The role of patents in market competition

As the LED industry develops and gradually matures, in the highly homogeneous LED market, mastering core technologies and continuously innovating products are the decisive factors for a company's success. Obtaining a patent is a guarantee for the competitiveness of an enterprise and is also the best mechanism to encourage innovation. The competition in the market is increasing day by day, the importance of patents is becoming more prominent, and enterprises are paying more and more attention to patents.

For the LED industry, patents are like a double-edged sword. If used well, they can protect themselves and gain a favorable position in market competition. If used poorly, they may become a defendant in court. Nowadays, our country's laws are increasingly protecting patents, and companies also need to strengthen their awareness of patent protection and better utilize the role of patents in market competition to improve corporate efficiency.

Increase the competitive advantage of enterprises

In market competition, no matter whether the industry is large or small, patent wars always exist. Some major LED manufacturers with core patents occupy a majority of the market share with their technologies and have good competitive advantages. This is also one of the roles of patents in market competition. For example, Nichia Chemical has obtained many basic patents. Nichia's patents include LED chips, epitaxy, LED structure, packaging technology and related raw materials. Nichia has relied on them to obtain a higher market share and market interests.

Patents can not only protect corporate intellectual property rights, but also enable companies to continue to gain competitive advantages. With the protection of patents, some litigation risks can be avoided and the market can be further developed. But the premise is that enterprises must strengthen the layout of patent strategies and increase research and development efforts. At the same time, it is necessary to appropriately introduce some intellectual property rights, purchase technology patents or license patents, build patent networks, strive for bargaining chips, reduce the market share of rival companies in competition, and use patents to create corporate wealth. Patents can also be used as bargaining chips for mergers and acquisitions, joint ventures, etc., to maintain and increase the company's competitive advantage in the market.

Patent cross-licensing

On April 5, 2011, Cree and Osram announced that they had signed a comprehensive global patent cross-licensing agreement. This agreement covers the patents of both parties in the fields of blue LED chip technology, white LED, phosphors, packaging, LED light bulbs, and LED lighting control systems. Prior to Cree's agreement with Osram, Cree had already reached LED technology patent agreements with Nichia Chemical and Toyoda Gosei, and later announced that it had signed a similar extensive cross-licensing agreement with Philips. At the same time, Osram also stated that it has completed global patent cross-granting with Nichia Chemical, Toyoda Gosei and Philips. So far, the world's five largest LED giants have basically completed mutual patent granting. Osram currently holds approximately 8,000 patented technologies. Osram publicly stated that mutual patent licensing between companies with intellectual property rights will be conducive to the smooth development of the LED market, and can accelerate the spread of LED technology in various application fields, reduce the risk of inadvertently infringing other companies' patent rights, avoid potential patent disputes, and help companies develop, produce and sell new products.

In order to maintain their competitive advantage and maintain their market share, these five major manufacturers have applied for a number of patents, covering almost the entire industry chain including raw materials, equipment, packaging, and applications. In particular, key patents such as the heat balance of white light and high-power LED lights, and long-lasting and efficient phosphors are all in the hands of the five major manufacturers.

Patent cross-licensing is conducive to competition and can promote the spread of technology. First of all, patent cross-licensing can eliminate mutual resistance between enterprises and promote healthy competition and development of enterprises. Secondly, related technologies can be combined to save R&D funds and time, thereby reducing production costs and increasing profit margins. The role of patents is not only to protect the intellectual property rights of enterprises, but also to be used interchangeably, which not only promotes the development of enterprises, but also avoids some infringement claims.

In my country, patent applications in the LED industry are mainly concentrated in the mid-stream and downstream sectors of the industry. Patent applications in mid-stream packaging and downstream application segments account for more than 60% of the total applications. Utility model patent applications and design patent applications are the main ones, and invention patent applications account for a lower proportion. Especially in key technologies, there is still a lack of core patents. In fact, our country's LED companies can also adopt certain patent strategies, use their patents to cross-license with other companies, and form a team to jointly face competition with foreign LED manufacturers.

Financing

Effective use of patents can also create huge royalty income for the company. Nowadays, the patent dispute in the LED industry is very fierce, and the added value of patents in products is getting higher and higher. Therefore, the role of patents in direct and indirect financing of enterprises is becoming increasingly obvious.

First of all, companies can use patents for patent pledge loans, and the loan amount depends on the value of the patent. However, customers accepted by banks who can apply for patent pledge loans generally need to meet three main conditions. First, the company itself is in good operating condition, has great development potential, and belongs to the category of high-tech enterprises; second, the patented technology to be pledged should not only have relevant ownership certificates issued by the State Intellectual Property Administration and the ownership is clear, but the patented technology should also be the core technology of the company, have been put into actual production for more than two years and have achieved sustained and stable actual profits for the company; third, the patented technology needs to obtain value evaluation from a third-party patent technology evaluation company recognized by the bank.

Secondly, if a company's patents have a certain quantity and quality, it will also be helpful for its listing and financing. Now when the China Securities Regulatory Commission conducts IPO reviews, intellectual property protection has been listed as an important review content. If there is no comprehensive intellectual property protection policy, no matter how good it is in other aspects, it may not pass this review. It is necessary to establish a good corporate image. At present, our country and other countries around the world attach great importance to the protection of intellectual property rights. If a company follows this trend and formulates a complete intellectual property policy, thereby improving the economic benefits of the company and reducing the legal risks of infringing on others' intellectual property rights, it will be beneficial to its public image and help the company go public.

Finally, companies can also license their patents to collect usage fees, which is also the most direct way to use patent financing. At the same time, companies can also obtain some corresponding government R&D fund subsidies and patent cross-licensing opportunities.

Protect corporate intellectual property rights

Although most LED companies are currently aware of the importance of patents in protecting intellectual property rights, they are still unable to maximize the role of patents in market competition, resulting in companies suffering unnecessary losses and legal disputes.

In Article 13 of the Decision of the Third Plenary Session of the Central Committee of the CPC in 2013 on deepening the reform of the science and technology system, it was stated that the use and protection of intellectual property rights should be strengthened and the incentive mechanism for technological innovation should be improved. This initiative will be beneficial to the protection of intellectual property rights in the LED field and promote the healthy development of the industry. At the same time, it also fully explains the role of patents in protecting intellectual property rights for enterprises.

Patents are a basis for enterprises to gain a prominent position in market competition and are also the core competitiveness of enterprises. Nowadays, domestic LED companies have paid more and more attention to product research and development and innovation. To gain market share, companies not only need to improve technology and attract customers, but also need to lay out patents and protect the company's intellectual property rights.

According to relevant information, since 2010, some LED core patents have exceeded the 20-year patent protection period, and a considerable part of them involve important white light LEDs. This will have a certain impact on the LED patent landscape and will also bring certain development to some LED companies in my country that lack core patented technologies.

However, no matter how they develop, LED companies still need to increase R&D efforts and technical capital investment, master core LED technology, enhance their own strength, and avoid various patent disputes. At the same time, we must also cater to the current trend of "patent cooperation", conduct patent cross-licensing, and build a "patent network" to protect ourselves while achieving win-win cooperation between enterprises, so that enterprises can develop better and faster.