Chinese telecom equipment suppliers ZTE Corp. and Huawei Technologies Co. Ltd. have scored a victory in the Section 337 investigation, which claimed they infringed patent rights in the United States. The US International Trade Commission (USITC) ruled recently that ZTE and Huawei did not infringe the patent rights of the three American companies. This victory is symbolic that Chinese companies are now eyeing on oversea markets and patenting abroad through strengthening their capabilities in independent innovation in order to improve their core competitiveness in the international market. Chinese enterprises are speeding up to enhance their intellectual property (IP) capability, according to analysts.

It marked ZTE and Huawei's second victory in four months. Three American companies asked the USITC to start the Section 337 investigation on Huawei and ZTE's wireless devices for patent infringement on July 24, 2012. Then the USITC initiated the Section 337 investigation into ZTE and Huawei on the ground of patent infringement on August 24, 2012.

"ZTE attaches great importance to patent layout and houses patent rights in many countries and regions. ZTE are also ranking the top on the list of international patent applications under the Patent Cooperation Treaty (PCT). We have been aware of the Section 337 investigation and are preparing to respond," a ZTE principal told to a CIP News journalist recently. Meanwhile, Huawei also responds actively to the investigation and expresses that the company has a history of respect for the IPRs of others as well as the protection of its own. What is more, Huawei is willing to adhere to the international IP rules to settle patent disputes with an open mind.

The tips of the two venturing out companies' success are their considerable IPRs both in quality and quantity. According to SIPO, Huawei obtained 898 invention patents ranking the top of enterprises in the invention patents granted in the first half of this year, followed by ZTE with 846 invention patents. IPR is not only the core competitiveness but also the key to hurdling IPR disputes. The patents ZTE and Huawei obtained in the new generation mobile communication LTE, cloud computing and advanced communication server impose pressure on American companies. Therefore, it is no surprise that ZTE and Huawei respond actively in the legal action.

More and more enterprises have been given increased access to compete on the international markets since China entered the World Trade Organization. However, many Chinese enterprises have suffered a lot from inadequate patent layout and lack of IP capacity. Section 337 investigation has become a tool for American enterprises to set up barriers between the markets. As of the end of 2012, the number of investigation that Chinese enterprises were involved in has been the largest for consecutive eleven years. Some Chinese enterprises were not familiar with the international competition rules and lack of the awareness of patent layout as well as IP. Once encountering the Section 337 investigation, they were hesitated to make response, often lost the foreign markets, and some small and medium-size enterprises were even closed down.

Five years after the implementation of the national IP strategy, Chinese enterprises' IP capability has been rapidly and significantly enhanced. More Chinese companies have gained perfect victory in the Section 337 investigations.

"Chinese enterprises are not only able to handle the international IP disputes but also respond freely in the complicate circumstances," said Cao Xinming, executive deputy director of the IPR research center of Zhongnan University of Economics and Law. Although it is just a preliminary victory for ZTE and Huawei, it reflects the competitiveness of Chinese enterprises as well as their IP capability are significantly enhanced, and shows the courage as well as the confidence of developing international market.

(China IP News)