Panasonic: The Trinity The Localization

Issue 31 By Doris Li, China IP,[Comprehensive Reports]

The Panasonic Corporation, an industrial giant in electronics and outstanding performer on the Fortune Global 500, has fallen victim to the global financial crisis, as reported in their 2008 Annual Report. Its worldwide turnover in 2008 reached 550 billion Yuan, down 14% compared with a year ago; and the financial deficit hit 27 billion Yuan.

To enhance competitiveness, Panasonic introduced a comprehensive promotional plan for its brands. As of October 1, 2008, Matsushita Electric Industrial Co., Ltd. formally changed its name to “Panasonic Corporation”. The company has also unified its corporate brands to the ‘Panasonic’ brand across the world. However, the Chinese characters “松下电器” remain in effect in China due to the huge number of consumers.

Since its entry into the Chinese market in 1987, Panasonic has achieved a great success in both operations and brand protection. It established a set of “defensive measures” in line with local conditions. Ms. Ren Feng, head of the IP Division of Panasonic Corporation of China met with this journalist and discussed the company’s experiences pertinent to IP protection on the mainland.

To initiate the trinity strategy

The Osaka-based Panasonic Corporation has more than 500 branches worldwide, including 80 in China. Its products cover 14 areas of business including digital network products, white domestic appliances, brown goods, components and parts, and industrial equipment.

Ms. Ren stated that, “Under each business field we have a variety of commodities. Each business unit makes and implements IP strategies based on the specialties of these commodities. The financial crisis forces us to reduce IP protection investments. However, the cuts are different for different business units.”          

Annually, Panasonic’s head office maps out a general strategy. Under its guidance, each business unit develops their own stratagem (including IP strategy). “We call this the ‘autonomous management’ pattern. Before making IP strategies, we fully consider the specialties of the different business units. The Panasonic Corporation is a technology-based manufacturer. Technology and patents are its lifeblood. To survive in the world market, we must have our own intellectual properties”, said Ms. Ren.

The Panasonic Corporation owns approximately 100,000 patents worldwide. More than 8,000 patents have been obtained in China - topping the list of patent applications. However, numbers are not the only concern regarding the company’s “lifeblood”. Ms. Ren commented that “Quantity is an essential factor, but in recent years, we have put great effort into improving the quality of patents. Now our focus is on patent retrieval work, because we believe that a perfect patent retrieval system is essential for a high patent quality. To maintain the competitiveness, a company must have its differentiated technologies. That’s why we keep making infusions of money and energy in IP development and protection.”

IP activities carried out by the Panasonic Corporation are governed by a “trinity strategy” comprised of an operation strategy, R&D strategy and IP strategy. Ms. Ren gave a detailed explanation: “It is to integrate the IP conception into every process of business operation and R&D. For example, before setting up a new R&D project, we use the patent retrieval system to know the conditions of our competitors and the position of our own. R&D results are protected in the form of patent. Before applying the technology to products, we resort to the patent retrieval system again to re-check the patent condition of related products, so as to get around existing intellectual properties and to protect by patent the new technologies. Before mass production, we develop production technologies and check the intellectual properties of others via the patent retrieval system, and apply for patent protection for the newly developed technologies. The ever changing technology urges us to grasp the updated industrial technologies and intellectual properties with the aid of the patent retrieval system in every process - basic technology research, product development and production. Once a new technology is developed, we turn it into a patent. Meanwhile, at every process, we work out the next process by patent diagnosis and analysis. This is what we call the ‘trinity’ – to integrate business operation, R&D and intellectual property into one union.”

To popularize the localization strategy

The Panasonic Corporation has more than 300,000 employees worldwide. Nearly 1/3 of their workforce is located in China. Therefore, regarding the Chinese market, the company has to create preferential policies concerning marketing, brand protection and personnel management.

Ms. Ren said: “Under the global guidelines, Panasonic takes into account the differences of countries and regions. China is a country with unique social customs that European and American countries do not have. To effectively carry out the IP activities in China, we must initiate a localization strategy. The localization strategy means a lot more to China than to European and American countries.”

Ren’s explanation of the localization strategy is as follows: “Usually, our Japanese headquarters manage the brand protection work in the Chinese market by remote control. However, Japanese people are usually not acquainted with the local conditions in China and the special customs here. So remote control has little effect. In 2007, we started to localize the brand protection, and assigned the work to Chinese officials. The localization process was finished at the end of 2008. This strategy is designed only for the Chinese market.”

Ren continued to say: “This localization strategy is initiated to improve IP protection efficiencies. As we know, different approaches of one same thing will lead to different results. A work done by local Chinese people usually come to the results different from that done by Japanese staff deliberately coming to China for it. Japanese people are too unfamiliar here to take actions that suit local circumstances. China’s specialties also lie in law and practices – they are much more obscure than American and Japanese laws and operation rules. It’s hard to tell how to judge and what judgment that Chinese law-enforcement authorities will make. If you want to tell, you must be fully aware of Chinese laws and the latest changes, the usual practices in dealing with IP problems in China, the position government agencies stand at in the process of law enforcement, and the conclusion they will probably come to. It’s too much for those overseas office workers who can only get some indirect information, and it’s the time for workers who are familiar with China and all the situations here to give play to their advantages. This is one important reason of localization. From another aspect, the Panasonic Corporation is a multinational company with more employees in China (100,000) than in Japan (80,000). Among the employees in China, more than 90% are Chinese. It is a Chinese company to some extent. So it’s natural to let Chinese people run it and make decisions.”

To create a more convenient IP environment

Recent years have witnessed great efforts by the Chinese government in encouraging enterprises to make independent innovations. The Outline of the National Intellectual Property Strategy was promulgated last year, making intellectual property a critical issue for Chinese companies. A few years ago, foreign businesses almost filled the entire list of applications for invention patents. However now, especially in the last year, 50% of the applications are filed by Chinese enterprises. Having been in the Chinese market for so long a time, the Panasonic Corporation is well aware of this evolution. Ren said: “Panasonic was continually topping the patent application list. Now, it has given way to Huawei. On the international patent application list, the Panasonic Corporation took first place in 2007, but Huawei replaced it in 2008. This is the first time that a Chinese enterprise appears at the top. It shows that Chinese enterprises have paid considerable attention to intellectual properties and have started accumulating relevant experiences. Regarding the use of the legal system, China also proves to the world its great improvement of the patent system after two decades of development. In 2007, China Customs received the 2007 Special Contribution Award for Cracking Down on Counterfeits and Piracies from the World Customs Organization (WCO). The amelioration of the IP environment fills foreign enterprises with great expectations of the Chinese market and a strong confidence in China’s IP protection mission.”

Ms. Ren has expressed great appreciation for the amelioration of IP protection in China. However, from the standpoint of businesses, she has also raised points that need improvement. She thinks that the handling of trademark infringement cases for some enterprises is not satisfactory. Additional amendments to the Trademark Law and the Anti-unfair Competition Law are necessary to popularize IP protection in China, as well as to provide law-enforcement authorities with an explicit theoretical basis for reference. Ms. Ren: “Some people put the two Chinese characters ‘松下’ in their company name, such as ‘四通松下’. Such cases are very common in Hong Kong in the past years, but have appeared on the Mainland over the past two years. We asked local industrial and commercial bureaus to investigate and take necessary measures, but they claimed that there was no specific legal basis to deal with it. This is actually quite plain and simple: ‘松下’ is used in the company name and the word ‘Panasonic’ is slightly altered by adding or changing one or two letters. They are not the same, but quite confusing. Law-enforcement authorities are still at a loss on how to deal with such cases.

In addition, there is a gap of IP system applications between the central level and local levels, and between big cities and small ones. A long time has to pass to shorten this gap. In the aspects of transparency and the efficiency of law enforcement, there are also places that need to-be-improved. For example, a law-enforcement agency must timely notify right owners of the results of case handling. This is also a legal requirement.

The last point is the IP consciousness of the public. Some people show partial or complete disregard for IP protection. I think they are more likely to form a protection consciousness at younger ages. Therefore it is quite necessary to popularize IP knowledge among students in primary schools.”

Panasonic’s experiences are identified with and shared by many other enterprises, especially international companies. With the growing number of foreign enterprises in China, and Chinese enterprises in the world, we think it is necessary and urgent to improve IP-related laws and regulations, and to strengthen IP protection awareness within the Chinese communities.

(Translated by Hu Xiaoying)


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