Blossom of New IP Business Models in China

Government policy and social media are stimulating the interest for exploring IP business models in China.  SpringIP Group conducted a survey and identified the top 3 most potential business models for IP monetization in China in the coming years.

Interests of exploring IP business opportunities among Chinese IP professionals were inspired by the successful stories of Getty Museum, Intellectual Ventures or global research institutions (such as MIT), all of which operate profitable models based on IP monetization. This interest group was once small. However, in the past few years, thanks to the government policy and the long-tail effect of prevalent social media, the discussion, debate and experiments of new IP business models have arrived at a new level within this interest group and even gone beyond this circle to become a hot topic in the business community.

In fact, as China’s IP regime is developing, more proven business models in the developed countries now start flourishing in China.  For example, IP securitization, IP brokerages, patent-based public stock indexes, just to name a few.

In 2019, SpringIP Group, a company dedicated to enterprise innovation through AI and Big Data tools, published the results of its survey about this phenomenon.  Using a framework from previous researchers (see “A Summary of Established & Emerging IP Business Models” by Raymond Millien PCT Capital LLC and Ron Laurie at Inflexion Point Strategy LLC), SpringIP applied its proprietary methodology to the information and opinions collected in US and China.

The methodology of SpringIP for this survey consists of 4 steps:

1.Assigning a rating (0~3) to each IP business model in US and in China respectively to reflect the model’s current level of activity in these two countries.  The ratings were opined by SpringIP’s founders and their peers working in IP, finance and high-tech industries.

2.Comparing the two ratings.  A larger difference between the two ratings hints a larger vacancy to fill in by new services. The demand for new services is assumed to grow along with China’s industrialization, following the path that US has travelled.

3.Adjusting the above difference by other influential factors, including, for example, business cultures, China’s development plans, sizes of talent pools, or levels of professionality, etc., as essential to the success of relevant models.  Namely, a large vacancy does not necessarily mean a lager commercial potential, if other factors are unavailable to support the grow of that particular model.

4.Assigning a conclusive rating (0~3) in light of the above analysis, with 3 standing for the most attractive opportunities.

The 3 examples below illustrate how this methodology provides useful insights on IP monetization in China.

University Technology Transfer Intermediaries as rising stars

For example, the business model “University Technology Transfer Intermediaries” presents an opportunity vacancy (difference = 3).  In addition, the Chinese government is spending significant budges to build “innovation ecosystems”, with reference to the successful models of MIT in Cambridge or Sandford in Silicon Valley. As such, the survey concludes that this business model has a great potential (rating 3).

Defensive Patent Pool continues to grow

The model “Defensive Patent Pool” provides an example showing how an influential factor increases the commercial potential of a particular model.  This particular model does not present a huge vacancy (difference = 0), meaning that the relevant activity level in China is similar to that in the US. However, this business model will continue to grow strongly, because more and more Chinese companies are globalizing their operations, resulting in a stronger demand for the services of defensive patent strategies.  As such, the survey concludes that this business model also has a great potential (rating 3).

Stay away from Patent Licensing and Enforcement model

The “Patent Licensing and Enforcement” model illustrates the influence of business cultures. In the US, Non-Practicing Entity (NPE) (i.e., an entity which owns but does not develop its patents like Intellectual Venture mentioned above) is a well-established model to monetize IPs.  The similar model in China is just emerging, so the difference is large (difference =2).

However, such business model has no potential in China in the next 10 years for two reasons. First, Chinese culture tends to favor harmony against confrontation. The business community does not completely embrace the idea of western adversary judicial system and this business model does rely on litigation and effective enforcement.  Second, Chinese courts are acting in lines with a global trend that becomes less friendly to NPEs, as exemplified in the America Invents Act (AIA) enacted in the US in 2011.

In conclusion, SpringIP Group adopted the above methodology in the survey and identified the top 4 most promising IP business models in China for the next 10 years. As summarized in the table below, these promising models include IP/Technology Development Companies, IP-Backed Financiers, University Technology Transfer Intermediaries, and Technology/IP Spinout Financing.  SpringIP Group is assisting several Chinese players in the adoption and effective implementation of these business models.

IP Business Opportunities in China - surveyed by SpringIP Group (智汇权科技) in 2019 Legend: Levels 0 ~ 3, with 3 standing for the highest potential or more attractive opportunities.

 (Dr. Jili Chung is currently working in Greater China, founding SpringIP Group, dedicated to foster enterprise’s innovation through AI and Big Data tools. Carlo Geremia has also contributed to this article.)

Source: iprdaily.com

Author：Jili Chung

Editor：Vapor