IPR in China Industry Perspective

1
IPR in China Industry Perspective

• Rick Greene
• Senior Vice President
• Kater Hake
• V.P. Technology Development
• Delta and Pine Land Company

2
The Big Picture

• Differences in GDP by Sector Employment by
  Sector lead to alternative political strategies
  regarding National self sufficiency

China
USA
Ag
Services
Industry
GPD Labor GDP
Labor
Source Wall Street Journal 4-28-07, CIA
Factbook 2006 Estimates
3
DPL in China

• Second largest cotton planting market in the
  world
• Began exploring business opportunities in 1993
• Two Rep Offices in Beijing
• Two JVs formed and approved in 1996 and 1998

• One JV signed in 2001, but never approved by
  Chinese government
• Significant Government Regulatory issues

4
Challenges in China

• The government owns virtually everything
• Our JV partners are government entities
• Our main competitors are government owned seed
  companies
• Many industries are highly regulated
• Limitations on foreign ownership and
  participation in IP protection
• Government Approval of Investments, contracts,
  Operating Agreements, etc.
• General Government requirements for normal
  operations
• For example, 7 governmental agency approvals
  needed to pay a dividend
• Government approval needed for accounting
  reserves, destruction of obsolete inventory, etc.
• Operating Permit and other issues- i.e., not just
  paying a fee and getting a business license
• Key to Success- hiring people who have and
  maintain Guanxi, i.e., relationships- who you
  know

5
Challenges in China

• Chinas government appears to be impervious to
  world political pressures
• Unwillingness to devalue currency
• No real progress on Intellectual Property
  Protection Issues
• Even though WTO member, little follow through on
  some commitments
• U.S. soybean imports issue

6
IPR Challenges in China

• Almost no respect for IP ownership
• local enterprises often do not follow the rules,
  the playing field is rarely level for all parties
• IPR is sometimes acknowledged but
  rarely enforced
• Occasional displays of IPR enforcement
  but mostly for
  propaganda

7
Seed Challenges in China

• National independence asserted
• Parochial self-interest to remain independent
• Chinese policymakers have stated
• There are unacceptable risks of being dependent
  on imported technologies for food security
• and that China would not commercialize a
  biotechnology trait if there was not a Chinese
  equivalent

Quote source ISAAA
8
China - Business Best Practices

• Take the time to learn the Business Culture
• In the U.S., its mostly about the Bottom Line
  and getting the job done
• In China, relationships and hierarchy are more
  important
• In China, be prepared for Banquets and Beijo
  (caution- you may have to eat the fish head)
• Surround yourself with trusted locals who have
  knowledge and influence (Chinese Guanxi)
• Former government employees sometimes make the
  best consultants
• Do your Due Diligence
• Talk to competitors
• Recognize the local practices
• Remember no deal is better than a bad deal-
  dont be afraid to walk away
• Most importantly, prepare yourself to BE
  PATIENT!!!

9
China- Seed Best Practices

• Plan for potential loss of IP and develop
  strategies to minimize (delay) exposure of key IP
• Cycle products rapidly, offering value and
  improved products every 3 to 4 years
• Utilize multi-layer systems to protect your IP
• hybrids
• test and seed increase with trusted partners
• proprietary seed conditioning and treatments
• register trademarks, brands
• anti-counterfit measures on bags and products
• Patents PVP (4/24/07 GAIN Rpt. on PVP in China)
  http//www.fas.usda.gov/gainfiles/200705/146281012
  .pdf