Shenzhen-based ZTE, China's second-largest telecommunications equipment maker has earmarked 6 billion yuan for research and development of new technology in 2009.

It's the core investment in the company's bid to be a top-tier company in the IT industry. In an exclusive interview with China Business Weekly in 2008 World Industrial & Commercial Organization Forum, Ke Xiaopeng, ZTE's IPR director says patented technology is a Chinese IT company's passport to overseas markets.

Going hand-in-hand with its technology research are the company's efforts to protect the company's intellectual property rights on the mainland as well as in other world markets.

"Proprietary technology and an IPR protective system are core to our overseas expansion plan," Ke says.

According to information from the State Intellectual Property Office, in 2007, a total of 5,401 Patent Cooperation Treaty (PCT) applications were filed in China, a 41.2 percent increase over the previous year.

Of all the PCT applications, 5,221 applications were from China and 180 from abroad. Of all the applicants, Huawei Technologies Co Ltd ranked the first with 1,544 PCT applications filed in 2007. ZTE followed Huawei with a total of 430 PCT applications.

AT ZTE, as in many other large Chinese corporations, the core strategy to explore the overseas market is with "self-developed technology".

"Only an enterprise that owns the technology it developed can stay on top of the market," says Ke.

ZTE has 200 employees out of total workforce of 54,000 working fulltime on IPR matters. Every year ZTE puts aside 10 percent of its sales revenue for research and development of new technology.

"But if we have no protection system to protect our research results, our investments and efforts will bring benefits only to the counterfeiters," Ke says.

The company now holds more than 16,000 patents around the world. "Our main trademark has been registered in more than 150 countries," says Ke.

But that's only part of the story. The company has long recognized that it must combine its research and development prowess with an effective strategy to protect its IPR, so ZTE has adopted an integrated approach to IPR protection.

It includes patent applications and maintenance, trademark registration and maintenance of software products and registration of copyrights, trade secrets management.

Operations is a sector that effectively creates value for the company directly through investigating intellectual property rights, licensing, transfer, business secrets protection and intellectual property review of contracts.

From the blueprint stage it's essential for the IPR sector to get involved.

When a company decides what kind of new product it wants to research, it should not start the research immediately. Chinese companies have a lot of failed cases in which their "new" product and technology have already been invented in other countries.

This causes difficulties when the companies go overseas and are asked to pay license fees they always can't afford.

"This is what we call 'avoiding IPR risk'. It means before you start researching technology, you should search for similar inventions and patents all over the world. A lot of foreign companies have an integrated system to avoid the IPR risk during the whole production period. But many Chinese companies have not established a system," Ke says.

"My advice is to find an IPR agency to help your company do the search, just like ZTE does," Ke says.

And after searching for the similar technology and patent, the next step is to carefully choose the location to sell the project.

"Different technical products will be sold to different countries and regions, so researching the market you want to enter is very important. Besides the products and business market, one should consider the legal system, what technology your main competition has registered in order to avoid risks," Ke says.

"But in a foreign market you will still encounter a local IPR holder who will charge for your products, just as lots of Chinese companies faced in Germany. You should consider cross-licensing patents or other ways to reduce your company's loss," he adds.

Editor's note: The IPR Special is sponsored by the State Intellectual Property Office and published by China Business Weekly. To contact the Intellectual Property Office, the IPR Special hotlines are 8610-64995422 or 8610-64995826, and the e-mail address is ipr@chinadaily.com.cn.

(China Daily 12/15/2008 page9)