There is never a dull moment in the Chinese patent market and 2021 proved to be no exception. From significant developments in FRAND jurisprudence through big plays from Huawei, Oppo and ZTE to a major overhaul of the law, it was all action in a jurisdiction that no-one with international pretensions in IP can afford to ignore.  

Chinese courts get green light to set global FRAND rates
The Supreme People’s Court, ruling in a SEP dispute between Sharp and Oppo, confirmed for the first time that Chinese domestic courts can set global FRAND licensing rates and terms under certain circumstances. It was the latest, and perhaps most significant move in the Chinese judiciary’s efforts to play a greater role in global SEP governance.

In theory, this groundbreaking decision potentially hands domestic manufacturers, and non-Chinese companies with significant production and sales footprints in the country, a powerful tool to wield for leverage in international disputes.

In practice, we are still waiting to see which Chinese court might become the first to exercise this new prerogative, with Sharp and Oppo having agreed on a cross-licence not long after the Supreme People’s Court ruling. One possibility is the Intermediate People’s Court of Chongqing, which has been asked to weigh in in the dispute between Nokia and Oppo.

Longtime Huawei IP chief Jason Ding announces company’s 5G licensing rates, then moves on
Huawei, the Chinese networking giant and a leading wireless patent owner, revealed 5G patent licensing rates capped at $2.50 per handset in March. Then, in May, its head of IP, Jason Ding, stepped down from the position to become general counsel at a smart energy affiliate, Huawei Digital Power.

Under Ding’s 15 year leadership, Huawei emerged as a powerful player in the global IP market. Its patent portfolio grew by leaps and bounds, and so did its stature in the world of licensing. The company surprised everyone when it reported royalty income of over $600 million in 2021’s first quarter, though it has not provided any subsequent updates.

Huawei’s smartphone and network equipment businesses have suffered significant decline thanks to years of sanctions. After spinning-off handset brand Honor, the company’s smartphone market presence is massively diminished. On the network gear front, its global market share has been suffered from geopolitical setbacks. All this has significant implications for Huawei’s licensing balance.

Having rolled out 5G royalty rates, the company is clearly eyeing not just the smartphone market but also auto and IoT companies to monetise its massive R&D investments. There are plenty of big decisions ahead in 2022 for new IP head Alan Fan.

ZTE unveils patent monetisation ambitions
Technology giant ZTE has pursued a balanced patent strategy for years, given its role as both owner and implementer in the wireless space. But with its smartphone business significantly reduced, and its overseas network infrastructure business slashed, the company made clear in 2021 that it is shifting gears to a more monetisation-driven IP strategy, especially in 4G and 5G wireless SEPs. It has told the market quite clearly that patents are set to become an important revenue stream.

To start with, ZTE says it is aiming to collect up to $930 million patent royalty revenue over the next five years. Marco Tong, the company’s chief licensing officer, elaborated on these plans in an exclusive interview with IAM. It is not merely the shift to a more licensor-centric perspective that is noteworthy, but also the way that the company is delivering that narrative in an open and confident fashion.

Following its announcement of licensing targets, ZTE filed a patent complaint against a Chinese smartphone maker, Tinno, in the Shenzhen Intermediate Court. Speculation is rife that more cases are also underway.

China’s patent law gets major overhaul
The Fourth Amendment to China’s Patent Law, which came into force on 1 June 2021, introduced significant reforms with far-reaching implications for IP protection and enforcement in the country.

The new law raised statutory damages to a maximum Rmb 5 million (about $735,000) in damages, and provides for awards to be up to five times that in cases of willful infringement. Those damages enhancements can also be applied to awards calculated on the basis of a patent owner’s losses or the benefit obtained by the infringer.

Addressing a long-time shortcoming, the revised law also seeks to alleviate the challenges in recovering evidence of infringement, enabling courts to order infringers to turn over materials such as accounting and sales records.

These amendments also represented the most substantial overhaul of China’s pharmaceuticals patent system to date, delivering a long-awaited linkage system. In November, the first civil patent linkage lawsuit was filed in Beijing; that case and other complaints in the courts and the patent office are being watched intently by the entire pharmaceutical industry.

Oppo dealmaking spree
Yet again in 2021, Oppo was in the headlines for its IP moves. The smartphone maker settled multiple patent licences, closing deals with Sisvel, NTT Docomo and Sharp. Wrapping up such cases has left the IP team under Adler Feng to focus on the company’s ongoing dispute with Nokia.

Oppo has demonstrated plenty of fight as a licensee and has established a track record of quickly responding to assertions using every available means: counter-suits in China or overseas, validity challenges, anti-trust claims and external patent acquisitions.

One significant commercial development in 2021 was Oppo integrating with brand OnePlus. This will place the combined IP operation’s focus even more squarely on overseas markets. For the patent team, that means a continuing central role in the global smartphone licensing space.