Chinese LED Manufacturers Strategies to Breach Foreign Patent Barricades

Patent wars set the tone for first half of 2015, a long list of lawsuits included Everlight’s long battle with Nichia, and patent disputes between Cree and Feit Electric. These developments alerted Chinese manufacturers to the fact that they had very little influence and power in the world of patents. Moreover, there were still many obstacles for Chinese companies to overcome.

China’s LED Patent Alliance Chairman Shirong Sui acknowledged the existence of patent barriers that have barred Chinese LED products from entering global mid to high end markets. In the LED market sector, big international players that have monopolized the market technology have been tightening their patent networks, with few Chinese manufacturers capable of escaping.

During second half of 2015, Chinese LED manufacturers have been able to breach LED patent walls, and rebuild their confidence. Below are a list of manufacturers that have acquired patent licenses during second half of 2015.

Nationstar headed the pack of Chinese manufacturers when it first obtained a LED package patent on July 21, 2015. In the following three months other Chinese LED manufacturers also acquired new patents.

In July, Toyoda Gosei licensed its white LED patents to two Chinese LED package manufacturers Jufei Opto and Shineon. The aim of the Japanese manufacturer was to form a strategic supply chain partnership, which in turn opened up global market growth opportunities for Jufei Opto and Shineon.

On July 23, 2015, Epistar licensed its filament LED bulb patent to Leedarson, and the patent covered Taiwan, China, U.S., Europe and other regional markets. Shortly after, Epistar signed a global LED chip cross licensing patent agreement with Cree. The agreement has been coined as “accelerating the adoption of LED lighting while respecting international intellectual property rights and valuing its importance.”

Industry insiders in China noted for Chinese LED manufacturers either will have to be big enterprises their own patents and R&D capacity, or small manufacturers with unique technology to be able to negotiate cross patent licensing agreements.

Whether these related patents will form alliances, sign patent licensing agreements, or merge will also benefit manufacturers development in different markets.  

From second half of August to early October, Honliopto received two LED patents and MLCOB light module manufacturing patents. Nationstar also received two LED patents, while Absen Opto LED display received a national invention patent. Chinese intellectual property firm Metis IP received 220 oversea LED patents, while Kingsun acquired a 6.15% stake in Lumileds, the latter company has a patent portfolio comprising 4,000 patents.

Chinese manufacturers aiming to breakthrough foreign manufacturers “patent embargo,” and deploy their international market strategies need to build up their own patent portfolio. Hence, how can manufacturers sign patent licenses?

The trick to signing patent licenses?

The number and quality of patents a manufacturer holds to a certain degree reflects its innovative capacity, and manufacturers with largest number of patent portfolios often have greater influence and power power as well.

On the other hand, large international manufacturers including Philips, Osram, Nichia, Toyoda Goesei and Cree have signed numerous cross-licensing agreements with other manufacturers to form a tightly knit patent network. In contrast, Chinese manufacturers patent filings occurred much later, and China’s invention patents are insufficient. Most of the country’s patents are functional design patents including the product shape and design. These patents classified as “peripheral patents” thwart Chinese manufacturers’ attempts of entering the international market. Yet, desperate situations springing from “domestic and international crisis” can also urge manufacturers to find new solutions.

International manufacturers spin offs and following market competitions has given Chinese LED manufacturers plenty of business opportunities. For instance, Epistar’s cross LED chip licensing agreement is aimed at accelerating LED chip on the global platform. Even though manufacturers had to “take a detour,” Chinese manufacturers have been able to break the patent monopoly established by international manufacturers and enter the global market.

Manufacturers can turn to cross patent licensing methods to realize their patent strategy development, but once the patent protection period expires, disputes might emerge again. It will be impossible for manufacturers to fully acquire all the patent usage rights that they have acquired from cross-patent licensing agreements.

Therefore, manufacturers engaged in collaborative innovation or even patent alliances has become two potential coping mechanisms in patent wars.

European manufacturers hold most core LED technologies, but going solo can be quite tough. Hence, alliances have become an option to strengthen strategic research and development, while broadening Chinese manufacturers oversea patent channels. For example METIS IP received more than 220 LED related international patents, Kingsun’s acquisition of Lumileds, and Feilo Acoustics (FACS) acquisition of Osram’s lighting business.

Disregarding the methods applied to acquire patent licenses, manufacturers are basically strengthening their patent technology. Additionally, patents can also be used as an additional insurance measurement to protect LED manufacturers patent rights.

(Author: Lurena Liu, Editor, China, LEDinsidehttp:// Translator: Judy Lin, Chief Editor, LEDinside)

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