Monetizing IP in China

By Jili Chung and 鐘基立

Preface 

This book consists of three parts. 
Part I covers facts. It provides straight forward state-ments of various stories or incidents relating to IP monetization in China.
A reader may feel the observations, though fascinating, are somewhat disorganized. That is exactly the case in China. So, we need Part II.

• Language: English
• Publisher: EHGBooks
• Release date: Nov 1, 2016
• ISBN: 9781625036056

Book preview

Part I      Observations on IP Monetization in China

Part I covers social and economic observations relating to IP monetization in China. It provides a snapshot of the current situation. It is more focused on factual introduction. More in-depth, insightful analysis is provided in Part II.

As a preview, each observation will deliver key messages as below:

Highlights of dynamic development: The selected highlights cover topics of the most popular market intelligence about IP monetization in China, a good quick overview of the current status for the first-timer to this energetic environment.

Planned economy and regulatory regime: One can really understand China only after understanding the role of the planned economy and hierarchy of its regulatory regime. They may not appear organized at glance. However, if interpreted with the right angels, the apparent chaos immediately becomes sensible. Fundamental principles, policies, and regulatory regimes, are actually consistent, coherent and predictable.

Spirit of experimentalism: Spirit of experimentalism or pragmatism provides an insightful view to the social and economic regimes. They also provide complementary perspectives to better understand the regulatory regime. This is especially true for IP monetization. The philosophy can sometimes serve as a compass for steering IP monetization projects through uncharted waters in China.

From quantity to quality: Quantitative changes may result in qualitative changes. This rule applies well to IP monetization in China. Such transformation is taking place in IP monetization with several driving forces.

Excess liquidity in certain sectors: Economic restructuring and excess liquidity are not only hot topics in China but also present opportunities. As government is tackling these issues, private money is eager to seek investment targets, fueling IP monetization.

Highlights of DynamicDevelopments

China is well known for its volume of population, consumption, foreign exchange reservation, etc. A small percentage of variation to the volume often causes a non-ignorable magnitude to the global economy.

This applies to the IP area, too. But, it should be good news for IP monetization. The voluminous base of IP may serve as a potential IP pool (i.e., the collection of the patents or trademarks filed at the China patent office) for deals.

The sizable volume can best be understood through a comparison below.

In comparison with Taiwan, a major player in the global high-tech supply chain, the growth rate of China’s IP pool is clear.

In the year 2014:

In the year 2015, the multiplier enlarges further:

Comparison with other global players is illustrated in Exhibit 1 below.

各國IP趨勢 NEW 2

Exhibit 1:     Worldwide patent application filing trends (2004-2014)

IP pledge (using IP, such as patent or trademark rights, as collateral for a loan; see Part II Section 2 for detailed definition and illustration) is an important tool for structuring IP monetization. Both the volume and complexity of IP pledge deals are increasing in recent years in China. The summary below shows the big picture.

Patent Pledge

Trademark Pledge

Copyright Pledge

As early as 2005, the movie Curse of the Gold Flower¹ secured a 10 million USD loan with collateral of the pre-sale contract of the box office (i.e., the rights to the sales revenue under the pre-sale contracts, a form of royalties derived by the copyright, are pledged to the lender).

In 2007, the movie Assembly² secured a 0.5 billion RMB loan with IP as collateral in its early stage of