Just finished coauthoring a short article for the upcoming Business at Oxford, any comments???

China’s Newest Appetite:
Growing respect for Intellectual Property in the Middle Kingdom

By James Lye & Stephen Gotz

With the Beijing Olympics heralding the end of the beginning for China’s re-emergence, the nation looks towards importing new technologies to move its industries up the value ladder. Much of the demand is bottom-up, with the massive SME manufacturing sector finding itself squeezed by upcoming low-cost centers in countries like Vietnam. Moreover, with the government having committed 2.5% of its GDP towards funding R&D, China’s lawmakers and courts are seeing the benefits of protecting the massive amount of IP being generated. This will come as good news for long-suffering foreign entrants. 

As the quality and quantity of indigenous Chinese IP continues to increase, the Western world can no longer claim a monopoly on innovation production. The locus of IP production and utilization is shifting from the Anglo-Saxon world to rapidly growing emerging market economies. In the not-to-distant future the greatest opportunities (financial, social and philosophical) in the field of Innovation Management will be in geographies where enlightened governmental policies encourage not only IP production and protection but also the art of commercialization. 

Worldwide, the portion of overall corporate value residing in intangible and tangible assets has reversed over the past few decades. The intangible value as a percentage of market value has grown from 16.8% in 1975 to 79.7% in 2005. Accordingly, it has never been superficially easier to protect IP. A single international PCT application now enables an inventor to seek patent protection in 124 signatory countries. IP is coming to be viewed as any other securitizable asset, to be traded, optioned and openly marketed on a global scale.

While the traditional technology transfer infrastructure in China remains embryonic with many voids, indigenous Universities are quickly adapting Western models to the intricacies of local market conditions. Subsequently the region is driving growing demand for innovation intermediaries, organizations and people, who are able to help bridge the current gaps preventing seamless IP commercialization and whose work will enable a whole new generation of IP-enabling services.

As many corporations abandon vertically integrated R&D efforts the need for globally distributed open innovation networks takes on new importance. Even highly localized retailers like Boots, the UK pharmacy chain, are leveraging the tenants of open innovation to enhance their product portfolio by tapping into an increasingly sophisticated network of IP generators throughout the Asia-Pacific. 

At the same time companies like Intellectual Ventures are the Blackstones of its sector, moving fast, aggressive, and extremely secretively to dominate the IP landscape, leading some to believe we are witnessing the beginnings of an IP Cold-War with the Asia-Pacific region being the frontlines and IP a strategic weapon in corporate arsenals. The newly founded Allied Security Trust is offensively acquiring global patents of strategic interest to its founding members, which include such transnational giants such at Motorola, Google, Cisco, Hewlett-Packard and Ericsson. 

As organizations begin to re-evaluate their strategic options and current IP portfolio, it is no longer enough to give lip service to open innovation. Those that do will find themselves increasingly sidelined. The recognition of China and other emerging economies as both a source and market for innovative, high-quality technology is remapping the strategic landscape.

Battle lines are now being drawn, and the outcome will determine the future of IP.


James Lye and Stephen Gotz are ‘08 MBA graduates of the Said Business School, and have spent the summer in the Far East conducting research on innovation strategy and IP management.