8 August 2011

Research Illustrates Importance of Partnership in IP Licensing in China.

China Business Solutions, in association with its strategic partner Schmittzehe & Partner, has just completed a study on business opportunities in IP licensing and commercialisation in mainland China.

The research shows that China is seeing significant growth in investment in R&D and patent registration. Two Chinese companies: Huawei and ZTE, are now among the world’s 100 top patent applicants. The Ministry of Science & Technology (MOST) has set up a nationwide network of IP exchanges and organisations to facilitate commercialization of IP at earlier stages. Despite of this, technology transfer is still small in China compared to other forms of technology exchange activities through these networks. There is an abundance of local VCs and incubators too although they are different from those in the West and typically reluctant to invest in early stage technologies.

The main opportunity continues to be in commercializing IP which has been progressed at least to the applied research level but ideally to the proof of concept stage. With a shortage of local VC funding for early-stage start-ups, a potential reluctance among them to invest in a not purely local venture, and a need for local entrepreneurs to run such companies, one or more local strategic partners would be very important should a foreign company or organisation wish to commercialise its IP in China. Such partnership would be important for a number of reasons such as to assist in developing local relationships, identifying potential customers, and facilitating the process on the ground. But one should not expect overnight success in licensing IP in China. Given the challenges with commercialization, Western organisations would need to show commitment to this endeavour and be comfortable with not expecting a return on investment into IP commercialisation in China for at least a few years initially. Ultimately, the key to success is likely to be forging strong strategic partnerships with the best potential local partners available and working with these partners to achieve success in China.