Chinese firms exposed to malicious IPR allegations

Although China has made great strides in developing its high-technology sectors over the past decade, awareness of, and respect for, intellectual property rights (IPR) still remains relatively low in the country. Regrettably though, many of China's most prominent technology companies are exposing their legitimate rights to serious danger by failing to develop a stronger expertise in matters related to IPR as they prepare to tap overseas markets.

Indeed, two of China's largest telecom equipment makers, Huawei Technologies Co Ltd and ZTE Corporation, may soon find themselves in hot water for this very reason as the United States International Trade Commission (USITC) recently launched an investigation into claims that the two had infringed on the IPR of US-based firms.

While no one can say at present whether or not Huawei or ZTE actually violated the IPR rights of their competitors in the US, it would not be going too far out on a limb to say that the world's established leaders in the telecom industry are feeling threatened by the presence of these two new comers as they enter the international market.

It's also probably fair to suggest that savvy foreign firms are attempting to exploit the lack of IPR knowledge among up-and-coming Chinese companies by bombarding them with patent violation claims in order to drive them out of - or at the very least weaken their position in - overseas markets.

Back in 2004, for example, US-based Leviton Manufacturing Co Inc, a leading manufacturer of lighting controls and wiring devices, alleged that its competitor, China's General Protecht Group Inc (GPG), had infringed on its IPR. Leviton filed a lawsuit to prevent GPG from importing its ground fault interrupters into the US.

Ultimately, citing US antitrust laws, a New Mexico district court in 2007 required Leviton to withdraw its charges and terminate a patent probe being conducted into GPG by the USITC. Unfortunately though, the three-year legal battle ended up costing GPG $13 million and never really laid to rest accusations that it had illegally used Leviton's patent.

At this point, as more and more Chinese companies move to take a place on the world stage, it behooves them to do their utmost to conform to international IPR standards. Not only will this spur homegrown firms to become more innovative and competitive, but also give Chinese companies with global ambitions the tools they need to defend themselves from charges of infringement.