Hong Kong IP Trading Platform Helps Taiwan Companies Exploit Business Opportunities in Various Fields

As intellectual property (IP) trading becomes increasingly internationalised and as supply and demand for IP increase incessantly in Asia, the market direly needs a regional IP trading platform to serve the multiple role of an IP management hub, a marketing and sourcing centre and a supporting services provider. On the strengths of its sound legal system, robust IP protection regime and diversified services such as IP matching and financing, Hong Kong has all along been playing the role of an important trading hub in the region. As cross-strait economic and trade development turns to an all-new chapter in recent years, consolidating Hong Kong’s position as an IP intermediary in the Asia region will definitely help Taiwan companies tap into more cooperative business opportunities in the IP field.

As pointed out by Andrew Liao, a Senior Counsel in Hong Kong who is known for his expertise in IP, with IP trading becoming increasingly internationalised, the greatest advantages of Hong Kong as an important IP trading hub are its sound legal system, robust IP protection regime and professional services of international standards. Hong Kong is highly acclaimed all around Asia in its contract signing, IP protection and arbitration status and this is providing western companies with much confidence. Hong Kong’s status as Asia’s IP trading centre is firm and it is expected that the use of this platform in carrying out related trade will become increasingly common.

Hong Kong has a comprehensive IP protection regime
Mr. Liao explained that Hong Kong’s legal institutions are on a par with European and American ones and have been operating smoothly and effectively. The rule of law has always been well respected. Both buyers and sellers can get the help of professional lawyers when signing legal documents. What is more, should dispute arise, they can resolve their differences fairly and effectively through the courts or arbitration mechanism of Hong Kong. As to fighting infringements, Hong Kong’s law enforcement bodies are quick and effective. These, together with Hong Kong’s abundance of professionals, provide all the prerequisites of establishing Hong Kong as an IP trading centre.

According to Mr. Liao’s analysis, as technology and innovation are emphasised in China’s “12th Five-year Plan” (12FYP), Mainland companies will inevitably take the hi-tech road in their development. Besides developing their own technologies they will also acquire some from overseas, so market demand will definitely surge. On the other hand, countries with advanced technology in Europe, America and Japan will certainly relax gradually their technology export restrictions and will be willing to transfer part of their technologies to developing countries. With the development of its technologies, China will also become a technology exporting country. When such a background is set against the close relationship between Hong Kong and the Mainland as well as Hong Kong’s superior geographic location, legal system and professional talents, Hong Kong has everything going in its favour and it would be a pity if this platform is not actively built.

Reciprocal recognition of court judgments and arbitral awards favourable to recovery by Taiwan companies
As to how to encourage the use of this Hong Kong platform by Taiwan companies, Mr. Liao said that, in addition to joint promotion efforts on the part of Hong Kong and Taiwan authorities, economic and trade bodies, certain arrangements on court judgments and arbitral awards signed between Hong Kong and the Mainland will also provide incentive and legal protection to Taiwan companies. For example, according to the provisions of theArrangements on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned, monetary awards made by Hong Kong courts in relation to civil and commercial matters are enforceable in the Mainland and this is favourable to Taiwan companies in their recovery in the Mainland. In addition, theArrangement Concerning Mutual Enforcement of Arbitral Awards between Mainland China and the Hong Kong Special Administrative Region also states explicitly that Hong Kong arbitral awards are enforceable in the Mainland. These arrangements are of high significance to protecting the interests of Taiwan companies, and will also help fortify Hong Kong’s status as an IP arbitration centre.

Hong Kong ranks second in Asia in licensed retailing growth
Dr. Raymond Choy, president of toy manufacturer Toy2R (Holdings) Company Limited, pointed out that in the past, Hong Kong was involved mainly in helping the development of licensing business of European, American and Japanese brands. As a considerable number of international brands have set up offices in Hong Kong and many of these are regional headquarters, Hong Kong has effectively become a springboard from which they forge into the mainland and other Asia markets. In recent years, with home-grown design brands rising from the ranks, demand for brand licensing is trending up as brands from around the world are scrambling to cooperate with Hong Kong brands to develop business opportunities in licensing. According to HKTDC data, Hong Kong’s per capital retail sales of licensed products grew more than two times from US$17.4 in 2001 to US$37.1 in 2009. This growth rate is second in Asia, just behind Japan. It is obvious from this that prospects for Hong Kong’s licensing business is quite promising.

As to how Hong Kong companies can help their Taiwan counterparts open up the mainland market and achieve mutual benefits, Dr. Choy, who is also co-founder of Asian Licensing Association, commented that, as the mainland licensing market is just in its infancy, as there are only a few domestic licensing brands, as most brands are coming from America and Japan and they are mainly entering mainland via Hong Kong, a considerable number of Hong Kong companies already have many years of experience in mainland market development. Since these Hong Kong companies are familiar with the market conditions as well as the relevant laws and regulations in the mainland and the rest of Asia, Hong Kong is the stepping stone for Taiwan companies to open up not only the mainland market, but also other markets internationally.

Dr. Choy said the key to success of a licensing business is in effective distribution. Foreign licensing companies are more inclined to choosing for cooperation distributors with sufficient IP protection and whose services are in line international practices. Therefore, those Hong Kong companies which have made good use of the opportunities offered by the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA) to develop mainland distribution business are often times targets sought by licensing companies for carrying out cooperation.

Hong Kong and Taiwan companies cooperate for mutual benefits
In recent years, Toy2R have been cooperating closely with Taiwan companies. In the past, in running a promotion in collaboration with Taiwan Starbucks, it had launched a series of 2.5-inch Starbucks Cupee Qee toys and made a sensation in the market because it was the first time in Taiwan that a chain store had ever used trendy dolls in promoting products. This shows that the creative ideas and promotion approaches of Hong Kong people can help catapult to a new level the promotion and development of licensing business of Taiwan companies.

In fact, many Taiwan companies like to work with Toy2R. It has licensed ChoiceOnly, a Taiwan electronic company, to produce electronic peripheral products such as USB external memories as well as iPad and iPhone cases. Appearing on all these products are the Toy2R design and the ChoiceOnly logo so that the recognisability of the brands of both parties are enhanced and their target markets can be jointly exploited. Another success story is the cooperation through the introduction of local designer Danny Chan with renowned Taiwan fashion brand Rednos in designing a collection of fashionable casualwear. This successful example once again proves that three brands in different sectors can create different business opportunities through their chemistry. It is expected that this form of commercial collaboration will be more common in future.

Matching by Hong Kong intermediary consultants highly effective
According to Billy Lam, vice president for business development of Transpacific IP Limited, an international IP management and consultancy company, Hong Kong has all along been providing demonstrations to foreign companies in the area of IP trading. For example, RBT, a drink and casual dining franchise chain from Taiwan, has first set foot in Hong Kong before venturing into the mainland market. Similar situations have also been found in the areas of copyrights or new technology trading. Hong Kong’s strength lies in the availability of personnel support from a multitude of disciplines (such as professionals in the licensing of patented technologies). Every year there are many technology trading and cooperation between local universities and the industry and this has trained up a considerable number of executive specialists. This, when coupled with Hong Kong’s proximity to mainland China, has allowed them to come to grasp with the pulse and needs of the market in the shortest time possible. Worth mentioning is the fact that Hong Kong’s tax regime is simple and its tax rates are low, so when Taiwan companies are transferring their technologies to the mainland, many of them would choose to set up a company in Hong Kong as a way to reduce tax burdens.

Demand for technological patent trading growing relentlessly
When it comes to the types of technological projects most suitable for development on the Hong Kong platform, Mr. Lam said that the hottest technologies are LED, LCD and technologies in energy conservation and emission reduction. The underlying reason is that, in the 12FYP, it has been expressly proposed that automobile emission standards must come to par with European and American ones. This policy will provide emission reduction devices and technologies with a lot of trading opportunities. In addition to environmental protection technologies, there is also substantial development potential for big screen TV technology as mainland brands such as Haier, Great Wall and TCL are all striving to break into the international market. This may take intermediaries in introducing some foreign patented technology.

He believes that, to enhance Hong Kong’s role as a trading platform, in the long term the provision of IP analysis services should be offered so as to increase the value added of the transaction project. As an example, he said that it would not be easy for individual Taiwan SMEs to offer their patented network technologies to large mainland companies. But if an intermediary can gather up different patents and offer market and technical analysis, this platform will easily entice the interest of giant enterprises. The advantage of this approach is that, in addition to raising the chance of the transaction, contract negotiation can be carried out in one go and this will lower the overall transaction cost.

As an example, Mr. Lam’s company has already brought about a large number of successful deals. He pointed out that Taiwan has a very strong R&D foundation in the areas of semi-conductors, audio-visual technologies and electronic equipment engineering. There was once a mid-size company which wants to sell to a mainland company the more than 20 technology patents in its possession. Transpacific IP therefore helped it to combine all these technologies with those already in Transpacific IP’s databank into one whole package and promoted the package to mainland companies. The result of this approach was significant. This demonstrates that a professional intermediary institution can play an important role in the screening of buyers and in facilitating transactions.