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EDITORIAL: Defending
high-tech sector is vital
HTC Corp has bowed to arch-rival Apple in a patent lawsuit that has hit the
local smartphone maker¡¦s shipments to the US, the largest of its export
destinations, because of weaknesses in its patent portfolio and also because of
a lack of government support.
This makes HTC the latest victim of intellectual-property rights disputes as it
has become the norm for large global technology companies to wage patent wars to
deter their rivals from catching up.
It is true that HTC can now focus more on inventing new products and redirecting
resources to promoting its products to win consumers over from Apple and
Samsung, as company chief executive officer Peter Chou (©P¥Ã©ú) had always hoped.
However, the concern is how much HTC will have to pay Apple in royalties for the
next 10 years. Will the royalty payments become a burden to HTC at a time when
it needs to spend heavily on global marketing as well as on research and
development (R&D)?
Taiwanese companies are particularly vulnerable to these patent disputes and
have rarely won. Many are also tight-fisted regarding investing in R&D, as well
as slow to develop their own patents.
HTC only spent 5.1 percent of its total revenues, about NT$3.43 billion (US$118
million), on R&D in the first quarter of this year. During that period, it made
NT$67.79 billion in revenue. Apple spent about US$700 million on R&D, accounting
for 2 percent of its revenue of US$35 billion in the quarter ending June 30
alone. Samsung allocated 6 percent of its revenue to R&D during the same period,
about the same US dollar amount as Apple.
HTC registered 264 new patents locally last year, according to the Intellectual
Property Office¡¦s records, ranking 10th and lagging far behind the No. 1 patent
inventor, Hon Hai Precision Industry Co, which has 3,968 patents. HTC was not
even in the top 20 in 2009.
Besides, the lawsuit is taking place in the US, which puts Apple in an even more
advantageous position because of patriotism. In the fourth quarter of last year,
HTC¡¦s new 4G handsets were temporarily stopped from entering the US by the
customs agency, a very rare event.
Dogged by patent disputes and accelerating competition, HTC is on the brink of
swinging into loss this quarter as the company forecasted that its profit margin
would plunge to just 1 percent from 14.9 percent last quarter, after reporting
the smallest quarterly profits in seven years for last quarter.
The government seems to have little influence in this sector, but should
allocate more resources to help companies collect information about the dynamics
of the world of patents. In the absence of such state aid, corporate executives
should shoulder their responsibilities and reconsider their investment
strategies to minimize the potential damage of patent litigation.
However, there is much more the government can do to protect local technology
firms¡¦ intellectual property and help companies safeguard competitiveness.
Proposed punishments for corporate espionage offenders are not enough to curb
growing trade secrets thefts by Chinese companies. The Cabinet gave the go-ahead
two weeks ago to a proposal to impose stricter punishments on corporate spies
after AU Optronics Corp filed a lawsuit against two high-ranking former
executives for stealing company secrets. Prior to that, revision of the Trade
Secrets Act (Àç·~¯µ±Kªk) had been suspended by the government for about six years.
The Ministry of Economic Affairs has proposed a maximum five-year jail term for
those convicted of corporate espionage, as well as a fine of up to NT$50
million. The current law does not mandate prison sentences for violators.
In the US, punishments are much heavier and jail terms can be as much as 10
years in similar cases.
The government should do much more to protect local companies because the
technology sector remains a central pillar of Taiwanese exports.
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