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City's IP protection stance brings renown
WHEN Microsoft Corp launched its Windows 7 operating system that supports multi-touch technology in 2009, Cai Guangde bet the sector would be revolutionary and decided to expand his company, a touch screen maker based in Chengdu, capital of Sichuan Province.
But he was turned away by banks while seeking financing because the start-up company, Chengdu VTouch Technology Co, didn't have sufficient assets to mortgage.
Instead, luckily, he later secured a 1 million yuan (US$162,600) loan through a local government-backed financial service platform - with its patents in touch screen manufacturing.
"This really threw a lifeline to us because we were in urgent need to improve cash flow after enhancing research and development, building a new dust-free workshop with constant temperature and humidity, and buying lots of equipment," Cai said. "It has allowed us to share part of the touch screen bonanza."
Today, after three rounds of IP financing with 7 million yuan in total, Chengdu VTouch has grown to a company with annual sales of 110 million yuan, compared with 16.2 million yuan before the credit sponsorship.
The company now counts big names like IBM and Kodak as its clients in China, with its products used in fields ranging from POS terminals, industrial process control, medical, to security and in-car systems. Chengdu VTouch has also extended its R&D capability into the United States.
Patents as collateral
Behind Chengdu VTouch's success was the Chengdu Productivity Promotion Center, which jointly provides loans to small high-tech companies with banks. Not commonly seen in China, the center allows applicants to use their patents, trademarks or copyrights as loan collateral.
"We have a complete loan risk management system," said Ding Xiaobin, vice director of Chengdu's Science and Technology Bureau, which oversees intellectual right protection issues and is parent of the productivity promotion center. "We have a pool of experts in a variety of industries to help assess the value of these intangible assets."
The promotion center, a de facto government-backed venture capital unit, also took on the majority of the mortgage risk so that more commercial banks would be willing to participate.
Since 2009, when the system was launched in Chengdu, 3.09 billion yuan worth of credit lines and loans was extended in 99 cases in the city.
"To date, there have been no defaults," Ding said. "We always feel that combining intellectual property and the financial industry is an effective path for tech companies which are seeking loans," he added. "For Chengdu, it's also a core part of our innovation-driven development."
Chengdu was selected by the State Intellectual Property Office as China's second batch of pilot cities to trial the intellectual property financing program.
And the city has become famed for its efforts in the development and protection of intellectual property. That was a key factor in alluring multinational companies, such as Intel Corp, the world's largest chipmaker, to set up major operations in the southwestern city.
"Intel guys spent a long time inspecting Chengdu's intellectual property environment," Ding said. "They even checked court documents related to intellectual property cases.
"We did well. They were convinced."
Last year, Chengdu was honored by the State Intellectual Property Office as the first batch of National Pilot City in Intellectual Property, with the city's achievements in fighting intellectual property violations, counterfeit and shoddy products and the enforcement of related laws. It was billed by Europa Press as the best city with regard to intellectual property protection in China.
"When talking about intellectual property, we are talking about the creation, protection, management and utilization of intellectual property," Ding said.
"And we believe of them the protection of intellectual property is the fundamental. By protecting intellectual property we are protecting the vitality of our city."
For example, Chengdu authorities have sent law enforcement officials to major expositions to provide onsite services in case of any disputes, wrongdoings and violations related to trademarks and brands.
"It's always a good idea for us to appear at those trade fairs," Ding said. "There, we can both tell exhibitors, in particular those small companies, to learn to protect their rights and meantime not to violate others'."
These business-friendly efforts have helped cement Chengdu's position as an economic powerhouse in western China.
In 2012, a total of 48,901 patents were successfully applied and 32,563 patents were licensed in Chengdu, more than any other city in western and central China, according to a Chengdu government white book. Of this, 28,412 patents were applied for by corporations, an increase of 45 percent from a year earlier.
By 2015, the city expects growth in the number of corporate patent applications to maintain above an annual rate of 20 percent.
The city was also efficient in handling intellectual property rights-related cases, with seasoned judges often selected by the nation's Supreme Court to help in suits at a higher level, Ding said.
Courts in Chengdu accepted 2,142 intellectual property rights-related civil cases last year, up 90 percent from a year earlier, according to the white book. Of them, 1,947 were closed.
New achievements were also made on brand cultivation. The total number of registered trademarks hit 110,600 in Chengdu last year, an increase of 17,262 over 2011, the paper said.