SHANGHAI: After four months of lawsuits, last week Philips Electronics Co Ltd withdrew an invalid core DVD patent from China.

The DVD technology patent number ZL95192413.3 illegally protected the transmission and reception method and transmitter of coded data.

With the removal of the patent from China's DVD patent pool, the country's manufacturers of DVD players will no longer have to pay a royalty fee for this key technology.

The success of the case signifies not only a dismissal of a multinational's royalty charges on Chinese users for an invalid patent, but is a reminder that the use of illegal patents is spreading, the Chinese professors who filed the suit told media.

"The market needs a fair environment," Xu Jiali, a professor at the China University of Political Science and Law in Beijing, was quoted as saying by China Business News, a Shanghai-based newspaper. Xu was a major plaintiff in the suit.

Even without the Philips DVD patent, China's DVD player producers still have to pay up to US$26 per player in royalty fees 20 per cent of their production costs for technology patented in developed countries, The patent hegemony is squeezing many Chinese producers out of the market, even though 80 per cent of the world's DVD players are made in China.

Infringement of intellectual property rights (IPR) may be rampant in China and other developing countries, but IPR abuses are unfair to developing countries, says Cynthia Cannady, director of the Intellectual Property Policies and New Technologies of the World Intellectual Property Organization (WIPO).

"It is unfair today to developing countries," she said on the sidelines of the recent Fourth Shanghai Intellectual Property International Forum, "because they are at an overwhelming disadvantage over patent-strong developed countries."

As a special agency of the United Nations, WIPO is responsible for IPR protection worldwide through co-operation among countries, including China.

'Hopeless disadvantage'

In her book "North South Trade in Intellectual Property: Can It Be Fair?" published in 2004, Cannady says shortages in technical and funding resources put developing countries at a hopeless disadvantage with developed countries. In particular, manufacturers in developing countries have to pay mountainous royalties for using technologies patented in developed countries, which, she says, is unfair.

"Chinese producers should be more careful about invalid patents imposed upon them," Cannady says.

Even so, she would not include China in the rank of patent-weak developing countries. "China is poised to be a patent power," says Cannady, an American educated at Harvard Law School.

Future patent power

According to a recent report from WIPO, patent applications filed in China have grown five-fold over the past decade and stood at more than 65,000 in 2004, ranking fifth in the world. "The world looks at China with admiration," Cannady says. "It is growing so fast." To her, it is only a matter of time before China becomes powerful in IPR.

She cited the example of Japan. In the 1980s, when Japan flooded the American and European markets with its semiconductor exports, Japan was charged with patent infringements. The country faced a flurry of lawsuits and finally agreed to pay royalties to the then technically more advanced United States and European countries.

"Japan was not a patent power then, but these lawsuits became a motivator for it to shake up its IPR strategy and became an owner itself," Cannady says. Only 10 years later, Japan was gathering momentum in patents and gaining strength in the IPR field.

"China is going through the same process," she says. The country has invented a new generation of disc players EVD players that could take the place of DVD players.

Indigenous innovation

Last year, China exported US$218.3 billion worth of high-tech products, but 60 per cent of them were made by multinationals and 88 per cent by foreign-related companies. That means patents owned by Chinese are used in only a small number of export products.

Hu Zhijian, deputy director of the Department of Policies, Regulations and System Reform of the Ministry of Science and Technology, said at the intellectual property forum that China has been relying too much on foreign funds and technology to manufacture for the world at the expense of its resources and the environment.

"We aim to become an innovative country by 2020," he says. "To that end, we are calling for more R&D activities in China." The policy would help lead to the eventual change in China's manufacturing from resource-intensive industries to more high-tech and innovative industries.

To motivate more people to create high-tech solutions, Cannady believes that nothing is more important than establishing a sound IPR system.

"The essence of IPR is a series of incentives to help scientists find solutions to problems," she says. "It is a prerequisite for high-tech and innovative industries."

Speaking at the forum, Hu made the point that China keenly feels the pain of its lagging IPR system and the pressure from the world to improve the situation.

China will work harder to improve its IPR-related legal systems and their implementation, Hu said.

WIPO has trained many patent drafters in developing countries, including Morocco and Tunisia, but so far it has not been very active in China. Cannady hopes there will be more programmes for China in the future.

(China Daily 12/18/2006 page9)