Earlier this year, China announced a bold intellectual property rights (IPR) plan that aims to make the nation to be a leader in the arena in 20 years.

As one of the first foreign companies that entered China, Philips, a diversified health and well-being company, and also a pioneer in patent protection, has witnessed China's growth over the past two decades.

On his latest visit to China, Ruud Peters, vice-president of Phillips and CEO of Philips Intellectual Property & Standards, the division responsible for managing the company's worldwide intellectual property portfolio, spoke with China Business Weekly reporter Cao Li about IP transactions with Chinese enterprises.

Q: How can Chinese companies acquire intellectual property (IP)?

A: They at least have to do in-house R&D. Without that, IP acquisitions or collaborations with third parties will be extremely difficult.

If you don't have a feel for the technologies yourself and what is important, it's very difficult to determine your needs from what you are looking to purchase and how to assess whether it is relevant to your future activities.

And, if you don't have a good feel for R&D yourself, you are not an interesting party for another company that does its own R&D. Some companies may be lucky enough to immediately get their hands on a nice portfolio to offset the royalties, but those are exceptions.

Q: What can governments do to encourage IP transactions?

A: Governments can help by participating in fostering programs. These government-sponsored projects are a special form of opening operations that many companies will collaborate on and share results on the basis of funding by the government. We have similar projects in Europe that are sponsored by the European Commission. They have been very successful in elevating the level of technology within European countries. It will be no different here in China. But at the same time, government should let companies realize their needs to initiate operations by themselves. Companies are the subjects of the market, not the government.

Q: Has R&D decreased since Philips began focusing on innovation?

A: No, it has been increasing. Look at the total number of R&D activities of Philips, you will find that even though the economic situation is sometimes not helping, we are increasing our R&D efforts. We establish it in a different way from in the past. We do more incubation, types of activities where you try to bring out new technologies; new product concepts come out of the release phase.

In the past, you immediately transfer them into product probation. Sometimes they failed because the transition process was not good. Now you try by separating processes to develop them further until they have reached a certain level of maturity. Then you transfer them to your business.

Q: What IP does your company have here?

A: We have done many IP transactions here in China. We have many cooperations with universities and research institutions. We work together in joint-development activities where we also share IP. We have many licensees here who share technologies with licensees who can export their products to more profitable markets. We are also looking for IP in the Chinese market that we can apply. The balance is now more selling than buying.

Q: How does the global credit crunch affect your company's IP strategy?

A: IP strategy is a long-term strategy. If you develop your IP portfolio, it takes time. So, you have to look at the horizon that ranges from five to 10 years and even more. You should not let your IP strategy, long-term strategy, be affected by short-term economic developments in the marketplace. And, of course, companies have to be very careful about how they spend their money but they should not change their strategy.

Q: How have IP transactions in China changed over the last 20 years?

A: If I look at the developments in China, there has been continuous improvement in IP awareness and understanding of the way IP works in the industry and in commercial relationships with other companies. So, I think that has helped to make the transaction side of IP easier to work with . You find in many companies now, they have their own IP department and lots of IP experts that have knowledge and understanding of IP. It's different from what it was in the past when hardly anyone in Chinese companies understood IP transactions.

Q: What do you think of China's IP strategy outline?

A: It's a very ambitious plan and it is good to have a national IP strategy. Other countries have it as well. I think it has a number of goals, short-term goals and long-term goals. The short-term goal within the next five years is to reduce the amount of fake market and copyright infringements. I think that will help the IP development in China and it will support Chinese companies, also foreign companies, and business activities in China. And, the long-term goal is to make China an innovative country from an IP perspective, which I think is very good and will in the long-term improve China's IP system.

Editor's note: The IPR Special is sponsored by the State Intellectual Property Office and published by China Business Weekly. To contact the Intellectual Property Office, the IPR Special hotlines are 8610-64995422 or 8610-64995826, and the e-mail address is ipr@chinadaily.com.cn.