If China really is hard at work ripping Americans off by stealing their intellectual property, then there’s money to be made in protecting it. In fact, protecting IP from the Chinese is becoming a cottage industry.
Eric Giler might be the man for the job. He runs CIPRUN Global, a Chinese subsidiary in Boston’s Back Bay. They protect China IP in the U.S. and are helping U.S. firms protect theirs in China. They incorporated in May 2018 and got their office in Prudential Tower a month later. It’s a small operation. Four people in the office as of April 2019, when they official launched. CIPRUN has around 1,600 employees spread out across China.
Giler might be the man for the job because he knows what it’s like to have his patents stolen. “Only my patents weren’t stolen by the Chinese,” he says. “It was the Canadians.”
Remember that computer application that allowed a fax to be sent to an email address instead of a fax machine? Giler is credited as the inventor of that. At the time, he was running Brooktrout, a Massachusetts-based tech company that went public in 1992 and then went private in 2005.
“One day we found that this Canadian firm was copying our fax-to-email service, and we chose to sue them to for patent infringement,” he says. Brooktrout won.
They spent $3 million suing the company in the Eastern District Court of Texas. They were spending the equivalent of 15% of their sales on research and development, and this particular product was bringing in around $60 million a year in free cash flow to Brooktrout. A Canadian company called Eicon was copying the hardware, and selling it for less than half the price because they were not concerned about paying themselves back for all the money they spent coming up with the thing in the first place.
Investing in IP is a lot like venture capital investing in startups. Companies spend a lot of time and money investing in three companies, and only one becomes commercially viable. The mark-up in the price of that product—whether it’s a drug or a fax-to-email device—can’t be attributed to simple human lust for profit. It’s to cover the other two investments that lost money and to invest again in the future. (The Brooktrout device was marked up nearly ten times cost.)
“It was in that lawsuit that I learned how the litigation business works from the outside and how important it is to protect your IP,” he says. He’s not a lawyer. “If someone copies it, steals it, sells your invention for less, they are threatening your economics.”
Brooktrout Technology got a court order for Eicon to stop. It would have killed his business if they were not successful. The patent has since expired.
The China-U.S. battle over IP is just getting started.
This summer, the University of California system sued Target, Amazon, Walmart and other retailers for patent infringement on LED filament bulbs designed by University researchers in Santa Barbara. A patent protects someone from making, using or selling the same thing, and it was China that was making the same thing.
Going after retailers for selling Made in China light bulbs that were based on the Santa Barbara patent is much easier than bringing a lawsuit to Chinese manufacturers who may, or may not, have known they were infringing on a patent.
Dean Pinkert, a partner with Hughes Hubbard’s international trade practice and former commissioner of the U.S. International Trade Commission said everyone in Washington knew that multinationals operating in China didn’t want to come forward and complain about IP theft publicly.
“They wanted to do business in China. There were lots of quiet concern about blowback from Beijing,” Pinkert says.
Should the University of California prevail in court, allowing future plaintiffs to sue a seller for patent infringement, then it changes the landscape for IP protection.
It’s potentially interesting for CIPRUN. “We have the connections,” says Giler on a summer afternoon luncheon at The Atlantic Fish Company in Boston. “We can go into China and say, ‘Look, here are the guys that are making this stuff’,” he says.
Target and others will say they didn’t infringe on anyone’s patents and that it is not their fault. The fault lies in China.
“They’re going to go after each one of their suppliers and tell them they are responsible for the purchase price and damages,” Giler thinks, adding that the retailers could be on the hook for “big money.”
In China, protecting IP is an agency business as opposed to a law firm as it is here in the U.S. The agency files the patents, not an attorney representing the company. It is considered a mostly apolitical business, though unlike here the China court system has no juries and they don’t use precedence.
CIPRUN’s main competition in China is Chinese lawfirms; lawfirms that rarely have U.S. subsidiaries so American filers have to have contacts there, either through their own lawyer, or through an on-the-ground contact. That means filers are dealing with two separate sets of lawyers, usually working for two separate law firms. CIPRUN is CIPRUN, whether in the Prudential Tower or Beijing.
“The ability to bring this huge market of China and have an office in Boston is logistically powerful. I don’t have anyone in China, but I have CIPRUN,” says Josh Dobrowitsky of Strong Force Intellectual Capital in Detroit. “Having a contact in my time zone who has China patent expertise is important. We had (patents) that had to be paired down, translated, and only had two months to do it. The only way to get it done is to have multiple people working on it, and it is hard to find someone who can do it that fast and do it that well,” he says.
CIPRUN Global’s business model depends on companies seeing them as a one-stop, cost-effective shop for document translation, filing, consulting and legal representation through partner firms in China. CIPRUN owns three law firms in China.
Filing patents is an expensive process. Concepts for product design don’t necessarily translate—especially into Mandarin. Some companies don’t bother filing for special protection in China because they have no intention of selling there, but in a global economy with Chinese spies allegedly in all four corners of the U.S., that doesn’t seem prudent anymore.
U.S. semiconductor giant Qualcomm always files for IP protection here and in China.
Companies filing for IP globally may or may not have China protections. Patent Cooperation Treaties with some 152 countries make it easier to protect in more places than one, sort of like a master patent filing application. But China is not a signatory for all patents. Inventors need to single them out some times.
Giler’s an inventor. He has over 30 patents of his own. He got on the China IP bandwagon a few years ago, thanks to a company he was running that was spun-out of the brainiac labs at the Massachusetts Institute of Technology: WiTricity.
Giler was their CEO from the summer of 2008 to the spring of 2014.
WiTricity’s biggest application is a technology that can charge electric cars wirelessly. They got an investment from the venture capital division of Chinese manufacturer Haier. In 2018, an ex-Haier venture capitalist and chief strategist named Tom Wang told Giler about CIPRUN China, saying they wanted to set up shop in the U.S. It was Wang that sold Giler on the endeavor.
Giler, who was in Shenzhen in August, comes to all this at a volatile time in U.S.-China history. The risk of decoupling is real.
“Absent some dramatic change in world legal systems, which is highly unlikely, the trade war isn’t a negative to our business model—which is getting U.S. companies to protect their IP in China,” Giler says. “Maybe some companies will now say they don’t want to spend time dealing with China. I don’t think that would be logical. You either want to protect your IP from the Chinese … or you don’t.”
Source: shared via Forbes https://www.forbes.com/sites/kenrapoza/2019/09/18/how-to-stop-china-from-stealing-your-intellectual-property/#7601927c1005