The man is clearly proud of his track record, and with good reason. Cheng Yongshun was one of the longest serving judges in China, and he spent a good portion of his career handling intellectual property rights (IPR) lawsuits.

Yet the retired Cheng is nevertheless disappointed that Chinese firms rarely win IPR battles with foreign companies.

"Most Chinese firms have yet to learn how to use IPR laws and regulations, but they have been in place in China for more than 20 years," says Cheng, the former deputy presiding judge of the IPR Tribunal in the Beijing High People's Court.

There were 9,300 IPR lawsuits in China in 2004. Foreign companies were involved in 4.3 per cent of those cases, up 60 per cent from the previous year.

In Beijing, the figure climbed to 8 per cent in 2004, compared to 2 per cent in 2002 and 3 per cent in 2003, Cheng says.

"In most cases, foreign companies are the plaintiffs and win the lawsuits. Over the past several years, many foreign companies have been taking advantage of China's patent-related laws and regulations to apply for patents and prove their own IPR strategies."

Few Chinese firms, on the other hand, have teams dealing with IPR issues. As a result, many of them have no idea how to respond when faced with lawsuits, particularly outside of China, says Cheng.

In one recent case, a domestic firm chose to discard its exported goods when they were detained by customs, following an order from a US court alleging IPR infringement.

"The domestic firm was frightened because it was told that the lawsuit in the United States could cost it a large amount of money," says Cheng.

This kind of passiveness underlines the low awareness in Chinese firms about how to use the established IPR system to protect their rights and interests.

Liu Chuntian, dean of the IPR Research Institute at Renmin University of China, is an expert on IPR. He is not shy about criticizing Chinese firms that try to fan the flames of nationalism when locked in IPR lawsuits with foreign companies.

"In most cases, they are just legal disputes," says Liu.

He urges domestic firms to play by the rules.

"The crux of the matter is that Chinese companies need to establish their own IPR strategies."

An IPR strategy is not just about applying for patents; it also involves training engineers and lawyers to avoid "patent traps".

Domestic companies in regions that are more market-oriented tend to learn the global rules more quickly. In Shenzhen, an economic powerhouse of a city near Hong Kong, many companies own patents, Liu says. In Shanghai, however, universities and research institutions are the main patent holders.

A number of companies in Shenzhen were the first in the country to adopt IPR strategies. Telecoms equipment manufacturers Huawei Technologies and ZTE Corp established their IPR divisions several years ago. Shenzhen-based flash disk drive maker Netac Technology Co Ltd even brought Japan's Sony to court, accusing it of infringing upon its patents.

The firm is now considering launching IPR lawsuits against several large global companies. It is also developing a tight "patent pool" to improve its competitiveness, a tactic frequently adopted by foreign companies.

This marks a significant shift in China's technology sector, which has been besieged by foreign enterprises' established patent protection systems.

A landmark victory by China's largest rechargeable battery maker, BYD Co Ltd, could have even more far-reaching implications. Japan's Sanyo filed a lawsuit in the United States against BYD, but was forced to settle last year. Sony also sued the Shenzhen-based firm in 2003 in Japan, but was forced to withdraw the case last month.

BYD was founded in 1995. A year later it established an IPR office, which became a separate division in 2002. The unit now employs 44 full-time engineers and 29 lawyers.

The Hong Kong-listed company's customers include top mobile phone makers such as Nokia and Motorola. Its aggressive global expansion has been overshadowed by legal disputes with Sanyo and Sony, however.

Sony asked the courts to ban BYD's exports to Japan. BYD had yet to directly enter the Japanese market at that time, but its management team was under great pressure, according to Huang Zhanghui, a manager in BYD's IPR unit. The lawsuit has affected BYD's customer base and its business prospects.

Sony initially said that two lithium battery models made by BYD infringed upon its patents, but later increased the number to six, accounting for 80 per cent of BYD's mainstream portfolio, says Huang.

BYD has about 50,000 employees, with one-fifth working on research and development (R&D). It applies for far more patents than most domestic firms, but it still had to face the lawsuit with Sony.

BYD hired foreign lawyers and consulted with many technical experts and institutions in the United States, but the biggest factor contributing to its legal victory was its comprehensive understanding of the rules relating to IPR lawsuits.

On October 8, 2003, BYD answered Sony's charges by submitting 37 files of evidence. The firm found that it was wiser to directly ask the court to invalidate Sony's claims, instead of trying to prove that it did not infringe upon any patents, which could have led to a longer battle.

Prior to that lawsuit, three other Japanese firms filed similar requests in Japan but failed.

BYD was undeterred. After an extensive study of Japanese law, it claimed that Sony's patents were ineffective because they weren't creative enough.

It also claimed the patents were low on technical expertise and had no adequate disclosure of reference. The court later deemed the patents invalid.

Sony appealed to a high court in Japan, but was rejected on October 7, 2005.

A Japanese district court also rejected Sony's claims. The company was forced to withdraw the proceedings on December 2.

Sanyo, meanwhile, has also already settled its lawsuit with BYD.

Chen Meizhang, a professor with the IPR Research Centre at Peking University, says BYD's skilled IPR team played a crucial role in the victory.

"A company needs legal personnel that clearly understand both the IPR rules and the technology," says Chen.

"BYD has done a good job of implementing its IPR strategy."

The company might have lost its legal battles without its IPR unit. In lawsuits with foreign companies, Chinese firms also need experienced legal talent who understand Chinese and international law, Chen adds.

It is rare for a Chinese firm to ask a foreign court to invalidate the patents held by a company in that country.

China relies heavily on exports, so domestic firms are likely to encounter an increasing number of lawsuits filed by foreign companies in the future, Liu says.

There will also be an acute shortage of talent with a keen understanding of global rules. BYD's victory should remind domestic firms of the importance of legal expertise, Cheng Yongshun says.

Chinese people usually misunderstand counter-charges, and see them as a way for the accused to prolong the lawsuit, he says.

Plaintiffs also tend to have the advantage in IPR lawsuits in China, at least compared with other countries.

That is partly why many Chinese firms accused of patent infringements do not stand up to lawsuits.

"This misguided mindset will gradually change with increasing awareness of IPR in China," says Cheng.

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