The second patent auction of the China Technology Exchange, co-sponsored by the Beijing Guoxin Xingye Auction Co. Ltd. and the Unitalen intellectual property agency, will be held in Beijing in October. For the first time, seven patents from outside the Chinese mainland will participate in the auction.

Interest from overseas patent holders in the Chinese market not only means Chinese patents will confront international competition but is also a sign that China's technology market is drawing increasing global attention.

Debut of foreign patents

More than 400 patents have been registered for sale at the October auction. Official bidding processes for 307 information technology patents from large companies, research institutes and small and medium-sized technology firms in China are under way.

Na Lan, head of the Beijing Guoxin Xingye Auction Co. Ltd., said the presence of seven overseas patents will be a highlight of the upcoming auction. These patents, all of which are in the field of consumer electronics, are expected to have good prospects for commercial application. The auction will mark the debut of foreign patents in Beijing's technology market as well as an initial step taken by the China Technology Exchange to reach out to the world.

"Overseas patent holders have come to us mainly because the China Technology Exchange always takes the initiative in establishing contacts," Na said. "It regularly upgrades its website while delivering timely information to Chinese and foreign companies."

Moreover, numerous media outlets have given publicity to the auction, which is also a reason why overseas companies have signed up for the event, she said.

After registration, foreign patents will be subject to strict scrutiny to get rid of legally problematic ones. Only those up to the standard will be recommended to Chinese clients, she added.

Optimism about China

Liang Yan, a lawyer and a partner with Unitalen, said the success of the first China Technology Exchange patent auction in 2010 thrust the event into the spotlight. "Overseas patent holders are optimistic about China's trading platform," he said. "Chinese companies have expanded rapidly in recent years. They have also recognized the need to protect patents in foreign countries. Purchasing is the quickest way for them to acquire patents."

Foreign patent holders possess advanced technology. Robust demand in the Chinese market is attractive to them. As a large manufacturing power weak in innovation, China has a pressing demand for applicable patents. Given their mutual needs, Chinese companies and foreign patent holders seem poised to forge cooperative ties.

"Foreign holders of technologically mature patents need to explore emerging markets in the wake of the global economic recession," Na said. "At the same time, China has a demand for patents that can be put into commercial use. That's why they have turned to the Chinese market."

Foreign companies have done extensive research before entering the Chinese market. For instance, 41 percent of the patents were sold at the first patent auction last year, the rate being much higher than in similar auctions in Europe and the United States. Transaction prices at this auction averaged nearly 110,000 yuan ($17,237), more than double the average transaction price in U.S. patent auctions in recent years, which stood at $8,000.

An encouraging sign

The participation of overseas patents in Chinese auctions shows China attaches great importance to the hi-tech industry and the increase of added value--a move that Na believes will facilitate the transfer of advanced technology to China.

"With its poor innovation capacity, China exported nothing but cheap labor in the past," she said. "Also, foreign countries were reluctant to sell innovative products to China because of trade barriers. This situation was detrimental to China. Now the auction of foreign patents in China can help boost China's research and development and technological upgrading."

Foreign patents should make the Chinese patent market more competitive. "Patents around the world are traded in the market based on their value. If Chinese patents are no good, they will lose the competition. We will not blindly protect Chinese patents," Na said.

Patent auctions provide a new platform for Chinese companies to acquire foreign patents, Liang said. While posing new challenges to China's patent assessment, they will prompt Chinese companies to give greater prominence to the application and protection of patents abroad.

The number of patents Chinese companies have registered in foreign countries has been on the rise in recent years. The Chinese Government has also adopted policies to encourage companies to do so.

"In the next few years, the number of patent applications abroad will continue to increase," Liang said. "As Chinese companies penetrate international markets, patent protection in foreign countries will help ensure their business security and safeguard their growing market shares."