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SCED's speech at luncheon of 4th Business of Intellectual Property Asia Forum (English only) (with photo)

     Following is the keynote speech entitled "Empowering our society through intellectual property: the case of Hong Kong" by the Secretary for Commerce and Economic Development, Mr Gregory So, at the luncheon of the 4th Business of Intellectual Property Asia Forum (BIP Asia Forum) today (December 4):

     Good afternoon. It's my great pleasure to be here with you all today.

     Since its inauguration in 2011, the BIP Asia Forum has become a signature event on intellectual property trading in the region. I am honoured to have witnessed its remarkable growth from the beginning, just shortly after I became the policy secretary overseeing commerce and economic development of Hong Kong.

     Indeed, in this day and age, ideas and innovations are the driving forces moving the world forward faster than ever before. Intellectual property, or IP in short, being the fruits of ideas and innovations, is changing the rules of competition and survival of today's business world. Businesses, societies and, no less, governments must rise up to the challenge in order to grasp the opportunities brought by this brave new IP world. How to empower business and society through IP is a burning question for many aspiring governments as they shape policy.

     Take the Fortune Global 500 companies for example. In 2014, the majority of the companies on the top of the list are those rich in IP, including those in the petroleum, automobile and communication product sectors. Some of them are household names. Samsung ranked 13th and its expense on R&D is over US$13 billion. Apple, ranked 15th on the list, spent around US$6 billion on R&D in 2014, which amounted to one-third of its total operating expenses of the year. R&D spending is an investment promising a handsome return. Or is it? In some economies, the governments invest heavily in R&D, but only a handful of innovations actually make it to the market. This points out the fact that innovations must be connected to the market. And IP trading points the way. With this understanding, it is a worthy price to pay by insightful companies nowadays, not just to gain a competitive edge, but also to survive in the relentless global competition.

     The opportunities are particularly visible in Hong Kong, Asia's world city. The trend of use and creation of IP is shifting towards Asia, particularly in view of the development in China. The economic growth has created tremendous demand for IP. According to the World Intellectual Property Organization (WIPO), China overtook the United States in terms of the number of patent applications received in 2011. Before then, China had already topped the league in terms of applications in trademarks and industrial designs. The leadership position which China has maintained in these three most prominent forms of IP rights is a remarkable reflection on the economic path it has gone down since joining WIPO only in 1980.

     In fact, borrowing from the words of Mr Antony Taubman, Director of IP Division of WTO (World Trade Organization), there has seen unprecedented growth in China's use of the IP system. From 2005, China's growth in trade in intellectual property as such has been remarkable, with an average annual growth of 31 per cent in receipts of royalties and licence fees for IP, and 19 per cent growth in payments for IP. On the back of that growth, China is now the sixth largest importer and eighth largest exporter in IP globally, a development that sheds light on the key role of Hong Kong, China, as a trading hub in IP.

     Same as many companies in advanced economies overseas, Chinese enterprises increasingly see IP as core business assets that should be built, managed, valued and leveraged upon to drive innovation and business growth. Indeed, China is geared towards better utilisation of IP. It is transforming scientific and technological achievement into mass commercialisation. In short, it is positioned to be a true world IP power.

Opportunities for IP intermediary services

     Unlike the trading of normal commodities, the transfer of IP rights requires highly specialised services provided by IP-related intermediaries. Some of these services may be underdeveloped worldwide but remain critical in IP transactions. The provision of IP valuation services affects IP trading decision-making and IP financing. IP-related insurance cover helps to spread possible risks in IP exploitation. Similarly, IP due diligence plays a crucial role. On the legal side, IP buyers and sellers always look for a sophisticated legal regime, a reliable court system, professional legal services and alternative dispute resolution possibilities such as arbitration and mediation. The availability of these highly specialised services encourages IP trading, through enhancing the certainty of the deals, lowering transaction costs and the risks involved, and maximising the benefits and potentials of IP exploitation.

     Given China's insatiable demand for IP rights and thus IP intermediary services, this presents a huge market potential for the world to harness.

Unique role and opportunities for Hong Kong

     In no uncertain terms, Hong Kong has long served as a strategic "gateway" between the Mainland and the rest of the world. This is not just for trade and investment, but also for ideas and innovations. We have accumulated much experience in cross-border IP transactions. Hong Kong is a regional marketplace and service centre for activities such as copyright trading, licensing and franchising, design services and technology transfer. According to statistics, the value of exports of services relating to the use of IP reached about $4 billion in 2012. This represents an average annual growth rate of 8 per cent since 2007. Similarly, the value of imports of services relating to the use of IP has seen an annual growth rate of 6 per cent since 2007, reaching over $15 billion in 2012. These figures show us very promising prospects for IP trading.

     Our fundamentals are strong as ever. We are adamant about upkeeping and enhancing our sound legal and financial infrastructure under the principle of "One Country, Two Systems". We have highly open markets and a deep pool of bilingual and experienced IP talent. We have put in place a robust IP regime to protect the fruits of creativity and innovation, in full compliance with the requirements of international IP treaties. These are some of the reasons why Hong Kong sits comfortably among the top 10 in the 2014 Global Innovation Index.

     With our low-tax regime and world-class business professionals, Hong Kong is fully equipped to pioneer new frontiers in the evolving IP landscape. Allow me to highlight a few roles Hong Kong has been playing to facilitate IP trading within the region.

     First, an IP middleman: Hong Kong is a true metropolis and an international business and financial centre with Mainland China as its hinterland. We have unparalleled experience in connecting overseas buyers and sellers to partners in China and across Asia.

     Second, a sourcing platform: Hong Kong stages an impressive string of international trade shows every year, and many of them involve the IP trade. These shows provide a ready and proven platform for business-matching and trading in the IP realm.

     Third, an intermediary service provider: Hong Kong supplies one-stop service in IP trading. We are endowed with traditional market intermediaries such as IP practitioners, lawyers and accountants. We also cultivate and boost new collaborators that can provide services ranging from IP management, trading mechanisms and portfolio-building to IP licensing, financing, valuation and arbitration.

     Fourth, an IP modifier or customiser: Hong Kong serves an important role in facilitating the import of overseas IP into China. Via Hong Kong, IP can be modified and customised to suit special needs of Mainland Chinese buyers. With China accumulating a rich pool of indigenous IP, we are taking up an increasing role in the reverse direction as well.

Government's commitment

     With all the opportunities in the wait, the challenges ahead are how to ensure society can benefit from IP exploitation. The HKSAR Government is committed to developing Hong Kong into a regional IP trading hub for co-ordinating IP business activities in such areas as marketing, sourcing, agency and other support and intermediary services.

     To forge ahead, I have been chairing a Working Group on IP Trading since March last year. Based on a Strategic Framework it promulgated last year, the Working Group has been exploring specific policies and other support measures that would bring our offerings in the IP realm to a new height. In a nutshell, we are building an ecosystem in which overseas and local entrepreneurs can meet, discover synergies and access markets, capital and talents together.

     Allow me to give you a few examples of action already under way following the Working Group's advice.

     First, we work hard to strengthen our IP regime:

* We are pushing the Copyright (Amendment) Bill 2014 through the legislature to keep pace with overseas and technological development. We are preparing another bill to introduce an "original grant" patent system in Hong Kong.
* Just three weeks ago we launched a consultation exercise to consider the case for Hong Kong to apply the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks.

     Second, we support IP creation and exploitation:

* Our Innovation and Technology Commission has launched new improvement measures to the Innovation and Technology Fund earlier this year to promote R&D activities in the private and public sectors.

* We are taking measures to assist small and medium-sized enterprises in raising their awareness of IP, as well as developing more effective IP management and commercialisation capabilities.

     Third, we foster IP intermediary services and manpower capacity:

* Two sub-groups of the Working Group have examined measures to support the development of specialised services of IP valuation, and IP arbitration and mediation, and have made recommendations to spearhead actions. For instance, we are supporting the development of IP valuation reporting standards and highlighting IP as a specialty area serviced by our arbitral and mediation bodies.

* The Hong Kong Trade Development Council launched the Asia IP Exchange in end-2013 to enhance Hong Kong's online IP trading volume, capabilities and connections. Now, it provides more than 25 000 IP listings and connects with 28 strategic partners internationally and locally.

* We will also help SMEs exploit IP effectively by means of running and sponsoring training courses in IP-related subjects.

     Fourth, we pursue promotion, education and collaboration efforts:

* The Intellectual Property Department will launch a promotion and public education campaign to raise the awareness of the local public on IP and to boost the overseas image of Hong Kong as a premier IP trading hub.

* This BIP Asia Forum has grown in scale and stature since its inauguration in 2011. This year we have over 2 000 participants and distinguished speakers coming over from more than 15 countries across the globe.

     The measures that I have mentioned are just part of the progress that we have made so far. The Working Group has just completed its deliberation on all the strategic areas under the Strategic Framework, and will submit a report with comprehensive recommendations to the Government early next year. Stay tuned.

     In sum, Hong Kong spares no efforts in empowering Hong Kong's business, intermediaries and society as a whole to make sure they are ready to reap the full benefits of the IP age. This is important to stay ahead of the competitive curve.

     Ladies and gentlemen, BIP Asia is definitely part of our success story. Please join some of the 25 concurrent breakout sessions covering industry-specific topics and IP practical tips. You are most welcome to visit the expanded exhibition zone featuring technology brands, IP services providers, R&D centres and worldwide IP organisations. Properly managed, intellectual property would not only have the shelf life of a banana, but a thriving rainforest, teeming with life! I wish you all an enjoyable and fruitful time at the Forum.

Ends/Thursday, December 4, 2014
Issued at HKT 16:43


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