to shield their products.

Take China's DVD business industry. The nation was once the biggest producer of DVD players in the world several years ago, accounting for over one third of total output.

However, since the core technologies in the DVD players are controlled by foreign companies, Chinese enterprises were asked to pay some US$20 in patent fees for every DVD player they produced.

"The patent issue has hurt China's DVD business industry a lot. But if the companies had mastered their own technical patents, they could have avoided the problem to some degree," Pu says.

"And for most domestic companies, how to apply for patents is still a course they need to learn," he adds.

Although China ranks among the top 10 countries for the total number of patent applications in the world in 2005, it lags far behind developed countries in per capita volume.

From the perspective of quality, among the three categories of patents, patents for inventions only accounted for less than 20 per cent of China's patent applications. But in foreign applications, over 80 per cent are inventions.

Chinese applications mainly focused on Chinese medicine, non-alcohol beverages, food and Chinese character input methods. Foreign applications focused more on high-tech products.

Luckily, like Haier, more and more Chinese companies have come to learn patent knowledge and are beginning to stress the importance of IPR protection.

To boost domestic IPR awareness and encourage innovation, the Chinese Government has moved to enhance law enforcement and has made IPR protection a key priority in the 11th Five-Year Plan (2006-10).

In 2004, SIPO began working with companies to build and improve IPR management systems and boost their safeguarding capacity. The establishment of IPR agencies is also on the agenda, and SIPO has started training high-level professionals in international IPR rules and laws.

IPR system

With more and more patent disputes occurring, China is facing increasing challenges from IPR competition.

Take the Section 337 IP Infringement Investigations of the United States as an example. The main target country for the investigation has been diverted from Japan and South Korea to China.

With compensation claimed easily exceeding hundreds of millions, the Section 337 investigation has become another block following the investigation on anti-dumping that made "Made in China" exports to the US more difficult.

Starting patent, trademark, and copyright legislation only 20 years ago, China's IPR regime has remained weak on account of inadequate implementation.

"Since self-innovation has become the national policy, China needs a more sound IPR system," says Yu, citing a recent case Haier faced.

South Korean home appliance maker LG Electronics Inc has sued Haier for using an air-conditioner brand that LG has registered. It will also file a separate lawsuit later to claim damages from Haier after a verdict on the injunction request.

In the case, the "2in1" brand was launched by Haier in the end of last year in South Korea and has seen its sales volume surging.

"In fact, Haier applied for its '2in1' brand early in 1996. But since there was no related regulation in China at that time, the government did not receive the application," Yu says.

"As China's IPR system catches up with international standards, domestic firms will have solid ground on which to develop their technologies and cultivate their brands."

(China Daily 10/16/2006 page9)

2013-07-17