With a strong creative sector, professional service industries, a solid legal system and a deep-rooted trading tradition, Hong Kong has set sail to become the center of intellectual property (IP) trading although a lot more needs to be done, industry veterans say.

"It takes competitive advantages in many fields to serve IP trading. Yet, there are very few places in the world that have gathered all of them. And, Hong Kong is one of these places," Secretary for Commerce and Economic Development Gregory So Kam-leung said earlier this month.

In the 2013 Policy Address, the government said it decided to promote Hong Kong as a trading hub for intellectual property, assets appearing in all aspects of modern life - from comic icons on packages of snack food to phone cameras able to take sharper photos, and safer prenatal test methods to uncover genetic diseases. A total of HK$23 million has been set aside to fund the development of the industry earlier in March.

"IP trading will bring a lot of business opportunities and become one of the drivers of Hong Kong's economic growth," So said.

Innovation is a key component of IP trading. As in the Hong Kong's case, the vibrant creative sector, including publishing, the entertainment industry and designing, generates huge amounts of IPs, which are natural underlying assets, said Raymond Yip, deputy executive director of the Hong Kong Trade Development Council (HKTDC).

"As a free-speech city without a pretrial system, Hong Kong, in particular, has an advantage in copyright trading," Yip said. "Our multi-cultural society is open and inclusive, encouraging all kinds of creative activities. Meanwhile, we are the regional center for the film and music industries. The annual Hong Kong Book Fair is also a landmark event, gathering worldwide publishers and booklovers. Such a city is bound to be the marketplace for various IPs."

More importantly, Hong Kong is the gateway to the mainland, a leading world manufacturer and active innovator. With developed financial and legal service industries, the city is set to seize IP trading opportunities in the region, said Kwong Chi-keung, president of the Asian Patent Attorneys Association.

"In today's era of a knowledge-based economy, one mobile phone could contain more than 100 patents if not more. It has become very hard for anyone to own all of them. As a result, it's increasingly important to have a platform for everyone to trade in what they have, whether it's authorizing or selling or in other ways," Kwong said.

"Hong Kong is ideal to serve this purpose. Not only because we geographically sit in the middle of Asia - a gift in deal-making - but our advanced legal and financial services, among all others we're proud to offer, also make the city a good spot for setting up IP brokerages," he added. "We have professionals in IP valuation - the base of trading. Our bankers are good at funding deals. Our lawyers are experts in pre-deal due diligence."

Meanwhile, Hong Kong's history as a regional trade hub makes it even more ideal for IP trading, said So, adding that local talents equipped with a deep market knowledge are experienced in customization.

"Hong Kong designers and market specialists are familiar with different cultures, especially the Chinese mainland and the Southeast Asia. It's very important to the licensing business," said Toby Chan Lap-man, a member of the Working Group on Intellectual Property Trading, an official body to supervise the task.

"Trading tradition has made Hong Kong the one-stop shop for the licensing industry - from seeking franchise from brand owners, to designing and manufacturing localized goods, and finally to distributing effectively to target customers," Chan said. "In Hong Kong, it's convenient to conduct business. It's true for both licensees and licensors. That makes the city a hub for IP trading."

What's more, in terms of solving IP disputes, Hong Kong is again cutting edge with its common law legal system and established infrastructure for arbitration - an alternative way that's faster and cheaper than litigation and hearing.

"Hong Kong is a neutral place. It enjoys the reputation as a society of rule of law. This is crucial in solving international IP disputes because it helps to avoid home court advantage for any party, thus making Hong Kong a more acceptable choice for all," said Anita Leung, chairman of the Hong Kong sub-chapter at Licensing Executives Society China. "A lot of mainland companies would prefer Hong Kong instead of the US or other jurisdictions to settle international IP disputes. The fact that Hong Kong is part of China gives them more faith," she added.

According to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, arbitral awards made in Hong Kong are generally enforceable in 159 contracting states and territories worldwide. In 2013, three quarters of arbitration cases solved at the Hong Kong International Arbitration Centre - the fourth-largest in the world and the second-largest in Asia - were of an international nature.

The International Chamber of Commerce International Court of Arbitration and the China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center are also available for IP disputes.

With all the advantages, Hong Kong is already running IP trading platforms both on and offline. Established in 2011, the Business of IP Asia Forum, an annual event, brings together IP users, owners and agents, and have grown into a flagship industrial platform in the region, said Yip.

"This year, we're eyeing more cross-border collaboration with tech-savvy countries like Japan, Korea and Israel. Currently focusing on patents and copyrights, the website will list more trademarks and registered designs. We expect the number of registered users to pick up from 12,000 now to 15,000 by year-end," he added.

However, despite all the strength mentioned, Hong Kong still has a long way to go towards an international IP trading hub. One of the crucial tasks is to introduce an original grant patent (OPG) system in town.

"It's a norm around the globe for all jurisdictions to establish their own patent system, under which to carry out their own substantial examination - the patent office exams whether it's worthwhile to grant a patent based on whether the application is new or inventive," said Andrew Liao Cheung-sing, vice-chairman of the working group.

"If we picture ourselves as an IP trading hub, we must be able to demonstrate that our system is on par with international practice," he said.

In a report published in March, the working group proposed building an OGP system that's "up to international standards and user-friendly" through cooperation with reputable patent examination offices". The new patent system is scheduled to be in use by 2016 to 2017 at the earliest.

Such a system will also stimulate local tech talents, Liao said. "It will not be good enough to promote innovation without our own original patent system. OGP will encourage local research and invention activities and promote Hong Kong as an IP trading hub."

(Source: China Daily)