“The Door is Wide Open for Industrial Espionage”

We found this very interesting article about the emerging Chinese technology market and why language barriers between Asia end Europe and a lack of IP monitoring can result in severe patent infringements.

“The door is wide open for industrial espionage”

German construction & engineering magazine ke NEXT spoke to Dr. Alexander Wurzer of Wurzer & Kollegen Germany about China and why it has not been easy for the industry. He explains what the industry should be paying attention to.

The Chinese government will give a presentation at the Hannover Messe (trade fair), presumably on government research projects in the field of energy efficiency, more specifically environmentally friendly automobiles. What does this mean for the industry?

Europeans need to separate themselves from the idea that only second-rate ideas and technology can originate in China. In all actuality, China has presented to the world original, and in many instances, world-class solutions. And that means that we have to deal with this prior art as it is produced in China and that the IP management has to look into this. There is an unbelievable amount of technical patent literature that we simply can’t read. However, this also means that patent applications based on Chinese inventions are filed in Europe. These applications can then be cited against European companies and in the worst case scenario German or European companies may be guilty of patent infringement.

You just said that it is up to the companies to research the Chinese prior art. But the Chinese language isn’t English. How are these companies supposed to accomplish this?

That is exactly the problem! There are some databases that provide Chinese literature in English. However, there is a pretty long delay from when the Chinese literature is published and when the English document is available. But they are helpful if someone wants to become familiar with and knowledgeable in one field. If someone wants to study current documents they can use service providers that specifically deal with Chinese patent literature inquiries. It is important to realize that the Chinese prior art needs to be monitored. This is an intellectual problem and not a technical issue.
In your opinion, in what areas is China already an industry leader?
Today, China is already a world leader in electric bikes. And one area in which China is absolutely a technology leader is in the field of battery technology, which includes electrochemistry. These are fields that are specifically selected because they are key skills that China will continue to lead in in the foreseeable future. It is important to understand that in this competition, the competitor has a completely different mindset. You can’t assume that this competition is played with Western ideals. They fight this economic war by completely different rules.

How does China go about capturing the market?

Chinese investment companies systematically buy technology companies or at least become shareholders in these companies. The most notable recent example of this is the concrete equipment manufacturer Putzmeister. To my knowledge, this is the first time that a larger mid-sized technology company was sold entirely to a Chinese competitor. This was a deliberate technology acquisition.

So what you mean is that Germany has to be prepared for this type of action?

We still have many competitive advantages like purchasing power, sophisticated networks, a high-level industrial culture and a decades-long culture of intellectual property. But there are still many areas in which we can improve.

Does that also include the patent field?

In the next few years we will most definitely see a German company close down specifically due to an infringement of a Chinese patent. Today, China has more patent applications submitted than Germany. And they will quickly catch Japan and the USA in this regard.

Regardless of this, plagiarism plays an important role in China. How can a company protect itself against this?

Plagiarism is the result of know-how theft. And know-how theft is just like a virus infection. At first you don’t know that you’ve become infected. Then you have an incubation period when you don’t know that you are already sick. Plagiarism is the outbreak of the disease. The even bigger problem is that you were unable to prevent your competitors from learning from your ideas. At this point the competition is able to imitate your product in any number of ways, many of which may even be legal. Like before, mid-sized companies don’t have a distinct feel for their own know-how and especially not for the massive shock of know-how theft. They go to China with hard drives and memory sticks and are wide open for any type of industrial espionage.

What advice have you given your clients, especially when they have discovered the plagiarism?

What is most important is that I have a consistent enforcement strategy. When I discover the plagiarism I first remove it from the market in Germany and track it in China with the help of local and experienced partners. Many people do the exact opposite and choose partners that aren’t established in the international markets who don’t know the political and legal environment in that area. There are many regions in China that make their living off of plagiarism. Do not underestimate this.

Tracking this must cost a lot of time and money. Wouldn’t it be more practical if you could prevent the virus from infecting the company in the first place?

Of course, but this requires protecting yourself early on. It is imperative to first identify what know-how you may have, where that information is located, and how a third-party could ever access that location. The next step is to guard, at least some extent, against industrial espionage. Just like with any other crime, the easiest victims are the ones hit first.

It sounds so obvious when you say that the company must first identify where their know-how is located.

It is, but when you are talking to a mid-sized company they sometimes don’t have a good sense of where this know-how really is. For example, I was working with a client in the field of manufacturing processes that had this mindset. As we began to look more closely at his company, we determined that these manufacturing processes were being done by specially constructed machines. They are custom-made machines that can only be adapted to the needs of the two-thousand employees that work there by two people. Only two people know how to operate that machinery. And the management had no idea! This company documented this knowledge, secured it, and trained more employees to be able to operate the machinery in order to widen this knowledge base.

Questions were asked by Angela Unger, ke NEXT magazine (translation by MultiLing)

Wurzer & Kollegen
Wurzer & Kollegen is one of the leading consulting and service companies in strategic intellectual property (IP) management and valuation of intangible assets in Europe. Based in Munich, Germany, they have more than 10 years of experience with consulting clients on the economic benefits of their patents, brands, and know-how.