Founded in 1958, Sichuan Changhong Electric (Changhong) is a major Chinese consumer electronics manufacturer. Its 20-person IP team sits within the research and development unit, with a chief focus on patents, and is headed up by Dejian Dai. Appointed acting IP director over 22 years ago, Mr. Dai initially started at the company as a technical engineer and, after getting an MBA, he took over project management for the company’s mobile phones.
“I fell into the IPR role by accident,” Mr. Dai says, during an interview with ip fray at the Via Licensing Alliance Business Summit in Shanghai last month. “And now I’ve been ‘acting’ IP head for over two decades,” he laughs.
Mr. Dai sat down to discuss some of the licensee’s biggest wins and losses, how China’s role on the IP stage has grown so much but why it still has so far to go, and the emerging technologies that it is eying (and is hoping patent pool administrators are eying too).
Today marks 40 years since the Patent Law of the People’s Republic of China came into force. Since April 1, 1985, companies have completely revolutionized their perception of patents and this has also shifted the power in negotiations for many of those businesses. But even when Mr. Dai started his role, there were “almost no patent experts in the company”, he says. It was only when China became a member of the World Trade Organization and foreign firms began setting up shop in Shanghai, Beijing and other major Chinese cities that this shift really flourished. He notes:
“I learned a lot from them, as well as foreign patent owners. I needed to. Only a handful of Chinese universities had IP-focused courses.”
U.S. and European victories
To say Mr. Dai was thrown into the deep end right from the start of his IP leadership role would be an understatement. In fact, he says, one of his biggest achievements was also one of his biggest challenges: a United States International Trade Commission (USITC, or just ITC) investigation initiated by U.S.-based battery manufacturer Energizer in 2003 (May 28, 2003 ITC press release).
Energizer accused Changhong and at least nine other Chinese consumer electronics manufacturers of infringing several alkaline battery-related patents. After the ITC issued a decision in favor of Energizer, ordering all their products to be banned from the U.S. market, the defendants grouped together and shared the costs of fighting back, recruiting a very prominent U.S. lawyer to handle their case, he recounts. “We didn’t have a high enough budget at the time, so it was necessary,” he explains.
After gaining a win before the United States Court of Appeals for the Federal Circuit, which Energizer subsequently appealed, Changhong and the other defendants emerged victorious in the Supreme Court in 2009.
Another significant case involved Sisvel over its Automatic Tuning and Sorting System (ATSS) pool, for which Changhong started negotiations in 2009. But the “rate was very high” and “the portfolio had some problems”, Mr. Dai says. In 2011, Sisvel filed a suit in the Mannheim Regional Court.
The court issued a judgment in favor of Changhong in 2012, which he describes as “very lucky”. But unhappy with the results, Sisvel continued to appeal until the case reached the German Supreme Court. In 2018, Changhong celebrated another major victory after the top court rejected Sisvel’s request for review and awarded the implementer damages.
“We believe that if a patent licensing program is FRAND, we will pay, but if not, we are not afraid to fight – including by going to court,” Mr. Dai emphasizes. He says the company has managed to strike licensing deals with major IP holders – including with pool administrators such as Via LA for its Advanced Audio Coding program (and Sisvel for its MPEG Audio, DVB-T and DVB-T2 programs).
Still a cost centre
But as most IP heads know, celebrating litigation wins is only a small part of the job. Mr. Dai says one issue that he is still grappling with is the low level of importance that his department is still given within the wider company. “There have never been enough resources, and there still aren’t,” he says. Having so few resources does not mean you go unnoticed, he explains. If anything, his unit feels more pressure:
“Pressure from the licensors to make more money, and pressure from our executives to reduce costs.”
But the Chinese consumer electronics market is currently shrinking, meaning that when licensors ask Changhong to simply raise their prices and absorb licensing fees into the cost of the components, this puts the company at risk of losing its already-diminishing market share. “We no longer have any bargaining power with retail companies,” he adds.
He explains: “Like in most Chinese companies, our business unit is treated like a cost centre. We are more of a licensee so we spend most money on patent licensing, and we need to do more to change this situation.”
China is transforming from a major importer of IPR to a major creator of IPR, however, and Changhong has a bright future, Mr. Dai believes. That will be heavily supported by the IP department, he says. Currently, Changhong owns a lot of patents in what he calls “white” consumer electronics (fridges, vacuum cleaners etc.) but the company is looking to invest more in standard-essential patents (SEPs) – especially in the consumer electronics field. Most notably, it is looking to invest more in lithium batteries and solar energy and has also been eying the electric car electronics market (screens, other devices inside electric cars). “More and more Chinese companies are participating in global patent pool licensing activities as both licensors and licensees,” he says, and Changhong wants to be among them.
Mr. Dai notes that LG has unveiled plans for a patent pool in lithium-ion batteries and Avanci has already launched several programs in the smart car area:
“If it were to launch one in the electric car electronics market, then we would consider joining. One of our key ambitions is growing our portfolio in that department – it’s prosperous and we attempt to trailblaze where no path exists.”