ZTE’s Global Patent Deployment

2010/1/10By Jody Lu, China IP,[Comprehensive Reports]

ZTE Corporation (ZTE) is a leading global provider of telecommunications equipment and network solutions. ZTE has brought many surprises to the world in addition to CDMA, TD-SCDMA, IMS, and GOTA. In 2010, a group of ZTE employees made the company a star once again. Under the context of addressing the company’s decreasing patent applications, for the first time in the last 30 years in 2009, ZTE became the No.1 enterprise in terms of having the fastest rate of patent applications, with the growth of 53% and 502 individual internationally published patent applications.
When referring to numbers, The IP manager of ZTE Feng Yanmin told China IP, “For us, numbers are the source of strength.” And it is from this sentence that he began to tell the IP story of ZTE.
 
ZTE IP Strategy from the Forced Choice to a Necessity
In 1995, like other Chinese high-tech enterprises that made the first step in implementing the “going global” strategy, ZTE was confronted with foreign IP barriers. “As early as 1996, ZTE established its preliminary IP model, and the model took shape in 2002. At first, the IP model was a forced choice for us, ” said Feng Yanmin.
 
With the “going global” strategy, ZTE has been involved with more and more IP disputes. In 2006, IP disputes began to emerge; 2007 and 2008 saw a large increasing number; in 2009, the year of the financial crises, the U.S. launched a “patent slaughter” in which Huawei, Lenovo as well as ZTE were impacted.
 
Besides the competition from its competitors, ZTE is also faced with the “blackmail” from patent license companies. There are even some patent license companies that do not manufacture any products but purchase patent or self-develop technology so as to gain compensation and licensing fees from other manufacturers by launching patent suits or patent licensing complaints. Since 2008, ZTE has been maliciously sued by HPL, WIVA and others.
 
“On the premise of the free competition of products and market, we have found that IP plays a pressing role in our development. However, this phenomenon is a necessary episode in the ‘going global’ of enterprises. We have realized that the IP strategy is a sure-fire way to satisfy our need for self-development, not only just a relief for suit pressure,” Feng Yanmin explained to China IP. “Telecommunication is a fully competitive market. In China, foreign companies monopolize the 1G and 2G industries. As a latecomer who seeks survival and development in such a fully competitive market, we place high priority on IP strategy. ”
 
Since 2006, ZTE has made great breakthroughs in African, Asian, and South American markets and ambitiously entered the European and the U.S. markets where IP is most developed. “ZTE felt more and more serious competitive pressure during its entrance into European and North American markets,” told by Feng Yanmin, “The IP battle with European competitors is more real and intensive.”
 
In 2005, the DSL equipment marched into the French market, and thus had bad impact on the market share of French competitors. So the French competitors brought an IP suit against ZTE. With sufficient patent analysis, the warning mechanism, and excellent products performance, ZTE responded positively to the suit. Finally, both parties reached reconciliation. This has helped ZTE clear away IP obstacles to sell its DSL equipment in France.
 
“Since this an international rule, both of our operators and clients take high priority on IP, therefore, we have to obey this rule. More still, if properly used, IP strategy comes out right every time” said Feng Yanmin.
 
Complete IP Management Mechanism from Top to Bottom
Up till now, besides China, ZTE has established 16 R&D center respectively in the U.S., Sweden, France, and India, with a stable investment of 10% of its turnover. The value of the investment has not decreased, even in the financial crisis. Correspondingly, a complete IP management mechanism from top to bottom was established by the IP strategy office, IP manager, and patent engineer.
 
According to Feng Yanmin, the IP management focuses on operating. ZTE sets up IP strategy offices, which connects IP with R&D Department, Marketing Departments and Logistics Departments, aimed to embed IP in daily operating. “It is difficult for IP strategy offices, an independent department, to co-work with other departments. To establish IP strategy offices on a level of decision-making is unique thinking.” told Feng Yanmin. The Logistics Department of ZTE could avoid the potential IP risks in the purchasing process with the IP guarantee from its clients; the R&D Department could control the risks with the patent project analysis, risk assessment and control; the Marketing Department could remove the sales obstacles with IP defenses and the operation of IP capital.
 
The IP team of IP strategy offices is the exclusive executive department. It is learnt that there are more than 100 IP managers, and the number is the largest among Chinese enterprises. The whole team is divided into line manager, general manager, and negotiating manager, based on their job responsibility, among which the line manager should have a strong technical background because his job is R&D related.   
 
Patent engineers in each product line of the R&D Department also need to work with the IP team. It is these patent engineers who implement IP theory into the product research and development. “Without the efforts of IP managers and patent engineers, IP operating won’t succeed. And it is very efficient in reservation and asset valuation. ” Feng Yanmin commented.
 
The highlight of ZTE IP management lies in its three businesses: the reservation, management, and operating of IP assets. The IP asset reservation works to develop and deploy trademarks and patents, so as to transfer technical innovation into property rights and become company assets. “If we don’t do this, many skill points are separated from each other. With the effective development and deployment, each skill point connects with others, and becomes an optimized patent portfolio, ” explained by Feng Yanmin.
 
In the field of IP asset management, a lot of work needs to be done, from patent application to patent authorization. This process relies on the complete workflow within ZTE. After the patent authorization, we must calculate the patent’s value by thoroughly investigating the patents assets. Feng Yanmin said: “With patent authorization, we must pay close attention to its value and effectiveness and then decide what measures we should take. Therefore, we have our own choice between attack and defense. This is the exactly the result we want from patent operations. ”
 
When asked about his feeling as an IP manager, Feng Yanmin said: “we have done all jobs related
to the process of transforming the patent authorization to an efficient asset and then vitalize the asset. The process is time-consuming and exceedingly laborious. And we are recruiting new people to join us for increasing IP work.”
 
ZTE places high emphasis on cultivating the IP culture in its workers. A compulsory course for new employees is the IP course. Meanwhile, ZTE have special awards not only for inventors but also those who make efforts in promoting IP development. Though ZTE has reduced awards in other activities, it never cut back awards in this field. More, Feng Yanmin introduced an interesting activity organized by the IP department; Mobile Innovation Hunt, which has attracted a lot of employees and many designs proposed by them are very exciting. 
 
Patent Deployment in Foreign Countries
As a leading company in the realm of telecommunication, the global patent deployment is a must.
The business area of ZTE covers wired products, wireless products, service products and terminal products. The major patents are derived from these products.
 
“We never talk about patent deployment with no real content,” told Feng Yanmin, “first of all, we make a general evaluation on the technology, and we make a judgment on the skill points to decide which ones qualify for a patent application, which one is a core patent, which belongs to a technologic gap. Second, we make choices based on different markets and regions, different legal systems and political environments. Third, we make a follow-up judgment whether the applied patent is effective, whether it needs maintenance or annual fees. More jobs are needed to practice making these judgments.”
 
Since the major patent battle field is Europe and the U.S., ZTE has made key deployments for these important technologic patents. In story form, Feng Yanmin told us a truth, that peace is built on the base of strength. 
 
Once time in France, a competitor wanted to make a patent license on ZTE. However, after information collection and analysis, ZTE found that the competitor had infringed some of ZTE’s patents when their products were exported to China. So ZTE took a clever countermeasure: requiring a patent license on the competitor. Finally, with negotiation, both made a cross license.
The negotiation in the realm of telecommunications is particular for the monopoly. Since foreign companies have technological advantages over that of China, they always ask for high license fees. “With great patent accumulation and excellent deployment, we usually make cross licenses with foreign countries, thereby we save a lot of money,” said Feng Yanmin. “For us, numbers are the source of strength. Analysis on a patent is complicated; hopefully, we can reach an ideal result where the parties have the ability to hold each other up.”
 
It is learnt that ZTE has begun to develop cross licenses in foreign markets, especially GOTA, CDMA technology, it also made license on other manufactures. Tian Lipu, director of the State Intellectual Property Office holds the opinion that from the application number one can tell the IP awareness of an enterprise, from the patent authorizations one can tell the quality and level of its innovation, more important is the quantity of effective patents, which reflects the level of marketization and industrialization. Like Feng Yanmin said, quantity was meaningful at the beginning of developing Europe and the U.S. markets. It was practical to increase the quantity at first, and then enhance the quality and deploy the global patent plans.
 
Also, ZTE positively takes part in the arena of international standards. It is reported that, up till now, ZTE has been a member of more than 70 international standardization organizations and forums. ZTE has submitted more than 12,000 articles to international standardization organizations such as ITU-T、ITU-R、3GPP、3GPP2、ETSI、IEEE、OMA、IETF, and there are 30 experts working as presidents and reporters. Even more, ZTE has obtained drafting rights and more than 80 international standard editors.
 
For enterprises, joining international standard organizations is a senior strategy of public relations. Combining IP with international standards has been a new rule of developed countries: turning the core technology into patents, which will be integrated into standards and be generalized in a large scope as much as possible so as to reach the goal of a monopoly, that is, patenting, standardization, and globalization.
 
China IP was told that compared with multinational company, ZTE’s development features a defense strategy. Though Feng Yanmin didn’t elaborate on this point, we can judge from its participation in a series of international standardization forums that it is waiting to get a large piece of the pie.

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