China may own more patents than anyone else, but it still needs to buy

China’s patent market has
 developed at breakneck 
speed, thanks in no small part to
government policies at both the national
and provincial level that have encouraged filings and IP-backed loans.

While it may be the case that Chinese entities now own more patents than those from anywhere else in the world, the vast majority of these assets are Chinese-issued. Given that the government has provided economic incentives for patent ownership and that utility models and design rights, which undergo no substantive examination, are typically included in Chinese patent counts, the overall quality of Chinese patent assets is regularly called into question.

Nevertheless, the sheer size and importance of this market in itself attaches value to its patents, meaning that growing numbers of foreign companies and investors are showing an interest in buying Chinese assets. This represents an opportunity for both Chinese entities and foreign businesses with under-utilised Chinese patents in their portfolios.

On the whole, however, the story in China is mainly about domestic companies buying up patents, with few currently finding themselves in a position where they are considering significant sell-offs. When it comes to foreign IP assets, many Chinese companies are actively seeking out third-party patents that could assist them in fulfilling their wider commercial objectives and growing their presence in overseas markets. Their expansion beyond China has been hampered at least in part by fear of being bombarded by infringement suits from competitors in those jurisdictions where they lack patent coverage.

Prospective buyers

  • Chinese corporates looking to expand overseas have turned to the patent market in attempts to strengthen their IP position and smooth their entry (eg, Xiaomi has made headline patent purchases from Broadcom, Intel and Microsoft since the start of the year; Lenovo bought portfolios from IBM, NEC and Unwired Planet).
  • Investors aiming to get access to high-grade technologies in areas such as semiconductors, LEDs and automotive (eg, Tsinghua Holdings’ acquisitions of Spreadtrum and RDA; Unisplendour joint venture with HP China server business; GO Scale’s abortive takeover of Philips’ Lumileds unit).
  • Patent aggregation funds acquiring patents for a mix of defensive and monetisation purposes.
  • State-owned enterprises may also potentially explore pure patent buys as a way of gaining access to new technologies and markets.

Prospective sellers

  • Patent-rich corporates may seek to offload non-core assets.
  • China’s public research sector generates a huge number of patents which may prove valuable to the right buyer.

Today’s blog post uses information from IAM Market’s newly published overview of the patent transactions marketplace in the Asia-Pacific region. You can download the full report – which also covers other key Asian jurisdictions, as well as an analysis of popular technologies and broader market trends and developments – here.

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