IAM Magazine, one of my favorite sources for information on intellectual property, just issued a blog post on the use of IP in lending in China: “Chinese companies have secured over $10 billion in patent-backed loans since 2008” by Jeff Wild, March 4, 2014. The news I share below (cross-posted at InnovationFatigue.com) definitely supports their article. Great timing!
March 6, 2014: I just learned of breaking news from the Province of Shandong in northern China. A Chinese paper company, Quanlin Paper (also called “Tralin Paper”) has successfully used its portfolio of patents and trademarks to secure a huge loan of 7.9 billion RMB (about $1.3 billion). Potentially significant story for those tracking IP and innovation in China. The story was just reported on March 3, 2014 at China Paper (the story is in Mandarin). This is quite a big deal and may be a record for China in terms of how much value IP brought in seeking a corporate loan. To emphasize the significance of this development, the normally dry China Paper publication begins with a somewhat flowery statement based on an interview with the Chairman, who expresses surprise and delight at how much money they were able to obtain with their IP. Here’s my loose translation, followed by the actual Chinese:
“I never thought that intellectual property could have such a big effect in obtaining this loan. IP was a big part of it,” according to Quanlin Paper Company’s Chairman of the Board, President Li Hongfa, speaking today to a reporter about the 7.9 billion yuan from bank lenders that began this week. He said that this money will help them rapidly expand and seize market opportunities. Money has been tight for business, and this new addition is welcomes just as the mist-covered earth rejoices in the spring rains from the night before.
OK, a bit flowery, but again, this is big news for China and things get flowery when the big news is good. This development shows that IP in China can be valuable (though the portfolio includes some international patents, though it is mostly Chinese IP). It also shows that Chinese companies, even in seemingly dull industries like the paper industry, can be innovative and create valuable IP. I haven’t reviewed their IP to assess its value, but I understand they have over 100 Chinese patents in areas such as technology for using straw and other renewable or recycled materials for making paper, with alleged benefits of enhanced environmental friendliness and cost effectiveness. Shandong Province’s IP Office has also created some publicity about Quanlin’s IP estate (see the Chinese article here), though this was before the news of the massive loan secured with the help of IP. Expect more publicity from them shortly.
Further background comes from Baidu’s wiki-like entry on Quanlin Paper.
When nations develop strong IP systems, companies can use their IP to protect their innovations. This also motivates them to take the risk and spend the money need to drive further innovation, and gives investors courage to fund growth and innovation. In this case, it helped give a lending partner (a Chinese financial organization) the courage to loan a giant sum of money to help Tralin grow. Tralin has been pursuing IP not just for tax breaks it seems but also for strategic purposes, and information coming out about this story shows that they have been developing expertise in their staff to develop their IP estate. Sure looks like that has paid off for them.
This is one of many signs that China is becoming serious about IP and innovation, and not just low quality IP, but IP that can provide significant value. For IP to apparently be a crucial part of such a large loan in this challenging economic times is a remarkably positive sign for China, in my opinion.
On the other hand, the loan may be due to politics and guanxi with officials, and the IP is just window dressing. That’s possible. But to even choose IP as the window dressing for publicity and hype is a remarkable thing in it’s own right, and still a sign of China’s rapid transformation in valuing and pursuing intellectual property.