Economy

Lawsuits to grow as patent filings rise

By Karen Yip (China Daily)
Updated: 2010-12-14 11:07

BEIJING - Lawsuits involving Chinese companies in intellectual property rights (IPR) are expected to rise significantly as cross-border trade accelerates and more patents are filed by Chinese companies.

This development also includes internal lawsuits between domestic companies, in addition to international cases, said John Quinn from US-based Quinn Emanuel Urquhart & Sullivan LLP.

"There are now more patent filings in China than anywhere in the world," he said during a news briefing following a week of exchanges and meetings with government officials and local lawyers.

"It's going to be an explosion (of IPR cases) and it's a very natural outgrowth," said A. William Urquhart, Quinn's partner.

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The US law firm is well known for its involvement in cases against large financial institutions and investment banks, such as Goldman Sachs and JP Morgan Chase, following the fallout from the financial crisis.

Chinese companies have ramped up their investments in research and translated it into patents, Quinn said. With more Chinese companies entering the US market, he projected that such companies will use the US courts to file IPR lawsuits when disputes arise.

The financial crisis has made Chinese companies realize that creating indigenous brands is imperative to survival, especially during tough times as many Chinese manufacturers are engaged in low-end processing with razor-thin profit margins.

China also spends a large amount of funds on foreign intellectual property every year. The Ministry of Commerce said despite China's surplus in commodity trade, the nation suffers a huge deficit in services trade, with royalties and license fees being the second-largest cause of the service trade deficit in 2009.

In 2009, China's service trade deficit stood at $29.6 billion - 1.6 times the 2008 level - of which $10.6 billion were royalties and licensing fee payments to foreign companies.

At present, Chinese companies suffer from a lack of independent legal advice, Quinn said. "Where there are disputes, Chinese companies should engage more with litigators, lawyers or arbitrators to resolve disputes. Perhaps Chinese companies are not familiar with the US legal system or they have not found a trusted legal partner."