Archive for China
The Tragedy of Chopsticks: Getting Things Straight in China
Posted by: | CommentsAs we’ve discussed previously on this blog, the West often gets things completely backwards when it comes to China, and the misunderstandings can be serious barriers to Asian innovators seeking global markets. The “Tragedy of Chopsticks” helps illustrate this.
A few years ago while in the US, I became concerned about chopsticks in China. The anti-chopstick publicity from Greenpeace and other groups was pretty convincing. What a shame to read about the vast tracts of precious forest land in China that were being mowed down to fuel China’s reckless, wasteful use of disposable chopsticks. What an environmental disaster! The New York Time‘s famous Green Blog recently reminded us all that “Disposable Chopsticks Strip Asian Forests.”
The article begins with a photo of a Greenpeace demonstration in Beijing where activists are building trees made from chopsticks to highlight how chopsticks wipe out trees. The coverage of China’s deforestation from its horrific chopstick use made me worry about the nation, for I had long known that China hardly had any forests left. Thirty or so years ago, the amount of forested land in China was around 9%. Some say it might have been a little higher, perhaps 10 or 11%, but it wasn’t much. As a young professor at the Institute of Paper Chemistry early in my career, I learned that China had to import most of its wood since there was so little forest land. But since that time, the paper industry and the chopsticks industry in China has boomed. So if we had 9% forest 30 or so years ago, how much, if any, do you think is left today? After all those people using disposable chopsticks for all these years, is there anything left of China’s forests?
That was a question in my mind before coming over here, where one of my first agenda items was to better understand some of the environmental allegations made against China and against the forest products industry here. What I found really shocked me. Take forest, for example. What’s left of China’s forest? What percent of China’s land is covered with forests? The World Bank and other credible sources now put the estimate around 21% – roughly double what China had a few decades ago. In fact, China is on course to achieve it’s goal of 27% forest land, and has what appears to be the world’s highest rate of afforestation, the opposite of deforestation. To provide the raw materials needed for forest products such as paper and, yes, chopsticks, China is ADDING forests, not mowing them down, creating sustainable high-yield plantations that can be planted and harvested repeatedly just like farmers plant and harvest their farmland, while carefully protecting virgin forests. Yes, plantations aren’t the same as wild virgin forests in terms of species diversity and beauty, but they are forests, and it is a good solution to the challenges of development. Yes, there was tragic forest lost in the past and irresponsible actions, but now China has strict policies and enforces strict regulations. Plantations must be approved before they can be created, and further official approvals are needed before trees can be harvested and then before they can be transported. As for chopsticks themselves, most of these come from bamboo, which grows rapidly and is easily planted, just like a food crop. In fact, bamboo is a food crop, with bamboo shoots being one of the most important components of Chinese cuisine. Will Western NGOs next tell us that we have to stop eating bamboo shoots? And then will we need to stop eating rice to save the rice fields?
So while the West is bemoaning the stripping of Asian forests from Chinese chopsticks and paper, the real story in China is a doubling of China’s forest with the help of the forest products industries and aggressive State policies. Why is this story so completely untold in the West? Why is it not part of the debate when Congress is deciding they need to punish the Chinese paper industry with punitive tariffs, when actually, the Chinese paper industry (at least based on my knowledge of APP) has environmental standards and achievements that are typically better than those that are standard for Europe and North America. But recognizing the remarkable environmental achievements of that industry, including its contribution to rapid afforestation through sustainable plantations, does not fit the agenda of some the West.
China has had its environmental problems and still has a lot of progress to make in terms of pollution, but it’s an issue that is taken seriously and remarkable progress is being made. In the forest products industry, the worse polluters are being shut down, hundreds of inefficient, highly pollution paper mills every year are being shut down as standards are progressively tightened. Come see for yourself and visit some of the beautiful, clean paper mills I’ve seen here in China. And before you try telling the people of China how or what to eat because of your enlightened knowledge of all things environmental (if, perhaps, you are as wrong as I was about the realities of China before coming here), you might want to get your chopstick facts straight. Chopsticks and forests are one of many issues where the West grossly misunderstands China.
Chinese Auto Innovation Rolling Westward
Posted by: | CommentsThe impact of innovation in China is often not obvious to the West, even when many gadgets like the iPhone draw upon innovations from China and Taiwan that make many Western products possible. Not many Chinese brands have spread outside the borders of China, leading some observers to question the significance of Chinese innovation in full-fledged products and not just components or manufacturing methods. China is just beginning to learn how to develop brands that will succeed in the West. The apparent dearth of brand-based innovation from China should change in the coming decade. Some of the front-runners might be found in the automotive industry.
The Chinese automobile brand, Chery, is already rolling westward. A friend of mine spotted it on-sale in Kiev, Russia, and sent me these photos (photos courtesy of Martin Daffner). Chery, now one of China’s leading exporters, began exports in 2001 to Syria and now sells its cars in the European nations of Russia, Ukraine, Belarus, Serbia, Macedonia, Turkey and Italy (per Wikipedia) and as of 2012 will be marketing also in Australia, Singapore, and South Africa. Chery’s strategy is to expand in developing countries first and then enter more developed countries.
As Chinese brands move to the West, we will increasingly see Chinese companies getting their IP stolen unless they take proactive steps early to protect it. It’s already happening in the realm of trademarks, as Li Yongbo reports in the China Daily article, “More Chinese brands victims of IPR violations.”
Related stories:
- Auto Innovation—China Style (Businessweek)
Another Invisible Chinese Company: Lenovo
Posted by: | CommentsFollowing up on the mind-numbing failure of Thompson-Reuters to include ANY Chinese or Taiwanese company on their list of the 100 Top Global Innovators, let me mention one more that should be there: Lenovo. This Chinese multinational company had 402 US patents granted from 2005 to 2010, well above the numbers obtained by some other companies on the TR list supposedly based on patent activity. They have international scope and are now the world’s 2nd largest maker of personal computers. Annual sales are over $20 billion. This puts them above many of the less-known companies on the TR list. OK, Lenovo inventors listed on patents are more likely to be from the US or Japan than from China, so Lenovo’s IP situation arguably doesn’t speak to innovation in China per se, but based on the stated criteria of TR, one would think that this Chinese company should still merit attention as a global innovator, regardless of which part of the globe their R&D centers are located.
Dehydrating Innovation in Europe: EFSA and Beverage Innovation
Posted by: | CommentsOne of the hottest areas for innovation globally is in improved foods and beverages that benefit human health. Unfortunately, bureaucrats are among the biggest barriers that innovators face in this field. In the United States, something as uncontroversial as the well-known relationship between citrus fruit and scurvy (that is, citrus fruit can prevent or help cure scurvy) becomes a dangerous proposition in the hands of a bureaucrat. One VP with a major global food company explained to me that selling an orange with the claim that it “may help prevent scurvy” could get you thrown in jail in the U.S. under the strict rules of the FDA, rules which make it exceedingly difficult to pursue innovation in food, no matter how strong the science is. But the innovation barriers from regulations in the U.S. may be dwarfed by those that are metastasizing in Europe, especially under the heavy hand of the EFSA (European Food Standards Authority). The fantasy land of bureaucrat anti-imagination in Europe is so other-worldly that you can become a criminal for claiming that “water may help prevent dehydration.” Incredible? Impossible? Here’s what Victoria Ward and Nick Collins report in The Telegraph, Nov. 18, 2011 (excerpt):
EU bans claim that water can prevent dehydration
Brussels bureaucrats were ridiculed yesterday after banning drink manufacturers from claiming that water can prevent dehydration.EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.
Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month.
Last night, critics claimed the EU was at odds with both science and common sense. Conservative MEP Roger Helmer said: “This is stupidity writ large.
“The euro is burning, the EU is falling apart and yet here they are: highly-paid, highly-pensioned officials worrying about the obvious qualities of water and trying to deny us the right to say what is patently true.
“If ever there were an episode which demonstrates the folly of the great European project then this is it.”
NHS health guidelines state clearly that drinking water helps avoid dehydration, and that Britons should drink at least 1.2 litres per day….
German professors Dr Andreas Hahn and Dr Moritz Hagenmeyer, who advise food manufacturers on how to advertise their products, asked the European Commission if the claim could be made on labels.
They compiled what they assumed was an uncontroversial statement in order to test new laws which allow products to claim they can reduce the risk of disease, subject to EU approval.
They applied for the right to state that “regular consumption of significant amounts of water can reduce the risk of development of dehydration” as well as preventing a decrease in performance.
However, last February, the European Food Standards Authority (EFSA) refused to approve the statement.
A meeting of 21 scientists in Parma, Italy, concluded that reduced water content in the body was a symptom of dehydration and not something that drinking water could subsequently control.
Now the EFSA verdict has been turned into an EU directive which was issued on Wednesday.
Ukip MEP Paul Nuttall said the ruling made the “bendy banana law” look “positively sane”.
He said: “I had to read this four or five times before I believed it. It is a perfect example of what Brussels does best. Spend three years, with 20 separate pieces of correspondence before summoning 21 professors to Parma where they decide with great solemnity that drinking water cannot be sold as a way to combat dehydration.
“Then they make this judgment law and make it clear that if anybody dares sell water claiming that it is effective against dehydration they could get into serious legal bother.
EU regulations, which aim to uphold food standards across member states, are frequently criticised.
Rules banning bent bananas and curved cucumbers were scrapped in 2008 after causing international ridicule.
The ruling is more than merely laughable. For those on the cutting edge of advanced foods and beverages, it is an ominous sign of the innovation fatigue from government that is increasingly strangling Europe and much of the Western world. The inability to make reasonable, scientifically-supported claims about the benefits of healthy foods and beverages is one that will stifle innovation and entrepreneurship in Europe. I’d rather have to do my own homework to understand the validity of health claims than to have bureaucrats completely stifle innovation in health-promoting goods. Give me the Wild West of unrestrained innovation, with all the risks and bad claims that might follow, rather than a sterile 1984 society in Oceania which hordes of bureaucrats protect me from myself and everything new. But between those two extremes are many healthy, democratic alternatives in which sound legislation reduces the most egregious crimes while allowing innovators for the most part to move forward.
Here in China, where some of the best beverages in the world are to be found, I’m happy to say that soft-drink entrepreneurs appear to still have the freedom to declare that aqueous beverages reduce thirst and help prevent dehydration. Watch for the world’s epicenter of food and beverage innovation to increasingly shift toward China, if it’s not already firmly rooted here.
Invisible Innovation: The Blindness of the West to China’s Innovation Story
Posted by: | CommentsMaybe China is just too far from the smug innovation circles of the West. Maybe language and cultural barriers make the events unfolding in China too inaccessible to Western media. Maybe decades of concern about IP theft from Chinese companies has closed the eyes of the West to present realities. Whatever the reason, the West today seems generally blind to the innovation powerhouse that China is becoming. Witness, for example, the highly publicized list from Reuters-Thompson of the top 100 global innovators, based on “patent activity.” With China having become one of the world’s true hotbeds of patent activity, not to mention economic impact with innovation in many fields, one might expect Chinese institutions to be well represented on the list. Incredibly, the list has ZERO Chinese entities on. None from Mainland China, none from Taiwan, and none from anywhere else in Asia except for a heavy dose of Japanese companies (27) and 4 from South Korea. Tiny Switzerland makes the list 3 times, and its minute neighbor, Liechtenstein, makes the list with Hilti Corporation. But zero from China and Taiwan? The list is related to “patent activity,” but its compilers wisely recognize that patent volume alone is a poor metric for innovation. Instead, they have created other metrics based on patent data:
The Thomson Reuters 2011 Top 100 Global Innovators are companies that invent on a significant scale; are working on developments which are acknowledged as innovative by patent offices across the world, and by their peers; and, whose inventions are so important that they seek global protection for them.
Sounds fair. So sure, the manufacturing and supply chain innovation that has been a big part of China’s economic rise are not expected to make a showing on this list. That kind of innovation doesn’t show up in terms of granted US and European patents. And the tendency for many Chinese companies to mostly file patents in China doesn’t help them with the methodology Thompson Reuters has, which looks for measures of international impact and international patents. But did they miss all the international activity of some Chinese companies? For example, a couple of days before this list of innovators came out, I posted this on LinkedIn and Twitter (@jefflindsay):
Two Chinese companies, ZTE and Huawei Tech., are among the top 5 international (PCT) patent applicants. Lots of IP here! http://is.gd/t2tUb4
OK, so Thompson Reuters doesn’t follow me, but these companies should have shown up strongly in their patent searches. These are innovative companies with products marketed internationally, having strong economic impact, and loads of patents. Being in the top 5 for international filings wasn’t good enough to even place in the top 100 for Thompson Reuters. Huh? OK, it turns out the ZTE’s surge in patent filings is recent and their numbers prior to 2010 were probably too low to make the cut for this study–that’s fair. But Huawei had 445 US patents from 2005 to 2010, a number in greater than some other companies on the list. For 2011, by the way, Huawei isn’t just in the top 5 so far–they are Number One, the world’s leader in international patent filings (see the Nov. 2011 article in the Vancouver Sun). Think they’ll be on the next list of leaders in patent activity Thompson Reuters publishes? Perhaps, who knows?
How about the Liechtenstein firm that’s in the Top 100, Hilti AG. Heard of them? They have good products for the construction and building maintenance industries such as hammer drills and other tools. They have 20,000 employees, including 2,500 in the US, and market products and file patents internationally. For the 2005-2010 time frame of the Thompson Reuters study, Hilti had 327 patents. Not bad. Well below Huawei’s score, but still respectable.
Now let’s consider a little company that was not on the list: Foxconn. Heard of them? They have over 1 million employees and are the world’s largest producer of electronic components, including circuit boards. They are the ones who actually make Apple’s products such as the iPhone and iPad. This Taiwanese/Chinese firm (China considers Taiwan to be part of China, and much of Foxconn’s work is in China) is arguably the real powerhouse behind the success of Apple and several other companies on the Thompson Reuters list. Foxconn builds Apple’s products, and not just as a mindless executor, but as an innovative partner.
Ah, but what about real technological innovation expressed in patents? Surely Foxconn is just about cheap labor and low cost manufacturing, right? A quick search of Foxconn patents granted in the US from 2005 to 2010 shows they have over 700 patents. Some are design patents, but the vast majority are technological. Foxconn apparently is conducting serious R&D and spending millions on patents to find new ways to make leading edge high-tech products better, safer, faster, and cooler (both in terms of heat management and the “wow” factor). I have the privilege of interacting with some Foxconn people and from what I’ve seen and heard I can say that they have a world-class IP program to support innovation, and I feel that they are way ahead of many Western companies in these areas. Foxconn innovation and Foxconn IP may be the real key to Apple’s success. Foxconn innovation is abundantly expressed in patents, not just trade secrets and know how, with an estate twice as big as Hilti’s over 2005-2010 and an economic impact on the global market far in excess of Hilti. But Foxconn doesn’t make the list. How do none of these Chinese companies break into Thompson Reuters’ Top 100? Did they miss the 2010 story, “China Poised to Become Global Innovation Leader,” based on patent activity? That must be from another source they don’t follow.
Nov. 24, 2011 Update: My search on Foxconn patents needs to be updated. Yes, Foxconn has an impressive 700+ US patents for the 2005-2010 period, more than some companies in the TR list. But my search was deficient, failing to consider that many Foxconn patents might have been filed under the real name of the company that owns Foxconn, Hon Hai Precision Industry Co., Ltd. So I expanded my search term to be “Hon Hai Precision” or Foxconn. Now, instead of 700 patents, we’re looking at a massive estate of 5,872 US patents (perhaps a couple dozen more when typographical errors are considered). This estate now dwarfs MOST of the companies on the list such as Brother Industries (2873, searching for Brother Ind* or Brother Kogyo), BASF (2771, searching for BASF or Bayerische Akt*) Goodyear (1152), ABB (948), Airbus (926), Avaya (<600), Arkema (205), Cheil (116), etc. Oh, and what about innovation giant Apple Compute? A search for simply "Apple" (which might include some smaller companies unrelated to Apple Computer) returns 1809 issued US patents from 2005 to 2010, less than 1/3 of the US patent activity of the invisible innovator that makes Apple what it is.
Let’s return to Huawei for a moment. There should be little doubt about the innovation prowess of Huawei, even though they tend to be far more secretive and do much less P.R. than Apple. But this telecom company is big (with over 100,000 employees, they connect 1/3 of the world’s cell phones) and highly innovative. Read, for example, BBC’s story, “Innovation in China: Huawei – the secretive tech giant.” Maybe the Thompson Reuters methodology docks them for being on the young side. Over half of their 445 US patents from 2005 to 2010 came in 2010–but they still clearly outpace Hilti and others over the 5-year span of the study. So what gives? I suspect that the youthfulness of the estate means there has been less time for others to cite Huawei patents, and that may be part of the problem since patent citations are part of the methodology. But to miss Huawei completely?
Thompson Reuters will surely argue that their methodology was developed and implemented fairly, even blindly (a fair term), but someone should have immediately seen that something was wrong if top international filers and innovators like Huawei, and Foxconn didn’t make the list. But when it comes to innovation, innovation in China tends to be largely invisible to Americans, who are stuck in the old paradigm of US being the innovation leader and China just being a copier. That kind of blindness will catch the West by surprise in the very near future when US companies find themselves facing numerous patent barriers from the Chinese companies that will own much of the most valuable IP. China is creating and will create much of the most important global innovation for the future. Innovation needs to ramp up in the West in order to not be left completely behind.
Dec. 8 Update: Chinese computer giant Lenovo, the world’s 2nd largest producers of personal computers, may also deserve to be on the list.
Related stories:
- IAM Blog: “The US, Japan and France dominate new listing of the world’s most innovative companies“
- Nielsen.com: “Nielsen China Forum: Dispelling the Myths of Innovation in China“
- China Law Blog: “Innovation In China. It’s Happening, But Not How You Think“
- Tech Crunch: “Thomson Reuters Names ‘Top 100 Global Innovators’“
Yesterday I had the privilege of visiting the beautiful campus of Tongji University in Shanghai where I was a speaker at a workshop on innovation and managing R&D in China. This international event was organized by a highly respected expert in global R&D management, Dr. Max von Zedtwitz, founder of GLORAD, a firm that helps companies with their R&D management issues and some of the toughest challenges of global R&D organizations. After the workshop, I had a very kind tour from a Chinese professor of the beautiful campus and the world-renowned MBA program, ranked by the Financial Times as one of the top 50 in the world.
In my remarks, I briefly touched upon what may be the biggest barrier to successful innovation and research in China: retention of talent. Indeed, companies requiring highly skilled employees repeatedly find turnover to be one of their greatest challenges. Employees gain a few months of years of experience and finally get trained to do the work you need them to do, and then they jump to somewhere else for higher pay. Large multinational companies may be viewed, for example, as good places to get trained for career advancement, resulting in those companies essentially providing training for competitors here.
There are no easy solutions to this problem, which is a challenge in most nations. But managers of skilled employees need to realize that especially in China, the guanxi or relationship between the worker and the company, or especially between the worker and the supervisor, will be an important factor. If the employee feels a sense of loyalty to the supervisor and the company, and feels that he or she is being cared for and nurtured in his or her career, the temptation to leave will be reduced, and the desire to look elsewhere may be largely forestalled.
Many things can contribute to a healthy relationship that keeps Chinese employees on your side. Managers need a great deal of training in some cases in order to be more helpful to their employees and build the respect and trust that is essentially for good guanxi. Authoritarian attitudes aren’t helpful for retention, though they can result in fast short-term results. Kindness and respect, shown in many ways, can bring out the best from employees and motivate innovators to share their best work. Good team-building events and extra-curricular activities can help, though sometimes they become viewed as a burden employees are expected to shoulder on their own time. Avoid eating into employees free time with mandatory events.
Here’s on often overlooked issue for Western-owned companies: Corporate cafeterias in Asia, if available, should have really good food. I’ve seen corporate sites with good food and noticed that the employees mention it frequently, and a site with just OK food which the employees also mention frequently. The place with the lower quality cooking has much higher turnover. Might just be a coincidence, but upgrading a cafeteria ought to be a priority for anyplace struggling with retention. If you’re in an urban setting without a need for a cafeteria, try some creative ways to make good local food affordable and readily available from time to time. If you keep food in mind as a motivator, your efforts may strike some important targets.
Western managers must be especially aware of Chinese attitudes, including the role of guanxi, the importance of family relationships, natural hesitancy in speaking out or challenging management even when truly needed, etc. Western managers really need a close relationship with key locals who can help them be aware of the feelings and concerns of team members and provide guidance in building rather than eroding relationships.
Around the world, the ways things really get done is through relationships, through guanxi. But understanding the special importance of that concept in China can help companies here find more success in innovation and new product development by retaining their star employees. And those stars can use their own network to reach out and find other stars as well. Guanxi again, not job boards, is the key to finding the right talent in the first place.
The Bogus IP Registration Scam: Becoming a Global Phenomenon, Beware!
Posted by: | CommentsThe good folks at the China Law Blog recently discussed a common scam that occurs in China. Actually, this is a scam that is shaking down small and large companies and lone inventors all over the globe. I’ve warned against it in the US for a long time and was intrigued to see it is going full-bore here in China.
When you file or obtain trademark registrations or patents, scammers are likely to send you an invoice asking for some large sum of money in return for being “registered” in their international database of patents or trademarks. In the Chinese version of the scam, you may received a bound volume of Chinese law with an enormous invoice. Failure to pay, they will tell you in annoying repeat calls, could result in all sorts of problems. Don’t pay. Don’t waste your time with them.
In US and European versions of the scam, the invoices sometimes come from Serbia or Croatia. But they can come from anywhere. If it’s from the government where you registered or filed your IP, throw it away. Unfortunately, enough businesses and gullible inventors just routinely pay invoices without asking tough questions that the scam is successful, thus causing it to spread. Don’t be fooled. When your innovation results in being ripped off, you’re on your way to innovation fatigue. Steer clear.
Subtle Corruption? The Weakening of US Patent Rights
Posted by: | CommentsOne of the troubling trends in US patent law, a trend I first heard about roughly a decade ago in a course “Drafting and Crafting Winning Patents” from Patent Resources Group, was the tendency for courts in patent litigation to twist the claims to limit their scope. Among the many examples of courts finding language or lack of language in the specification to import unintended and often questionable limitations into the claims is a 2011 case, Retractable Technologies, Inc. v. Becton, Dickinson & Co.. It took creative mental gymnastics by the court to rule that the “body” of the claimed syringe must not read on two-piece bodies, contrary to logic and evidence within the claims themselves. See the response of IP Watchdog to see how this decision may contradict fundamentals of established patent law. The Patent Prospector blog offers this view:
Somewhat subtlety, but most assuredly corruptly, the courts are on a continuing crusade to limit patent protection. In the past four years, the capriciously subjective Obzilla (KSR) has trampled many patents, where an objective evidentiary standard would have left them standing. In this episode, Retractable Technologies v. Becton, the crusade against patent enforcement continues, but from a different angle, with the CAFC distorting well-settled claim construction precedent to squeeze the scope of claims.
The courts seem increasingly ill-disposed toward protecting property and intellectual property rights, especially those of individuals and small companies lacking political clout. Is that due to corruption or just the twisted anti-property (well, anti-other-people’s-property) ideological bent that many of our leading universities impose on students? To be fair, many large companies also bemoan US patent law trends where intellectual property is increasingly taxed and stalled (e.g., through high costs and delay at the USPTO, and the siphoning of patent fees by Congress to pay for their excesses elsewhere), where claim scope is being limited, and where the capricious uncertainties and cost of litigation are ominous. To revive the US economy, there really is a need to strengthen innovation by strengthening and accelerating our patent system and strengthening, not diluting, property rights.
Meanwhile, here in China, there are serious efforts to strengthen enforcement of IP rights, to encourage patent pursuit (e.g., with generous tax incentives and some special incentives that local governments may add in some areas), and to facilitate enforcement. There is a rush in China to create IP and it will have profound long-term effects in terms of global competitiveness. I think that China will become the technology leader of the world and the IP leader, and the U.S. will pay dearly in the end–royalties and more. The U.S. needs to regain its IP and innovation momentum and abandon capricious judicial changing of the rules at the expense of innovators.
China Gets Serious about Intellectual Property
Posted by: | CommentsMany people in the West think of China as a copier exploiting the IP of the West and generally ignoring IP rights. In reality, China, the nation where I now live, has made steady and rapid progress in building an IP system and in enforcing and respecting IP rights. Companies are increasingly able to protect their IP in China and have it enforced successfully. Successful experiences in enforcing IP has led some Chinese consumer products companies, for example, to become much more serious about protecting their innovations in China and beyond.
Chinese companies are now racing to create strong patent portfolios not only in China but overseas as well. China’s tax incentives contribute to this as does its increasingly strong patent system, and the strong investment in R&D in this nation and the growing technical competence and creativity of China has led to a serious need to protect Chinese IP from infringement by the West and others. China is becoming the world’s leader in filing patents. In 2011, China is expected to overtake Japan and the United States for the #1 spot as top patent filer. They appear to be leading the world in terms of the number of patent law suits being pursued in Chinese courts, with significant awards being made that should encourage companies to pay more attention to patents here. In many areas, Chinese innovators are leading the world and are backing up their work with aggressive international patent filings. My own study of biofuels patents, for example, shows that China is becoming the world’s top source of IP related to biofuels and other plant-based bioproducts. Chinese universities are filing patents in many areas and have even had success in courts enforcing them. China on all fronts appears to be accelerating its move toward being a source of global IP and innovation.
The July 13, 2011 issue of the China Daily that I picked up last week illustrates the growing importance of IP. Page 5 had a story, “Courts Do More for IPR [Intellectual Property Rights] Protection.” The article reported that the Chinese government is seeking to learn from experience in the West to further improve and accelerate its legal system to strengthen IP protection. I should note, though, that Chinese courts already have a reputation for being much faster than Western courts, so I hope they don’t learn the slow part from the West. The article also reported that over 9,000 arrests have been made in the past 9-months in efforts to crackdown on piracy and other violations of IP rights. Nearly 13,000 underground factories have been closed in another campaign and nearly 5,000 gangs selling illegal goods have been broken up. In this 9-month period, 2,492 IP cases were brought to Chinese courts and 1,985 cases were adjudicated.
In the same issue, page 17 had a section called “ipscene” with IP-related news stories from around China. There were reports on China’s proprietary subway noise reduction technology being installed on Beijing’s new line 10; on the rapid growth of China’s LED industry; on the advances in diesel design from Yuchai Group which now has over 600 patents and has become a leading force in “green power”; and on a low-cost solar water heater being patented by inventors from Jinan. There was also a report on prison terms and fines for producers of counterfeit liquor. On the same page was a half-page article on grassroots inventions at a national innovation exhibit, and an article about educating Chinese children to boost innovation.
That’s a lot of IP and innovation content for a popular newspaper, and reflects the importance of these topics in China.
As the West continues to make patents more difficult to obtain and less valuable, frustrating innovators and contributing to innovation fatigue, China is doing the opposite. They are out to build a stronger IP system and make IP more valuable. They are encouraging the pursuit of IP protection and the creation of IP, and will continue to surpass the West in many measures. The pace of innovation in China continues to accelerate. Now companies, such as the one I work for, will increasingly be concerned not with copying what the West has, but in preventing the West from copying what is created here. There are further ironies to be revealed in this adventure.
Chinnovation: Lessons for the West from China
Posted by: | CommentsYinglan Tan’s new book, Chinnovation: How Chinese Innovators Are Changing the World, offers many lessons for the West. Tan explores several dozen case studies of entrepreneurs from small and large companies with roots in China. Some of the lessons counter popular Western perceptions about business in China and others point to broadly applicable lessons in entrepreneurship. The book is well written with key takeaway points highlighted throughout.
A common theme is that Chinese innovators are finding success in spite of highly limited initial resources by taking risks intelligently but aggressively, pushing for cash flow early in the process, and growing rapidly with the help of a healthy network and quick learning. Opportunities are being found in numerous spaces, both low and high tech and with novel or basic business models. Contrary to some stereotypes, integrity matters a great deal in the rising Chinese economy, with respect for others playing an important role in how business is done.
Tan offers much useful advice to Western entrepreneurs to help us find success more rapidly, Chinese-style. For example, he wanrs against the “focusing effect” in which entrepreneurs get too focused on one aspect of an event or business. Falling in love with a project, as often happens to engineers, can lead to losing sight of the larger mission, he warns. Ultimately, he urges entrepreneurs to consider taking a “good enough” approach rather than striving for perfection. “Many products can be built much more quickly and cheaply in China bu settling for good technology plus a bunch of hacks–human editing, partnerships, and outsourciing–instead of trying to create a perfect technology from scratch.” (p. 76)
Chinese companies are also gaining a competitive edge by being able to retain and attract top talent. It’s not just through good salaries, but also through many factors that build trust and loyalty. For example, Wayne Dai, CEO of Verisilicon Holdings, explains that they pay attention to the corporate cafeteria to make sure there is outstanding food. “The first thing I look at in a Shanghai company is the quality of the cafeteria. Without a good lunch, there is no productivity. Two vendors compete in our cafeteria.” They also offer stock options to many in the company. The receptionist, for example, has stock options.. Such steps build loyalty and increase productivity of employees.
The rise of entrepreneurship in China is now being followed with the rise of strong IP rights. There is much progress to be made, but companies are learning that IP matters and that failure to respect the IP of others can result in painful surprises. China is now on the path to surpassing the United States in terms of patent applications. It is a myth that China’s competitiveness just comes from being a source of low cost labor. They are leading the world in R&D in many high tech fields and are becoming the intellectual powerhouse of the planet, not just the source of labor. Between low cost resources, high tech IP, and a Wild West spirit of entrepreneurial adventure, the innovation potential of China cannot be overestimated. The West has many lessons to learn if it is to remain competitive in the global economy.