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Hong Kong grows as a regional intellectual property market (Executive Summary)

Executive Summary

  • IP trading generally refers to the buying, selling and transferring of IP rights through a standard or customised agreement to allow IP acquirers to use IP under mutually agreed conditions. However, IP trading remains a loose concept due to the enormous complexity of IP, high degree of customisation on IP rights sold, huge diversity in the modes of transaction and the intangibility of IP.
  • Growing globalisation of IP trading activities and increasing IP supply and demand in Asia have induced a greater need for regional IP intermediaries, performing multiple roles as a IP management hub, marketing & sourcing platform and support services provider.
  • Hong Kong has always been a regional marketplace for IP trading, which is manifested in forms of copyright trade, licensing and franchising, technology transfer and design services. While these transactions have co-existed for a long time, they are now bundled together under the broader banner of “IP trade”.
  • There are multiple factors underpinning Hong Kong as a leading regional IP intermediary, thanks in particular to its pillared legal and IP regime and availability of top-rated services and financial resources. Hong Kong stands out as a regional IP intermediary compared with other emerging competitors, in light of the combined strengths of its location and IP ecosystem, if overseas companies are looking for a single hub for both the Greater China and Southeast Asian markets.
  • Hong Kong companies can offer many value-added intermediary and support services to bridge the gap of market information between the East and West, as well as facilitating the IP trading process.
  • Strengthening the role of Hong Kong as a regional IP trading hub will not only attract more overseas companies to set up regional headquarters in Hong Kong, but also bolster the city’s entire IP economy, spanning from IP creation to IP exploitation. This will also feed through a virtuous cycle in enticing more IP to Hong Kong.

IP trading: new ways to push forward old concepts

IP trading generally refers to the buying, selling and transferring of IP rights through a standard agreement or a customised agreement, which allows IP acquirers to use IP under mutually agreed conditions. However, IP trading remains a loose concept due to the huge degree of customisation on IP rights sold, high complexity of IP, huge diversity in mode of transactions and its intangibility.

In fact, “IP trade” has been conducted for years in Hong Kong, which has always been a regional marketplace for these transactions. IP trading includes Copyright Trading (for copyright), Licensing & Franchising (for trademarks), Design Service (for registered designs) and Technology Transfer (for patents). These forms of transactions have co-existed for a long time and now they are bundled together under the broad banner of “IP trade”, based on the similar attributes of the “rights” that are traded, that is, they are creations and innovations which receive protection under law after registration.

A unique role to play as a regional IP trading hub

Developed countries like the US and Japan have complete IP supply chains spanning from IP creation to IP exploitation, and they are actively involved in the globalisation of IP trading. Hong Kong, has long been engaged in different kinds of IP transactions, notably the acquisition of technology-related overseas IP. Despite the growing demand and supply of IP in Asia, particularly on the Chinese mainland, the development of IP intermediation in the region appears to be lagging behind.

In light of the high intra-regional differences, it would be desirable to see the emergence of pioneering hubs in coordinating regional IP businesses, as well as providing support to the region and connecting it with the world. While there is room for Hong Kong to augment the whole IP ecosystem, one aspect that it has excelled in, and can go from strength to strength with, is its role as an IP intermediary for regional as well as international markets.

Strengthening Hong Kong as Asia’s leading IP trading hub

Hong Kong’s leading position as an IP marketplace in Asia has been bolstered by its vibrant creative industries, which are strong in IP creation, its role as an international commercial hub and service platform, and its strong legal and IP regimes along with lots of IP intermediaries and service suppliers. Hong Kong also has a strong role in IP exploitation, facilitating importation of overseas IP to the Chinese mainland, and through further modification or customisation of the IP to suit specific needs of mainland-based users.

In terms of IP intermediation, Hong Kong should focus more intently on the multiple roles that it has been assuming, namely, a regional marketing and sourcing platform (e.g. trade shows), IP middleman (e.g. technology brokers), regional IP manager (e.g. master licensee) and supplier of support services (e.g. legal and financing services).

Hong Kong: a conduit to connect the Mainland with overseas

One of the clear advantages of Hong Kong in developing its IP trading platform is proximity to the Chinese mainland. While the enormous and booming Chinese market creates a huge demand for overseas IP, there are lots of mainland-based IP owners who are seeking marketing channels and IP specialists to help internationalise their businesses.

In comparison with Singapore and other Mainland cities aspiring to be the leading regional IP hub for both the Greater China and Southeast Asian markets, Hong Kong stands out in light of its combined strengths of location and IP ecosystem. Hong Kong can serve not only overseas companies looking for a single hub for these markets, but also Mainland companies looking for a springboard to go overseas.

Setting up RHQ in Hong Kong

As a regional commercial hub with the required “soft infrastructure”, Hong Kong creates a good business environment for overseas companies which deal with IP. Moreover, a dynamic cluster of regional headquarters (RHQ) of many overseas companies, international buyers and professional IP intermediaries, business opportunities abound in Hong Kong. Therefore, overseas IP owners, with strong interest in entering the Asian market, can readily take advantage of Hong Kong as their first stop and RHQ in expanding and managing their IP-related business in Asia.

While attracting overseas companies from Western economies to manage IP in Hong Kong, or use Hong Kong as the market platform, attention should also be paid to target IP companies within the region, in particular the rising number of IP owners on the Chinese mainland. With broad international connections and the capacity to offer services with international standards, Hong Kong stands out as the springboard for Greater China and Southeast Asian IP owners.

Realise IP opportunities via Hong Kong

Given that many overseas IP owners do not have sufficient resources to expand into the Asian market on their own, Hong Kong companies should be more proactive in bringing them into Asia, particularly the Chinese mainland, while helping minimise their financial burden and risk. Meanwhile, Hong Kong companies can be the agents for IP owners in Asia, in exporting their IP to the overseas market.

On the other hand, immature IP intermediary and management services in many Asian countries generate business opportunities for Hong Kong companies to offer high value-added services, such as branding consultancy and IP management, to Asian companies. A good understanding of the Asian market has always been an asset for Hong Kong companies, providing IP customisation and market intelligence services to overseas companies.

Defective IP legal systems, poor IP enforcement and lots of IP infringements in the region naturally give rise to opportunities for Hong Kong services providers, whose professional services and efficiency readily supplement Hong Kong’s robust legal and IP regimes.

Content provided by Picture: HKTDC Research
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