Semiconductors Aid Chinese Focus On IP Issues

SHANGHAI, China — As China and the United States prepare for the annual Joint Commission on Commerce and Trade (JCCT) early next month, the thorny issue of intellectual property protection is pushing to the forefront again.

Even though there is deep dissatisfaction among many U.S. businesses about China’s track record, many semiconductor executives believe the benefits of engagement outweigh the risks of IP abuse. “The Chinese mainland will not go on ignoring IP protection,” said Justin Wang, a vice president at leading semiconductor production equipment maker Tokyo Electron Ltd. “If you wait until everything comes into place, it will be too late.”

The JCCT is a chance for high-level trade officials from the United States and China to hash out differences on trade policy, and discuss opportunities for cooperation. In 2004, the JCCT is where China decided to back away from mandating a proprietary wireless LAN technology known as WAPI. The forum was also used to discuss U.S. protests related to China’s tax refunds on locally made semiconductors.

This year, IP will be a central focus, as the U.S. expresses frustration over the pace of progress on IP protection across a wide range of industries, from textiles to semiconductors and electronics. Chip executives in town this week for the annual SEMI equipment trade show said they expect China to make more rapid progress along the technology front in order to improve its ability to attract high-level foreign partners.

“The most successful collaborations or joint ventures have a flow of intellectual property between the partners concerned, and that can only really occur if there is sufficient protection,” said Paul Hyland, president and CEO of Aixtron AG, a provided of deposition equipment to the chipmaking industry. “The fact that the government is making noises about enforcing IP rights is a good sign.”

China has, indeed, been sending signals of its intent. Last week, it released a treatise spelling out its plan to improve IP protection. Yet it has issued similar documents before. Time will tell if the central government has the ability to enforce its will.

Like others before him, Hyland believes China needs a better framework of IP litigation so that potential partners can feel comfortable that there is legal recourse if something goes wrong. But even though some observers have noted that China has plenty of laws governing the use of IP, consistent enforcement and punishment are still lacking.

“If there is any IP dispute arising in China, it is very difficult for the foreign companies to win the lawsuits because the cases are handled in regional courts and those courts usually understand the IP rights in the domestic region,” Wang said. “So for any company to enter China, they should have applied for patents here.”

Certainly, there are examples of growing confidence in China’s desire to protect the innovations of the semiconductor industry. In the long term, it will be a strategic necessity if it wants to protect the partnerships already in the works, and persuade others to take the plunge.

This week, a delegation of small businesses sponsored by SEMI will be surveying the business environment in China to see if the opportunities eclipse the risk. “We have entrusted our technology to a Chinese company before, and so far we haven’t found any problems,” said William Lee, general manager of Asia Pacific sales for foundry chip provider Jazz Semiconductor.

“Just because you can get pirated DVDs in China does not mean that there is no IP protection at all. If the two technology partners want to have a long-term relationship, they won’t take the risk of fooling around with IP,” he said.