Suzhou survey: More IP protection needed

Known as a center of Sino-German cooperation, Taicang in Jiangsu province is now home to more than 140 German-funded companies.

Few German companies in Taicang are filing patent applications on their core technologies

Lack of confidence in the nation's intellectual property protection is a major reason foreign companies are reluctant to transfer core technologies to China, according to a recent survey in Taicang, a part of Suzhou in Jiangsu province.

The survey by the local intellectual property administration was sent to 100 German-invested companies in Taicang, 58 of which responded.

Respondents are mainstay foreign investors whose answers reflect the overall opinions of the target group, said Xue Gongliang, head of the Technical Market Management Office of Taicang Intellectual Property Bureau.

The survey results show that only 17 companies, less than one third of the total 58 respondents, have applied for patents in China.

Of the 17 that did file applications, 11 were granted a total of 30 patents - seven for designs and 23 for utility models, a form of patent that legally protects rights to a product's shape and structure.
Utility models and design patents are protected for a shorter duration and have less stringent requirements than an invention patent.

None of the German-funded companies in Taicang have yet to be granted invention patents.

Most respondent companies are involved in manufacturing highly engineered machinery, auto components and construction materials, which generally require extensive hi-tech processes to produce.

Forty respondent parent companies hold patents in Germany, but just three have registered patents in China.

Xue said German companies lack faith in the system and are concerned about protection of intellectual property so they are reluctant to transfer core technologies to their facilities in China.

Infringement on patents, trademarks and copyrights, as well as theft of technical know-how and trade secrets, still trouble the market and continue to cause concern among foreign investors, the Taicang survey found.

Helping companies maintain their intellectual property rights is already the consensus among the Taicang authorities, said Chen Huiliang, director of Taicang Intellectual Property Bureau.

"Through legal and administrative means, we spare no efforts to stop infringements that occur locally," Chen said.

"Yet it is beyond our capacity to handle infringements on Taicang companies' intellectual property rights in other places," he added.

Nationwide cooperation needed

Frustrated with patent infringements outside Taicang, Xia Yuanhai, general manager of Suzhou Tox Pressotechnik Co Ltd - the first German-invested company to apply for patents in China and also one of the survey respondents - cited local protectionism in some regions as well as prohibitive costs of collecting evidence and filing court cases as obstacles to protecting intellectual rights.

"We can not find a satisfying way to solve these problems," Xia said.

Though he admitted the Taicang government is trying to build a sound intellectual property environment, he said his company would develop better if authorities in other regions cracked down hard on infringement.

Xia said joint infringement control effort among regions would better fight unauthorized sale of patented products as well as the production and sale of counterfeit goods, which are often sold at the same time in different places.
Xia's opinion was reflected in the survey's suggestions to the government, which include enhancing communication with the administrative and legal departments and establishing a nationwide system to rate the good will of companies. Once infringements are found, infringers should be disclosed to the public, the recommendations said

As one of 26 key national patent protection bases, Taicang will enhance cooperation with other regions addressing the trans-regional infringements, Chen said.

National patent protection centers selected by the State Intellectual Property Office (SIPO) are authorized to provide information and advice on building an intellectual property system while participating in discussion about major issues affecting patent protection.

Participation by the centers is important in exchanging information, leveraging advanced experience across the entire country and helping improve the performance of law enforcement, according to SIPO.

The first 10 patent protection centers were announced in April 2009 and a second list of 16 bases was released last November.

Improved efficiency

Cutting the investigation costs for collecting evidence, a requirement for filing an intellectual property infringement case, and shortening the time for patent application examination were other needs cited by survey respondents.

It now takes around three years to process a patent application in Taicang.

According to the statistics on SIPO's website, the national average examination period dropped from 53 months in 2001 to less than 26 months in 2009.

Time needed to secure patents on utility models fell from 11 months in 2005 to 5.8 months in 2009, while design patents required 5.5 months last year compared to 9.5 months four years earlier.

Improved efficiency enabled more than 150,000 invention patent applications to be handled during the first nine months of last year, a 40.9 percent increase over the same period the previous year. About 230,000 were processed in the entire year.

Hi-tech status

The Taicang survey showed just four of the respondent companies meet regulations to be recognized as hi-tech enterprises, only about 7 percent of the total.

Regulations require sustained development, research capability and proprietary intellectual property rights to obtain regulatory status as a hi-tech enterprise - entitling such companies to a 15 percent tax cut.

Without the high level of intellectual property rights required by regulations, the majority of German-invested companies are not eligible for the tax break - a factor hindering their growth, according to the survey.

Chen said local authorities plan to host briefings for foreign investors to enhance understanding and trust in various levels of the system.

"Foreign-invested companies will then be in a better position to know how to use the system and maintain their rights," Che said.

"Credibility is vital to an enterprise," Xia said, adding that his company will file for another two patents this year after applying for 10 last year.

Like Suzhou Tox Pressotechnik, Kern-Liebers China Group, the first German-funded company in Taicang when it began operations in 1993, is also a strong proponent of patented technologies.

Zhang Zhenwei, Kern-Liebers general manager, said the group applied for five patents in China in 2009, which are now being processed by authorities, and plans to apply for another five patents this year.

"Despite the global economic turmoil, our sales revenue did not decline in 2009, but instead increased by 15 percent compared with the same period of the previous year," Zhang said.

He partly attributed the growth to support for intellectual property protection from Taicang authorities.

"Now 85 percent of core technologies have been introduced into Taicang from our parent company in Germany," Zhang added. Kern-Liebers is one of the four companies in Taicang granted official hi-tech status.

Investment destination

To date, more than 140 German investors have established operations in Taichang, making it the most German- intensive investment destination in the province.

At a recent intellectual property forum for German-invested companies held in Nanjing, capital of the province, more than 70 percent of participants were from such companies in Taicang.

Because Jiangsu province is a key German investment destination, Taicang has drawn wide attention from the German business community.

With close proximity to Shanghai, the country's commercial hub, Taicang is attractive to investors due to convenient information, logistics and human resources.

At the center of the Yangtze River Delta, the small city is ranked among Forbes magazine's top 50 commercial cities on the mainland, according to Feng Yuliang, deputy director of the administrative committee of Taicang Economy Development Zone.

Jiangsu province has an established sister relationship with Baden-Wrttemberg, a state in southwestern Germany, which increases exchanges and enables more German investors to know about Taicang's investment potential.