There’s a New Kid on the Block: China’s Ruichuan IPR Fund

There is a growing player grabbing attention in China’s IP scene. Ruichuan IPR Funds (睿创专利运营基金) is a complex organization with the potential to play a key role in China’s developing IP market and globally, and certainly a player worth keeping an eye on.

Founded in April 2014, Ruichuan is celebrating its first birthday this month, making it a fitting time to take a look at the organization so far. The target set for the Ruichuan fund is somewhere between RMB300 million (around US$48.2 million) and RMB500 million (US$80.4 million). Denounced by many as China’s Sovereign Patent Fund, it is true that somewhere between 30% and 40% of the Fund is government owned, with the Zhongguancun high tech District in Beijing and the Haidian District of Beijing each contributing a reported initial investment of RMB20 million. However, Ruichuan is distinct from more classically defined Sovereign Patent Funds such as France Brevets by its majority private ownership. 60%-70% of Ruichuan is owned by corporations such as Xiaomi, TCL, and Kingsoft among others.

To begin with Ruichuan has stated that it’s goals will be purely defensive, focusing on developing or acquiring the intellectual assets needed to protect Chinese companies at home and abroad. However, on a more ominous note the head of IP at a relevant Chinese company told IAM that “In order to build up a strong patent portfolio, they will also invest a lot in third-party R&D, including working with universities and research institutions in China, acquiring innovations, and so on. I think it could be more like IV [Intellectual Ventures] by that stage.”

Ties to Intellectual Ventures and its business model would not be surprising given the history of some of the key players involved in Ruichuan.  The Funds’ general manager is Lin Peng, who once served as executive director of patent licensing at Intellectual Ventures

Ruichuan IPR Funds is run by Zhigu (智谷), a Chinese IP services firm with a profile bearing some similarities to key US companies such as RPX or Acacia in their early days. Xiaomi also owns a 20% stake in Zhigu. Ruichuan has already made its first patent acquisitions in smart devices and mobile internet according to broker China Technology Exchange (CTEX).

Another interesting point to note when looking at Ruichuan are a few key names that might be expected, but are missing from the list of private investors, including Huawei and ZTE, both of which already control significant patent pool. Instead key owners are Xiaomi and TCL, both of whom are involved in rapid expansion and probably feeling the IP pressure as they try to move away from their home turf. Clearly at least the initial appeal of the fund is to organizations feeling threatened, rather than those on the offensive.

As China continues to pour effort into modernizing its IP system and the protections available in China for both international and domestic companies the rise of new players like Ruichuan will be important to watch. Whether concerns about Ruichuan going on the offensive against US firms internationally prove valid or not in the short term, companies planning to sell in China should not overlook domestic implications.  If conglomerates like Ruichuan snap up key patents in the local market they might prove to be an expensive barrier to market entry for developed companies from abroad.