1. MANAGING INTELLECTUAL PROPERTY IP IN CHINA GROWTH & OPPORTUNITIES FOR U.S. COMPANIES Robert M. Siminski rmsiminski@hdp.com

2. March 14, 2006

3. SIPO In 2012, Chinas State Intellectual Property Office (SIPO) granted more patents than any other patent office in the world, including the U.S. (USPTO). Those 1.26 million Chinese patents represented a 31% increase over the number granted in 2011. Almost 80% of Chinas patents were awarded to domestic applicants in 2012. Source: WIPO Statistics Database, October 2012

4. IP Proliferation The explosion in Chinese patent applications resulted partly from the nations emphasis on R&D and incentives offered by the Chinese government to pursue patents. Overall, China spends almost $300 billion on R&D, second only to the U.S. R&D spending in China is expected to exceed that of the U.S. by 2023. Higher comfort levels in IPR enforcement in China by foreign entities.

5. IP Litigation in China Chinese courts handled 83,850 civil lawsuits involving IP rights in 2012 An increase of 44.1% over 2011 87,420 new civil lawsuits involving IP rights were filed in 2012 An increase of 46%

6. Patent Infringement If a patent owner cannot prove lost profits, wrongful gains or reasonable royalties related to infringement, it must settle for statutory damages that are capped at 1 million RMB (about $160,000 US). Because China lacks formal discovery procedures, that is the usual outcome. Enhanced damages for willful infringement are not available in China. Multi-million dollar judgments are rare, however, the Schneider Electric case should be a wake-up call ($48.5M judgment/$23M settlement). Chinas government is presently considering potential revision to the Patent Law, including adding possible treble damages for willful infringement and better mechanisms relating to the preservation of evidence.

7. Recent Key Developments in IP Litigation A directive authorizing the Supreme Peoples Court to designate jurisdiction of patent lawsuits to certain lower lever courts (below the intermediate courts). Expanded roll of the Patent Administration Departments ability to enforce IPR and award damages.

8. Conclusion As a result of significant resources being allocated to IPR by the Chinese government: Participants in Chinas marketplace must understand how to obtain and enforce IPR to remain competitive