Intellectual property is proving successful for a number of domestic companies in Shandong province.

"It's just a game rule that we have to follow," said Wang Jianguo, IP director at home appliance giant Haier Group.

While many domestic players talk about the significance of IP, those announcements are often only on the surface, said Wang.

At Haier, IP means far more than public image, he noted.

"It ensures greater mobility for our company in the market.We need to pay more attention to data research before filing a patent to avert infringement risks. And in case of a violation by others, we should be in a position to defend ourselves with a vast IP pool," he said.

Wang cited the principle in the ancient Chinese military treatise The Art of War by Sun Zi that "you'll be never defeated if you know both your rival and yourself well" to illustrate the importance of expertise in the overseas IP systems and markets.

After consulting with US attorneys many times, Wang's team set up an "information firewall" tailor-made for dealing with the legal system in the United States.

They have compiled a set of detailed protocols, including how to handle legal correspondence.

Their prudent attitude helped them through three US Trade Commissions Section 337 investigations - which can ban imports for IP infringement - filed against Haier in recent years.

In one of the cases, the Qingdao-headquartered company reached a settlement with the complainant in a month at some $10,000, much lower than the average multimillion-dollar cost.

In another, the company leveraged its supplier's legal force to defend itself.

In the most recent case, the trade commission ruled in Haier's favor.

The ancient military doctrine is also valued at another Qingdao company, Luye Pharma Group.

Noting the marked difference in the medical industries and patent systems in various countries, the company's IP Director Sun Lifang said Luye Pharma prefers outsourcing foreign patent filings in target markets such as Germany and the US.

The company has since been granted 65 overseas patents.

Unlike most of its domestic peers that make generics, products resulting from Luye Pharma's patents and know-how generate some 80 percent of its sales.

As well, the pharmaceutical company has long made it a priority to fully use IP documentation, Sun said.

"Disease prevention is always better than treatment. It's the same with IP management," she noted.

Searches of industry patent databases are an essential prerequisite for starting an R&D project at Luye Pharma, Sun said.

"It enables us to not waste time developing already patented technologies. At the same time, analyses of patent data from industry leaders also gives us a clue about future trends."

The IP team does not only serves as part of the management. It also has close ties with the business development department and R&D, she added.

One of its products was crossed off the list for export to the US after Sun's team recognized its IP risks in the market.

Haier Director Wang said that the IP department plays an active role in quality control. It not only serves, but also monitors research.

"Capitalizing on the patent database worldwide, the IP team is well positioned to evaluate the quality level of research results," he said.

The pursuit of quality has resulted Haier's ranking as eighth among the top 50 innovative companies worldwide, according to the latest survey by Boston Consulting Group.

Before a small factory with more than 1 million yuan ($163,413) in debt, the company has grown into a top home appliance maker with an inventory of more than 13,000 patent filings by the end of last year, 9,000 of them granted.

Shengrui Transmission Corp made its own turnaround legend because of its edge in patented technologies.

Before a spin-off of Weichai Power, the company manufactured simple auto components at the time. Though the business made a profit, the management sensed a looming crisis.

Liu Xiangwu, general manager of Shengrui, said that anyone could jump into the simple production.

After a thorough study of China's auto industry in 2007, the company turned to automatic transmissions, which was then a void in the domestic industry.

In cooperation with experts at home and abroad, Shengrui developed a proprietary eight-speed automatic transmission, which won China Patent Golden Award in 2011.

The award winner attracted the attention of financiers. After a bank pledged to offer patent-collateral loan worth 50 million yuan last year, an investment fund poured in another 180 million yuan to support mass production, Liu said.

The company has now signed deals with domestic auto brands Landwind, FAW Haima, Guangzhou Automobile Group and Zotye.

"Whether a business is small or big, it is promising only after it has its own technological expertise and core competitiveness," Liu said.

Two other Shandong companies - Goer Tek, a maker of acoustic components, and electrical kitchenware maker Joyoung - are examples of growth through proprietary technology. Backed by their strong patented-tech portfolios, both have participated in formulating national and international industry standards.

Government data shows more than 23,000 invention patent applications were filed from Shandong province in the first seven months of this year, a 60.8 percent year-on-year increase and 32.8 percentage points higher than the national average.

"Since the launch of the national IP strategy in 2008, we have seen increasingly improved innovation and creation-friendly environment over the past five years," said Yu Zhiyong, chief of the Shandong IP Office. "IP is now a pivotal force in driving local businesses."

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(China Daily 09/04/2013 page17)