Innovation's Crouching Tiger (Second Edition): 新創臥虎（第二版國際英文版）

By Jili Chung and 鐘基立

No One Will Remain Unaffected.

Upon the inception of the US-China trade war, China's IP regime experienced rapid-fire development. The STAR market and the first patent securitization deal are a few of many developments accelerated by this conflict showing that the market appetite for IP monetization has reached

• Language: English
• Publisher: EHGBooks
• Release date: Nov 1, 2020
• ISBN: 9781647844080

Book preview

About the Author

About the Author

Dr. Jili Chung (鐘基立) is an MIT Sloan Fellow and holds a J.D. from UCLA, a Ph.D. from Peking University, both an MBA and a BS from National Taiwan University, and an MS in Management of Technology from MIT, with qualifications of attorney-at-law in California and China, a patent agent in China, and certification of securities professional in China.

With 20 years of working experience in Greater China, he dedicates himself to IP-leveraged innovation and is enthusiastic about exploring values of ancient Chinese cultural heritage entangled in modern, technological innovation. Take iPhone for example; the simplicity in the design of this modern commodity is informed by Zen teachings.

Dr. Chung has worked in Washington D.C., Hong Kong, Beijing, Shanghai, and Taipei for global corporations, as an executive director at Goldman Sachs, a senior lawyer at Clifford Chance, and as the General Counsel for a leading company in Apple’s supply chain. He is an adjunct professor of the Xiamen University Institute of Intellectual Property Rights in China, and a research fellow at the Legal Research Center of Internet Finance at East China University of Political Science and Law.

He is the author of IP Financing for Creative and High-Tech Industries (2015 Peking University Press) and IP Monetization in China (2016 EHG Books Press).

Dr. Chung has founded SpringIP Group, dedicated to fostering innovation in small-to-medium enterprises in Greater China through AI and big data technologies.

He can be reached at [e-mail].

Preface

Preface

In August 2018, at MIT, we published the first edition of Innovation’s Crouching Tiger, introducing China’s innovative development trends that present both threats and opportunities (depending on your views in this co-competition). That was on the eve of the US-China Trade War.

In the two years looking back, the top five trend forecasts in the book have been realized and continue to change the balance of co-competition down the road.

Trend Forecast #1:  Collaboration with research institutions.  China considers it essential to build up innovation ecosystems around campuses like the models of MIT or Stanford.  Private research and development (R&D) expenses decrease as the economy slows down.  Research institutions are now driving fundamental research fueled by the government.

Trend Forecast #2: Foreign direct investment (FDI) liberalization. China’s FDI regulations are moving towards creating a level playing field, benefiting global players seeking collaboration beyond borders, especially in technology and finance.

Trend Forecast #3:  IP financing – patent pledge. The government continues to invest enormous amounts of resources to incentivize financial institutions, high-tech companies, and appraisers participating in the pilot program of the patent pledge.

Trend Forecast #4:  IP financing – IP securitization.  At the end of 2018, the Chinese market saw its first IP securitization deal (mainly related to copyright), and global financial institutes took note. In July 2019, as the third IP securitization deal in a row, the first patent securitization deal debuted.

Trend Forecast #5:  You cannot wait and see.  The first edition of this book from 2018 advises that "you can choose to collaborate or to compete, but cannot afford to wait and see." Co-competition between China and the US will undoubtedly continue for decades.  No matter where you are, their cooperation, disputes, debates, and both good and bad developments will remain a focus of attention as they shape almost every aspect of the global economy.  No one will remain unaffected by this most intense yet unpredictable dynamic of the century.

Riding on these trends, in this edition, we more deeply explore their implications. The methodology used in this book to analyze contemporary issues and stories relating to these trends can be used by readers to analyze future global issues, domestic happenings, and to inform one’s actions.

How is the trade war fostering IP monetization in China? Some commentators believe the trade war is speeding up the transformation of China’s IP innovation regime, creating a more favorable environment for IP monetization.  Is this true and, if so, in what aspects?

The STAR Market – a new window to observe China’s innovation regime. China’s new stock board is revealing valuable information and insights on its evolving innovation regime. How can one effectively use this board as a dashboard for IP monetization in China?

What do AI and blockchain have to do with IP monetization in China? China is a leader in these emerging technologies. How will such competitive advantages benefit IP monetization in China?

How does China’s new Foreign Investment Law clear the way for IP monetization? As globalization stalls and confidence in currencies decreases, is ‘in-kind investment’ a feasible option in China?

The new era of IP securitization in China. In 2019, the Chinese market has seen more than ten IP securitization deals, with accumulated proceeds exceeding CN¥10 billion.What is the background of this achievement? Will the growth continue?

This text also covers first-hand, exclusive surveys providing extraordinary insights on the developmental status of the innovation regime in China, including:

The blossoming of new IP business models in China. Exploration of IP monetization is becoming a hot topic. Our survey on this trend identifies the top three most promising business models for IP monetization in the coming years.

Will AI conquer the challenges in IP monetization? The story of top innovators in China. Our survey on the current leaders and their approaches reveals that they are transforming cutting-edge technology into products or services of commercial value in the innovation and IP monetization arenas.

IP exchange in China.As important venues, IP exchanges help to circulate and determine the value of IPs. Our survey on thirty state-owned exchanges and ten private exchanges provides insights on their challenges and implications for IP monetization in China.

This text also includes updates on regulatory developments, statistics, figures, and references, bringing readers up to speed on important, recent developments.

The structure of the book continues to follow the first edition:

Part I looks at key facts. It provides straight forward accounts of relevant episodes and incidents relating to IP monetization in China.

A reader may feel the observations, though fascinating, are somewhat disorganized. That is intentional—this reflects exactly the chaotic state of affairs in China. We make sense of this in Part II.

Part II organizes and analyzes these facts into three components (i.e., the three lenses) of any IP monetization deal. These are the IP’s creation and transfer, the IP pledge (as collateral to a loan), and IP risk mitigation.

In this part, we analyze against the backdrop of the evolving regulatory regime. This provides additional information for those seriously planning to monetize IP in China.

Part III concludes by highlighting certain strategic guidelines for IP monetization in China.

Readers who will benefit most from this book are:

Young business professionals planning their career paths under the new global economic norm

Senior business managers shuffling their global technology supply chains around the US-China trade war

Engineers, scientists, or researchers wanting to apprehend the changes of the global innovative ecosystem resulting from China’s technological growth.

Think tanks within governments, NGOs, or global institutes deploying their resources in response to China’s developing innovative regime.

Investors and their agents (bankers, lawyers, accountants) seeking insights on global investment opportunities created by chain reactions from China’s move in innovation.

Foreword by Tianpeng Wang

Innovation: Momentum of Change

A small, power-efficient sensor invented in 1992, by Professor Eric Fossum of Dartmouth College, made it possible for all of us to take photos using our cell phones. Based on this technology, electronic eyes were later developed which transformed traditional tractors into GPS-guided autonomous farm equipment, dramatically increasing the productivity of farms worldwide. Technology has changed the way we travel, where we stay, how we make payments, the way and frequency with which we take photos, where we interact with our friends, our expression of 'likes', how we shop, communicate, and conduct all kinds of business.

Innovations provide continuous momentum for growth and improved efficiency in the world of work, which simultaneously makes global economic interdependence unavoidable. The pace of technological innovation seems to be increasing exponentially; businesses simply cannot stand by and watch. Business models need to adapt and change alongside technology.

When Jili and I were both business lawyers at Clifford Chance, we were committed to providing the best legal service to Fortune 500 companies and global financial institutions.  We were lucky to see the world from a variety of perspectives, and we were both compelled to do something more and make the best use of our knowledge and experience. Our respective paths have been different since those early days of working together, but our interests and endeavors continue to overlap significantly.

Since the early days of my legal career, I have always wanted to make high-quality legal services available and affordable to small and medium-sized international businesses and individuals. This is the vision behind Trustiics.com; to improve the efficiency of the legal services market through the use of information technology and the internet; and to break down geographic, linguistic, and financial barriers for businesses looking for top-notch legal counsel in a foreign country.

As Jili highlights in this book, China especially is a rapidly growing market for foreign investment and other business opportunities. Access to professional legal counsel there is thus invaluable to those who wish to succeed in that market. When I launched Trustiics early in 2020, none of us could have foreseen the extent of the global impact of COVID-19, and the even greater reliance on e-commerce the pandemic would bring. What began as an innovative way of accessing legal services has quickly become almost a necessity.

A well-known saying from Confucius advises that learning without reasoning leads to confusion; thinking without learning is wasted effort.  In Innovation’s Crouching Tiger, Jili has provided an indispensable updated overview of the IP monetization landscape