#1Morgan Lewis AN INTRODUCTION TO SHENZHEN: CHINA'S TECHNOLOGY MEGA-CITY Eric Kraeutler Shaobin Zhu Yalei Sun May 18, 2020 © 2020 Morgan, Lewis & Bockius LLP#2SECTION 01 SHENZHEN: THE FIRST FOUR DECADES#3Shenzhen Then and Now Shenzhen 1979 调动一切 因素,为在本 |内把我国建设 | 伟大的社会主 | 代化强国而奋 Shenzhen 2020 中广ECGN Morgan Lewis https://www.chinadiscovery.com/shenzhen-tours/shenzhen-visa-on- arrival.html 3#4Deng Xiaoping: The Grand Engineer of Reform 坚持党的基本路线一百年不动摇 Morgan Lewis "There was an old man/Who drew a circle/by the South China Sea." - "The Story of Spring," Patriotic Chinese song 4#5Where is Shenzhen? • On the Southern tip of Central China • In the south of Guangdong Province • North of Hong Kong $39 SHUNDE 56 顺德区 PANYU 番禺区 |G1501 NANSHA 南沙区 • Along the East Bank of the Pearl River Morgan Lewis S43 Zhongshan DALANGZHEN 大朗镇 G25 G9411 $22 HUMENZHEN TANGXIAZHEN 虎门镇 53 $31 交椅洲 LONGGANG G15 LONGHUA 533 関区 PINGSHAN 龙华区 #UE G205 $28 「田区 BADAN Shenzhen YANTIAN 宝安区 深圳市 中山市 Zhujiang River Estuary 珠江口 Zhuhai 547 珠海市 DOUMEN 斗门区 Macau Lanni Bay Hong Kong SPA $21 G15 HUIYANG 海阳区 Dawan Bay 大湾 New Port 新港 大亚湾 Jiediagsha Bay 桔钓沙灣 Mira Bay Pinghai Baj 平海湾 Daya Bay 大亚湾 Map data ©2019 5#6Shenzhen: Growth and Development • 1979: Shenzhen officially became a City; following the administrative boundaries of Bao'an County. • 1980: Shenzhen established as China's first Special Economic Zone (SEZ). Separated into two territories, Shenzhen SEZ to the south, Shenzhen Bao-an County to the North. - Initially, SEZs were separated from China by secondary military patrolled borders. • 2010: Chinese State Council dissolved the "second line"; expanded Shenzhen SEZ to include all districts. • 2010: Shenzhen Stock Exchange founded. • 2019: The Central Government announced plans for additional reforms and an expanded SEZ. Morgan Lewis 6#7Shenzhen's Special Economic Zone (2010) 2010: Shenzhen SEZ expanded to include all districts. Shenzhen plan for city-wide SEZ Province: Guangdong Special Economic Zone (SEZ) is established on August 26, 1980 Current SEZ (Total area: 395.81 sqkm) CHINA Morgan Lewis Bao'an 713 sq km SHENZHEN Longgang 844 sq km Nanshan Yantian Luohu Futian Pearl River HONG KONG 10km Source: Shenzhen government Graphic by Kinyen Pang 7#8Regulations of the Special Economic Zone • Created an experimental ground for the practice of market capitalism within a community guided by the ideals of "socialism with Chinese characteristics." • Preferential policies to attract foreign investment: - - - Business autonomy Taxation Land use Foreign exchange management Product sales Entry and exit management Morgan Lewis 8#9Defining Shenzhen • "China's Instant City" • "The World's Factory" • "China's Silicon Valley" • "The Electronics Capital of the World" Morgan Lewis ©Getty Images#10"The Instant City" - Cityscape "The world leader for completing new skyscrapers" (The Guardian) • Ranked third in the number of buildings above 150 meters - Behind Hong Kong, New York City - 223 completed as of July 2019 • The Ping An Finance Centre - 599 meters, 115 floors Morgan Lewis 10#11"The Instant City" - Population 12,905,000: Registered population as of 2017 - With an area of 1,997.47 square kilometers, Shenzhen has a density of 7,317 people in every square kilometer • 20 million: Includes short-term residents, unregistered migrants, part-time residents, commuters, visitors, temporary residents • 108.5 million: Pearl River Delta Metropolitan region Morgan Lewis 11#12Young City, Young People MEDIAN AGE: 28.65 COMPARED WITH: • China: 38.4 • U.S.: 38.2 Morgan Lewis 12#13Shenzhen Age Distribution SHENZHEN PERCENTAGE BY AGE GROUP: 0-14: 8.5% • 15-64:90.39% 65+: 1.11% COMPARED WITH CHINA GENERALLY: • 0-14: 38.4% • 15-64:71.2% • 65+: 11.9% Morgan Lewis 20-24: 20% 20-29: 35.77% 15-59: 88.41% 13#14"The Instant City" - Entrepreneurship . 16.04% of population reported nascent or new entrepreneurial activities 240 commercial entities and 150 enterprises per 1,000 people Participating Economy Nascent New Entrepreneurial Entrepreneurial Activity-% Activity-% Total Early Established Stage Entrepreneurial Business Owners -% Overall Entrepreneurial Tencent 腾讯 HUAWEI Activity -% Activity-% (1) (2) (3) (4) (5) Hong Kong 4.99% 4.66% 9.44% 6.12% 15.30% Shenzhen 6.26% 9.98% 16.04% 7.82% 23.38% BYD BYD A Your China 4.45% 6.09% 10.29% 7.49% 17.51% Israel 7.04% 4.45% 11.31% 4.04% 15.04% South Korea 3.70% 3.04% 6.69% 6.55% 13.04% Chinese Taipei 3.64% 4.65% 8.24% 7.74% 15.59% United Kingdom 5.16% 3.73% 8.80% 6.05% 14.57% United States 8.88% 4.00% 12.63% 9.22% 20.99% Efficiency-driven 7.95% 6.53% 14.16% 8.61% 22.25% economies (mean) Innovation-driven 5.59% 3.68% 9.07% 6.68% economies (mean) 15.37% Source: Global Entrepreneurship Monitor- Hong Kong and Shenzhen Report Morgan Lewis 14#15SHENZHEN 2019 UN - "The Instant City" – Dramatic Growth • Lonely Planet, "Top 10 cities to visit in 2019" • Shenzhen Symphony Orchestra • Shenzhen Cultural Center • Shenzhen Convention and Exhibition Center • Overseas Chinese Town - cultural theme parks • 630 libraries and bookstores Morgan Lewis (3)创新工场 SINOVATION VE Miri 四 15#16- "The Instant City" – Education Shenzhen University (1983) • Shenzhen Virtual University Park (1999) • Southern University of Science and Technology (2011) • Shenzhen Institute of Technology (2018) Morgan Lewis 16#17"The Instant City" - Legal System (#1 Permanent population Yr. 1979 31,400 X 430 Yr. 2019 13,438,800 GDP 28 million USD X 13,724 374 billion USD GDP per capita 87 USD X 334 29,069 USD Morgan Lewis 17#18Shenzhen's Economic Miracle ⚫ China's richest city • The third largest Chinese City, behind only Shanghai and Beijing • Estimated GDP (2019) - $374 billion Surpassed Hong Kong in 2018 - GDP grew 7% in 2019 • By 2030, estimated to be the city making the 7th biggest contribution to global GDP - Ahead of London and Tokyo • The eighth largest stock exchange in the world Morgan Lewis © 视觉中国 18#19SECTION 2 SHENZHEN'S IMPORTANCE TO THE GLOBAL TECHNOLOGY INDUSTRY#20SECTION 2.1 SHENZHEN: ONE OF TOP GLOBAL INNOVATION HUBS#21The Greater Bay Area (2017) • Population: 71 million - UK - 66 million; Canada - 36 million • GDP: $1.6 trillion - 12% of China GDP; about twice of SF Bay • Air freight traffic: 7.96 million tons. - > San Francisco + New York + Tokyo • Container ports: 3 of world's top 10 Shenzhen, Guangzhou, HK - 66 million TEUs, > any other bay areas The economies of the Greater Bay Area (GDP, in billions of dollars) Guangzhou 341 Dongguan 123 Zhaoqing Foshan 33 148 Population 14.5 million 0.5 million Zhongshan 54 Jiangmen 43 Shenzhen 361 Huizhou 61 * Hong Kong Macao 362 Zhuhai 54 43 Figures do not add to up GBA total due to currency conversions and rounding Source: Local governments in China, Hong Kong government, Macao government CCGIAR-CSI Greater Bay Area Area: 56,094 km² Population: 71.12 million GDP: $1.642 trillion GDP per capita: $23,300 https://www.scmp.com/print/native/economy/china-economy/topics/great- Morgan Lewis powerhouse/article/3002844/greater-bay-area-10-facts-put https://asia.nikkei.com/Economy/China-s-plan-to-rival-Silicon-Valley-stirs-hopes-and-concern 21#22Shenzhen: Top Global Innovation Hub - Why? x Cabre ML8160 『廳AI 線芯片 魔力生物识别引擎 Morgan Lewis 7719 MC BELTE 1412 大族選 WWW.NEWS.CN Innovation Ecosystem Heavy Investment on R&D Competitive IP Strategy Rich Young- talent Pool and Entrepreneurs Strong Legal Protection 22#23Innovation Ecosystem Logistics Key industries in Shenzhen ■ Culture ■ High-tech ■ Finance ■Logistics Percentage of GDP 15.67% 273.98 billion Finance 20.97% 366.76 billion BYD CJI 光峰 APPOTRONICS® HUAWEI High Tencent 腾讯 Hytera海能达 OFILM Tech 欧菲光 大族激光 KONKA康佳 HAN'S LASER Culture 10.58% 184.95 billion GDP(RMB) 923.09 billion 中国平安 深圳证券交易所 前海人寿 366.76 billion Finance PING AN SHENZHEN STOCK EXCHANGE FORRSEA LIFE INSURANCE 273.98 billion 184.95 billion (Sr) Logistics EXPRESS 顺丰速运 C.旗丰 FIRST FLAG 185 Eternal Asia 全球专业供应链服务 High-tech 52.78% 923.09 billion Culture OCT華僑城 ●腾讯视频 T 优质生活的创想家 V.QQ.COM related 华强方特 FANTAWILD Source: www.newsgd.com Morgan Lewis 23#24Innovation Ecosystem • Fortune 500 in Shenzhen 98 Int'l Fortune 500 invested in Shenzhen 7 local Fortune 500 Enterprises 28 China Top 500 中国平安 PING AN HUAWEI 恒大集团 ANTERNATIONAL GROUP Amer 正威国际 八招商銀行 世界500强 vanke л Morgan Lewis CHINA MERCHANTS BANK Tencent • Leaders in Niche Market 7 鴻鼎控股 AVARY HOLDING World's largest printed circuit board manufacturer Hytera海能达 World's second largest provider of professional mobile radio solution 大族激光 HAN'S LASER Hepalink World's largest heparin sodium API supplier Unilumin洲明 World's top 3 LED display screen manufacturer CuCloudlink CIMC connection and sharing without limitations | 中集集团 EvIC 24#25Heavy Investment on R&D Morgan Lewis Matched only by South Korea and Israel US$14.9 billion investment in tech research and development 4% of Shenzhen's GDP https://www.scmp.com/print/native/economy/china- economy/topics/great-powerhouse/article/3002844/greater-bay-area- 10-facts-put 25#26Competitive IP Strategies • China takes over world leadership in international patent applications in 2019 • Top 10 PCT filers - 4 Chinese companies 3 Shenzhen-based: Huawei, Oppo, and Ping'an Morgan Lewis Top 10 countries Number of PCT applications and percent growth since 2018 ^ 10.6% China 58,990 57,840 52,660 ↑ + 2.8% U.S. 5.9% Japan -2.0 19.353 Germany 12.8% 19,085 Republic of Korea ↑ 0.2% 7.934 France 2.7% 5.786 U.K. 0.7% 4.610 Switzerland ^ 0.4% 4,185 Sweden -3.0% 4,011 Netherlands Top 10 PCT applicants Number of published PCT applications 4,411 2,661 2,334 2,127 1,927 1,864 1,698 1,691 1,687 1,646 Huawei Mitsubishi Technologies Electric Samsung Electronics Qualcomm Guang Dong Oppo Mobile Telecom. BOE Technology LM Group Ericsson Ping an Technology (Shenzhen) Robert Bosch LG Electronics https://www.wipo.int/export/sites/www/ipstats/en/docs/infographic_pct_2019.pdf 26#27Strong Legal Protection to Innovations O Experienced Judges and Law Officers Cases on Cutting Edge Technologies Enhanced Evidence Preservation and Production Allowing Mainland China, HK, and Macau Law Firms to Establish Joint Offices Morgan Lewis Supreme People's Court Judicial Proceedings High People's Courts Judicial Proceedings Dissatisfaction with infringement determination IP Courts; Intermediate Court - IP Tribunal; Internet Court Judicial Proceedings Failure in mediating the amount of compensation Local IP bureau Administrative Proceedings Patentee/interested party in case of patent infringement 27#28Guangdong- IP litigation Hotspot Guangdong instituted nearly 1/3 IP cases of China in 2019 Shenzhen instituted nearly 1/3 IP cases of Guangdong in 2019 Others: 35.85% Jiangsu: 4.2% Shanghai: 4.89% Guangdong: 32.66% 157,363 Cases Shenzhen: 27% Others: 73% 42,660 Cases Beijing: 16.64% Zhejiang: 5.75% Morgan Lewis Source: Supreme Court of China, 2019 IP Protection White Book Shenzhen IP Tribunal: 3,191 cases Guangzhou IP Court: 12,896 cases Source: Shenzhen Intermediate Court, 2019 IP Protection White Book 28#29Top 3 Forum of Injunction and Preservation Orders Top 10 Provinces issuing Pl and Preservation Orders (2011-2020) 900 856 800 731 700 600 500 400 345 300 200 100 0 104 98 96 90 82 73 Henan Shandong Shanghai Guangdong Morgan Lewis Anhui 62 62 • • Guangdong is top 3 forum of granting preliminary injunction (PI) and assets/evidence preservation orders 254 Pl and orders were issued since 2015 in Guangdong, 12.6% of Nationwide Shenzhen constitute 33.6% of Guangdong, Rank 1st Zhejiang Beijing Hunan Fujian Jiangsu Source: Iphouse.cn 29 29#30High Efficiency Judicial System-Shenzhen IP Tribunal High Case-conclusion Rate: more cases closed than newly instituted 3,191 Instituted in 2019 3,221 Concluded in 2019 Tech Contract: 45 Tech Contract: 16 Copyright: 368 Others: 68 Copyright: 241 Others: 48 Trademark: 265 Trademark: 147 00 Patent: 2445 Patent: 2769 Source: Shenzhen Intermediate Court, 2019 IP Protection White Book Morgan Lewis More than 80% cases were concluded in less than 1 year 365 days or more 18.75% 2-15 days 18.75% 16-30 days 12.5% 181-365 days 25% 31-90 days 6.25% 91-180 days 18.75% Source: Wolters Kluwer 30#31Increasing High-Amount Damage Awards in Guangdong In 2019 • 67K USD: average damage awards in patent case, yearly increase 140.84% • 19 cases with damage awards of more than 10M RMB (1.42M USD) in Shenzhen and Guangzhou • Representative IP Cases Awarding Big Damages - - - Guangdong High Court: GREE v. AUX, 14M USD awarded in 2 patent cases Guangzhou IP Court: Guangzhou Redsun v. Guangdong Zhimei, 7M USD awarded in a trademark and unfair competition case Shenzhen IP Tribunal: Tencent v. Yingxiong Entertainment, 6.3M USD awarded in a game copyright case Morgan Lewis DED 31#32Guangdong Guangdong: China's Top Province for IP Monetization Int'l Trans of Copyright (US$) 100 10 50 2018 China's General IP Monetization Index 84.95 84.36 68.62 70.12 71.26 72.28 71.63 71.46 74.13 78.14 78.87 65.85 65.02 4555 3000000.0 2500000.0 山西28 云南29 青海30 西藏31 崭27 江山北浙陕辽天安上湖四吉湖重福内甘广江河河: 宁津徽海北川林南庆建 内蒙古17 甘肃18 广西19 江西20 河南21 河北22 黑龙江23 贵州24 宁夏25 海南26 Guangdong Source: cnipa-ipdrc.org.cn Morgan Lewis 2000000.0 1500000.0 1000000.0 500000.0 0.0 北天河山内辽吉黑上江浙安福江山河湖湖广广海重四贵云西陕甘青宁新 京津北西蒙宁林龙海苏江徽建西东南北南东西南庆川州南藏西肃海夏疆 古 江 ■29.软件业务出口额(万美元)2018 #29.软件业务出口额(万美元)2017 Patent Licensing (10k Yuan) 200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 Guangdong 北天河山内辽吉黑上江浙安福江山河湖湖广广海重四贵云西陕甘青宁新 京津北西蒙宁林龙海苏江徽建西东南北南东西南庆川州南藏西肃海夏疆 江 古 ■25.专利实施许可合同金额(万元)2018 = 25.专利实施许可合同金额(万元)2017 32#33- The Greater Bay Area – IP Transaction Fair 2019 S Types of IP Transactions: patent, trademark, copyright, geographical indications, etc. IP Transactions on the Fair in 2019: USD 1.4 billion, up • 12.74% than 2018 Patent and trademark, up 42.61% Morgan Lewis GEA 粤港澳大湾区知识产权交易博览会在线交易系统 上线仪式 33#34Huawei v. Samsung (Shenzhen Intermediate Ct. 2018) Facts: Huawei sued Samsung for infringement of two SEPS regarding 4G LTE in 2016 after the failure in the cross-licensing negotiations started from 2011. Huawei sought a permanent injunction. Holding: • • • Huawei's patents are SEPs. Samsung infringed Huawei's SEPs. Samsung maliciously delayed negotiations and was "at fault" during the negotiation. Thus, injunction is granted. Settlement: Huawei and Samsung reached agreement during the appeal. HUAWEI SAMSUNG Morgan Lewis 34#35Huawei v. Samsung (Shenzhen Intermediate Ct. 2018) Determining Infringement of SEP • Is the asserted patent a SEP? • Does the defendant practice the standard? - Samsung smartphone uses 4G network. - China's top 3 telecomm service provider adopts the 3GPP standard. PATENT INFRINGEMENT Morgan Lewis Determining Permanent Injunction • Whether plaintiff complies with FRAND during the negotiations? • Whether defendant complies with FRAND during the negotiations? If plaintiff has no faults and the defendant violates FRAND, a permanent injunction shall be granted. INJUNCTION 35#36Tencent v. Bytedance (Guangzhou IP Ct. 2019) Facts: Tencent owns copyright over the online game Honor of Kings (or Arena of Valor) and organized a tournament for the game. Without authorization, Bytedance provided live- streaming of the tournament on its video-sharing platforms. • Tencent sued Bytedance for copyright infringement and unfair competition, and claimed USD 7.18 million for damages on Feb. 15, 2019. • On Mar. 1, Tencent sought preliminary injunction while providing a bond of USD 7.18 million. Order: • Preliminary junction granted. likelihood of infringement exists likelihood of irreparable harm exists balance of equities tips in Tencent's favor no harm to public interest Morgan Lewis 王者荣耀 36#37Tencent v. Qihoo 360 (Supreme Ct. 2013) Facts: Qihoo developed its software Guard which scans Tencent's QQ instant messager, flags the ads and other plugins in QQ as dangerous items, and promts users to remove those plugins. Tencent sued Qihoo for unfair competition. Guangdong High Court entered judgment for Tencent and awarded USD 710k for damages. Qihoo appealed to the Supreme Court, which affirmed. Holding: Guard damaged the security and integrity of QQ software. • Removing QQ's ads would result in Tencent losing transactions and ad income. • Qihoo defamed Tencent. 你360推出新产品:扣扣保證 扣扣保镖 让QQ更好用更安全永久免费 • 去除QQ广告 可去除QQ的聊天和弹出广告,给您一个绿色的QQ * 加快QQ速度 可禁用30多个QQ插件,提高一倍启动和运行速度 • 清理QQ垃圾 可清理20多种垃圾文件,减少一半内存占用 • 保护QQ安全 超强查杀QQ盗号木马,全面保护QQ安全 立即体验 以后再说,关闭 Morgan Lewis 37#38Guangzhou Tianci New Materials v. Mr. Hua and Anhui Newman Fi ne Chemicals (Guangzhou IP Ct. 2017) Facts: Anhui Newman was given criminal sentences due to misappropriation of Tianci's trade secret. Among the TINCI criminal investigation, Tianci discovered that it is Mr. Hua and some other Tianci's employees disclosed the trade secret to Newman, thus filed a civil litigation against the employees and Newman. Holding: - The defendants jointly and severally liable for infringement of trade secret. The court awarded punitive damages at USD 4.3 million, 2.5 times of the profits gained by the defendants. Morgan Lewis TINCI Product Name TC-Carbomer 340 Batch No.: JCR171113222 38#39Tencent v. wdzj.com (Shenzhen Nanshan Dist. Ct. 2020) • . . . . • Facts: Dreamwriter is an automated news writing program (AI) based on data and algorithms developed by Tencent in 2015. On Aug 20, 2018, Dreamwriter wrote a financial report, which was published on the Tencent Securities website, noted that "the article was automatically written by Tencent Robot Dreamwriter." Wdzj.com copied the article onto its own website. Tencent sued for copyright infringement. Holding: The article generated by Al was original, and a copyrightable work. Tencent is the author since the work was the result of activities carried out on behalf of Tencent. Damages: 1,500 RMB Morgan Lewis Chinese court rules Al- generated article is entitled to copyright Updated 14:55, 13-Jan-2020 Zhang Guanlan Share f R 39#40Success Resulted in More IP Cases in U.S. Courts • 2011-2020: about 2,000 U.S. district court IP cases involving Shenzhen companies 200 150 Claimant Win 524 30% Likely Settlement 723 41% Default Judgment 413 23% Plaintiff Voluntary Dismissal 221 13% Filings Consent Judgment 49 3% Stipulated Dismissal 502 28% 100 Judgment on the Pleadings 0 0% Procedural Resolution 174 10% Summary Judgment 25 1% Contested Dismissal 22 1% 50 Trial 35 2% Dismissal 32 2% 50 Judgment as a Matter of Law 2 0% Consolidation 29 2% Decision on Bankruptcy Appeal 0 0% Severance 2 0% Claim Defendant Win 32 2% Interdistrict Transfer 48 3% 0 <2011 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Default Judgment 0 0% Intradistrict Transfer 5 0% Consent Judgment 2 0% Stay 24 1% Patent 43 31 54 93 66 102 95 133 143 110 65 Judgment on the Pleadings 3 0% Multidistrict Litigation 12 1% Trademark 25 22 25 38 65 69 93 128 188 169 36 Summary Judgment 16 1% No Case Resolution 311 18% Trial 8 0% Copyright 5 7 6 7 14 14 13 21 44 46 42 7 Judgment as a Matter of Law 3 0% Morgan Lewis Source: Lex Machina, 5/15/2020 40 40#41Success Resulted in More IP Cases in U.S. Courts • 2011-2020: about 240 ITC-337 investigations involving Shenzhen companies Investigation Spa Pumps, Jet Pump Housing Motors, Components Thereof, and Products Containing Same Portable Gaming Console Systems with Attachable Handheld Controllers and Components Thereof II Electronic Candle Products and Components Thereof High-Density Fiber Optic Equipment and Components Thereof Audio Players and Controllers, Components Thereof, and Products Containing the Same Wearable Monitoring Devices. Systems, and Components Thereof Balanced Armature Devices, Products Containing Same, and Components Thereof Smart HVAC Systems, and Components Thereof Wireless Communication Devices and Related Components Thereof Certain Foldable Reusable Drinking Straws and Components Thereof Pouch-Type Battery Cells, Battery Modules, and Battery Packs, Components Thereof, and Products Containing the Same Collapsible and Portable Furniture Semiconductor Devices, Products Containing the Same, and Components Thereof (1) Lithium-Ion Battery Cells, Battery Modules, Battery Packs, Components Thereof, and Products Containing the Same Toner Cartridges Components Thereof, and Systems Containing Same Rotating 3-D LIDAR Devices and Products Containing the Same (Including Autonomous Vehicles, Unmanned Aerial Vehicles. Industrial Machines, and Robotics), and Components Thereof Filament Light-Emitting Diodes and Products Containing Same Fish-Handling Pliers and Packaging Thereof Mobile Devices with Multifunction Emulators Reload Cartridges for Laparoscopic Surgical Staplers Foodservice Equipment and Components Thereof Barcode Scanners, Scan Engines, Products Containing the Same, and Components Thereof Light-Emitting Diode Products, Systems, and Components Thereof (1) Certain Light-Emitting Diode Products, Systems, and Components Thereof (II) Morgan Lewis Investigation Number 337-TA-1198 Judge Notice Termination McNamara 2020-05-11 337-TA-1197 Shaw 337-TA-1195 Lord 337-TA-1194 Shaw 2020-05-04 2020-04-06 2020-03-24 337-TA-1191 Bullock 2020-02-11 337-TA-1190 Lord 2020-01-15 337-TA-1186 Lord 2019-11-29 337-TA-1185 Shaw 2019-11-27 337-TA-1183 Elliot 2019-10-10 337-TA-1179 Bullock Chency 2019-10-09 337-TA-1178 Shaw 337-TA-1176 Bullock 2019-10-04 2019-10-01 337-TA-1181 Lord 2019-09-27 Dispositions 337-TA-1180 McNamara 2019-10-17 Settlement 94 Complaint Withdrawn 67 Violation Found 53 Consent Order 50 Default 47 No Violation Found 37 Other 30 General Exclusion Order 9 Limited Exclusion Order 9 Cease & Desist Order 6 Summary Determination - No Violation 4 337-TA-1174 Cheney 2019-09-23 337-TA-1173 McNamara 2019-09-17 337-TA-1172 Shaw 2019-08-02 337-TA-1169 Shaw 2019-07-29 337-TA-1170 Elliot 2019-07-19 337-TA-1167 Bullock 2019-07-05 337-TA-1166 Lord 2019-07-03 337-TA-1165 McNamara 2019-07-02 2020-03-12 337-TA-1163 Cheney 2019-06-25 2019-10-29 337-TA-1164 Shaw 2019-06-25 2020-03-20 Source: Lex Machina, 5/15/2020 41#421:16-cv-00706 Enforcing IP Rights in U.S. Courts Increasing Shenzhen companies enforce their IP rights in US courts Huawei Technologies, Co, Ltd et al v. Samsung Electronics Co. Ltd. et al Huawei Technologies Co. Ltd v. T-Mobile US, Inc. et al Huawei Technologies Co. Ltd v. T-Mobile US, Inc. et al SZ DJI Technology Co., Ltd. et al v. Autel Robotics USA LLC et al 2:16-cv-00055 Patent 2016-05-24 2020-02-26 2019-03-25 2016-01-15 2017-12-22 2017-12-22 3:16-cv-02787 Patent N.D.Cal. 2:16-cv-00052 Patent E.D.Tex. E.D.Tex. 2016-01-15 2018-02-21 2017-12-22 Patent SZ DJI Technology Co., Ltd. et al v. Yuneec International Co. Ltd. et al Enargy Power (Shenzhen) Co. Ltd et al V. Xiaolong Wang et al 5:16-cv-00595 Patent D.Del. C.D.Cal. 2016-08-11 2016-04-01 2020-05-08 2017-01-30 2017-01-30 1:13-cv-11348 Contracts Trade Secret D.Mass. 2013-06-05 2018-01-30 2017-01-12 Shenzhen Kinwong Electronic Co, Ltd et al v. Kukreja et al 0:18-cv-61550 Trademark S.D.Fla. 2018-07-09 2020-04-30 Shenzhen Smoore Technology Ltd. v. Anuonuo International Trade Company, et al. 1:19-cv-09896 Trademark S.D.N.Y. 2019-10-25 2020-04-24 Shenzhen Jinghe Technology Co., Ltd. v. Does 1-166 Shenzhen Liown Electronics Co., Ltd. v. Luminara Worldwide, LLC et al 1:18-cv-05031 Trademark N.D.III. 2018-07-24 2019-03-11 2018-10-18 0:14-cv-03112 Patent Contracts D.Minn. 2014-08-06 2017-01-12 2015-03-31 3:18-cv-05031 Patent N.D.Cal. 2018-08-16 2020-03-30 Hong Kong uCloudlink Network Technology Limited et al v. SIMO Holdings Inc. et al Shenzhen Topgreen Technology Co., Ltd. v. XVAPE LLC et al Morgan Lewis 1:18-cv-01243 Trademark D.Colo. 2018-05-22 2019-06-03 2019-06-03 Source: Lex Machina, 5/15/2020 42#43Improved IP Protection and Risk Management • Build effective IP portfolio facilitating international competition • Responding to infringement notice & licensing request • IP due diligence; monitor IP litigation Opinion of counsel Design around • Licensing & cross-licensing . Challenge validity of threatening patents at the USPTO • Allocate IP risks through contracts Actively responding to IP litigation • Effective settlement and negotiation Manage risks of trade secret misappropriation Morgan Lewis Anancial motivation action innovation work T STRATEGY motivation action Winancial ideas Innovation goal success ancial action money Ideal goal 43#44SECTION 2.2 COVID-19 INSIGHTS: CHALLENGES & OPPORTUNITIES#45COVID-19 to Shenzhen: Challenges vs Opportunities • Mainly local companies, not many foreign companies Complete industry chain High-tech hub: Low percentage of labor- intensive and low-tech assembling industries • COVID-19 inspires new tech development Morgan Lewis OPPORTUNITIES CHALLENGES 45#46COVID-19: Opportunities • Health IT - Telemedicine Artificial intelligence ("AI") Drones - Robots - Big data • Online entertainment • E-commerce & Live-streaming commerce • Online education • Remote-work technologies . E-government Morgan Lewis 46#47Where Do We Go From Here? Morgan Lewis FORWARD LOOKING Reevaluate the industry chain Drive new technology adoption and innovation Enhance technology Plan ahead capabilities through to buffer volatility and risks M&A 47#48SECTION 03 SHENZHEN'S IMPORTANCE TO THE GLOBAL LIFE SCIENCES INDUSTRY#49Overview Shenzhen's Life Science Industry and its Significance Opportunities in Shenzhen • COVID-19 and Life Science Industry Morgan Lewis 40 49#50SECTION 3.1 SHENZHEN'S LIFE SCIENCE INDUSTRY AND ITS SIGNIFICANCE#51China & Global Life Science Market Scales 80000 70000 60000 China & Global Life Science Market Scales 70000 China & Global Life Science Compound Annual Growth Rate 25% 20% 20% 50000 40000 30000 19000 20000 10000 10000 6400 3700 0 15% 30000 12% 8.3% 10% 7.4% 5% 5% 5% 0% Biopharma Chempharma Medical Biopharma Chempharma Medical Device Device Global ■China (hundred million yuan) Global China Morgan Lewis Source: Pingshan Biomedical Industry Innovation and Development Blue Book 51#52Key Competence - Medical Device Shenzhen: 深圳市8% • 700+ medical 2010-2017 Shenzhen Medical Device Industry Production Value and Growth Rate device companies • 8% of the national 365.37 20.00% 400 700多家 全国医疗器械市场规模 医疗器械生产企业 全国其它城市 92% medical device market 350 311 239 270.13 300 8% 15.00% 250 13.35% 184.79 195.38 210.92 % 200 163.03 10.00% 150 7.95 100 5.00% PRODUCT FIELD DISTRIBUTION OF SHENZHEN'S TOP 50 MEDICAL DEVICE INDUSTRY MANUFACTURING ENTERPRISES IN 2016 50 0 0.00% Dentistry 5% Processing 7% Mid to low-end of retail 5% Hospital consumables 13% 00 Medical devices 34% 2010 2011 2012 2013 2014 2015 2016 2017 Annual Production value (hundred million yuan) مرس In vitro diagnosis 25% Hospital infraestructure wwww 7% H 4% T Implantation and intervention Source: Shenzhen Medtech Association Morgan Lewis Source: Shenzhen Biomedical Industry Development Analysis Report by SINO-INNO Research 52#53Key Competence - DNA Testing 华大基因 BGI World's leading life science and genomics organization Cooperation with thousands of organizations across multi-disciplinary research China National CNGB GeneBank . 国家基因库 HK 华因康基因 HYK GENE First national integrated genebank Public, non-profit, open, enabling and leading platform Cica iCarbon SARS-COV-2 NP Ab ELISA kit Comprehensive health data platform Artificial intelligence and biotech YU Cancer immunotherapy BIO: Clinical high-throughput gene 裕策生物 sequencer--HYK-PSTAR-IIA gene sequencing system Assistive cancer diagnosis gene detection Morgan Lewis Source: Shenzhen Biomedical Industry Development Analysis Report by SINO-INNO Research 53#54Key Competence - Pharmaceutical Pharmaceutical Manufacture 55 manufacturers Total Profits: 5.78 billion yuan (816 million USD) in 2018 Figure 14 Share of value-added among top industrial sectors in GBA cities Computer, communication and electronic equipment Electrical and mechanical equipment Heat and power generation Chemicals Textile and garment Metal products Rubber and plastic products Petroleum processing, coking and nuclear processing Non-metal mineral products Non-ferrous metal smelting Pharmaceutical Manufacture Morgan Lewis Shenzhen Dongguan Huizhou Zhuhai Zhongshan Jiangmen Foshan Guangzhou Zhaoqing >>> Guangdong-Hong Kong- Macau Greater Bay Area - Well-poised for success by EY 54#55Home to Life Science Innovation 21 National Level Innovation Bases More than Key Industrial Parks 300 Innovation Bases Pingshan National Bio- industry Base Shenzhen International Bio Valley Life Science Industrial Park Shenzhen Life Science Innovation Bases Nanshan Medical Device Industrial Park Guangming Modern Biological Industrial Park Morgan Lewis Source: Shenzhen Biomedical Industry Development Analysis Report by SINO-INNO Research 55#56PCT Applications in Life Science Industry Top 5 Shenzhen Applicants BGI GLOBAL GENOMIC SERVICES PCT Applications of Life Science Industry 700 659 596 318 600 mindray BIOCAN Lifetech SCIENTIFIC 480 500 260 400 118 300 93 338 236 93 182 200 168 83 122 83 121 SIAT 100 31 0 || 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Morgan Lewis Patent search conducted on 04/23/2020 ■PCT Application of Life Science Industry 566#57SECTION 3.2 OPPORTUNITIES IN SHENZHEN#58Internationalization and Diversify Industry 2019深圳国际 生物/生命健康 产业展览会 2019 SHENZHEN INTERNATIONAL BIOTECH & HEALTH INDUSTRY EXPO 9.11-13 深圳会展中心7号馆。*号馆 • 5+ Exhibit Areas 10+ Trendy Topics 20+ Forums 200+ Companies 15,000+ Square Meters 20,000+ Participants Morgan Lewis BIOTECH 聚力科技新契机 扬帆健康大湾区 2019深圳国际BT领袖峰会 SHENZHEN INTERNATIONAL BIOTECH SUMMIT 2019 指导单位:深圳市人民政府/科技部中国生物技术发展中 支持单位;深圳市发展和改革委员会/深圳市卫生健康委员会 主办单位:深圳国家高技术产业创新中心/茉圳迈瑞生物医疗电子股份有限公司 2019年9月11-12日 • MOORKARRINGE • 中国深圳 Trend of Innovative Drugs • Big Data of Healthcare • and Medical Treatment Nano Tech in Medical Science Personalized and Precision Medicine 58#59Investment Hotspots 2018 Shenzhen Life Science Industry PE/VC Distribution 2018 Shenzhen Life Science Industry PE / VC Distribution Statistics Analysis 100% 16 14 12 10 222036420 14 12 10 Source: wind Medical Device Biotech Morgan Lewis 14 12 Medical Service 80% 23 1 60% 40% 4 7 1 20% 4 0% Medical Device Biotech Medical Service Pharmaceutical Pharmaceutical Angel pre-A A A+ pre-BB Source wind B+ C F Strategic 2018 Shenzhen Life Science Industry PE / VC Investment Statistic (Number of Investment Events) 12 10 S 6 5 4 2 ° ul.. 2 Angel pre-A pre-B 6 2 Strategic Source: Shenzhen Biomedical Industry Development Analysis Report by SINO-INNO Research 599#60. • • Strong Regional Life Science Collaboration Foshan: 2017 Pharmaceutical Ouput: 3 billion RMB Life Science Annual Growth Rate: 23.3% Zhaoqing: 2017 Pharmaceutical Annual Growth Rate: 13.7% Zhongshan: 300+ Life Science Companies Expected Industrial Output in 2022: 120 billion RMB Jiangmen: 2016 Healthcare Industrial Output: 37 billion RMB Annual Growth Rate: 18% Zhuhai: • 2017 Life Science Industrial Output: 30 billion RMB • First half of 2018: Increased Output: 2.6 billion RMB Growth Rate: 31.8% 合 中山 珠海 东营 Guangzhou: Life Science Industrial Output: 70+ billion RMB Average Annual Growth Rate: 15+% Equal to 60% Total Output Huizhou: • Traditional Chinese Medicine Dongguan: •300+ biotech companies, Growth Rate 42.7% ⚫2014-2017 Life Science Annual Growth Rate: 28% Shenzhen: • • Hong Kong: R&D 2017 Life Science Industrial Output: 240 billion RMB Increased Value: 30 billion RMB Annual Growth Rate: 24.6% Universities Concentrated Macau: • R&D, fundamental research • International talents Morgan Lewis Source: Shenzhen Biomedical Industry Development Analysis Report by SINO-INNO Research 60#61SECTION 3.3 COVID-19 AND LIFE SCIENCE INDUSTRY#62COVID-19 and Life Science Industry • Impact on Global Life Science Environment - - Supply chain blockages Drug and labor shortages Materials and finished goods shortages Clinical trial halts Surging demands for COVID-19 related medical products • Turn Crises into Opportunities in China - Produced 90% of APIs used in generic drugs - Increased exportation of medical protection products - Accelerated researches on related diagnosis kits and vaccines Concentrated geographic centers for research and manufacture Morgan Lewis Source: POTENTIAL IMPACT OF CORONAVIRUS (COVID-19) ON THE PHARMACEUTICAL AND BIOTECH INDUSTRIES, Morgan Lewis law flash 62#63COVID-19 and Life Science Industry • Forward-looking from "where we are here" Use of AI based diagnostics and tools - - - Adoption of healthcare big data for disease management Accelerated digital transformation of healthcare delivery models Comprehensive ecosystem from early diagnostics to follow-up treatment Supply chain integration and optimization Morgan Lewis Source: Six Predictions for 2020 China Pharmaceutical & Health Care by Deloitte 99 63#64Biography Eric Kraeutler Philadelphia T F +1.215.963.4840 +1.215.963.5001 Morgan Lewis Eric has decades of experience representing clients in complex, high-stakes litigation-including trials, appeals, and government investigations. As a member of the firm's litigation practice and the global leader of the firm's intellectual property practice, Eric has achieved distinction across a broad range of matters. He is a fellow of the American College of Trial Lawyers and is listed in Chambers USA: America's Leading Lawyers for Business (2013- 19) and Best Lawyers in America (2008-19). In 2016, Chambers USA described Eric as "very smooth in court" and "a very good manager of complex matters." Eric is a former Assistant US Attorney for the Eastern District of Pennsylvania and a former Special Deputy Pennsylvania Attorney General. Connect with Eric on LinkedIn: https://www.linkedin.com/in/erickraeutler/ 64#65Biography Shaobin Zhu Shanghai/Silicon Valley T +86.21.8022.8778 +1.650.843.7506 F +86.21.8022.8599 +1.650.843.4001 Morgan Lewis With a focus on the technology sector, Shaobin advises on intellectual property (patent, trade secret, trademark, and copyright) litigation in US district courts and Section 337 investigations at the US International Trade Commission (ITC), as well as client counseling, intellectual property licensing, opinion work, patent prosecution, and open source software strategy. Shaobin handles matters relating to a variety of technologies, including computer software, telecommunications, smartphones, artificial intelligence (AI), Internet of Things (IoT), semiconductors, video processing, Internet television, LEDS, wearable devices, robotics, 3D printing, consumer electronics, and related electronics. Connect with Shaobin on LinkedIn: https://www.linkedin.com/in/shaobinzhu/ 65 65#66Biography Yalei Sun Silicon Valley/Beijing T +1.650.843.7558 +86.10.5876.3699 F +1.650.843.4001 +86.10.5876.3501 Representing companies from hardware, software, telecommunications, medical equipment, and energy industries, Yalei counsels clients on strategic patent planning and dispute resolution. Actively involved in expanding Morgan Lewis's Greater China Practice, he advises Chinese companies in practice areas ranging from intellectual property due diligence, licensing and settlement negotiations, and patent litigation to US government regulatory compliance and appellate matters. He also collaborates with many Chinese law firms to help foreign companies enforce their IP rights in China. Connect with Yalei on LinkedIn: https://www.linkedin.com/in/yalei-sun-54aa2213/ Morgan Lewis 99 66#67Our Global Reach Africa Asia Pacific Europe Our Locations Latin America Middle East North America Abu Dhabi Almaty Beijing* Boston Brussels Century City Chicago Dallas Dubai Frankfurt Hartford Hong Kong* Houston London Los Angeles Miami Moscow New York Nur-Sultan Orange County Paris Philadelphia Pittsburgh Princeton San Francisco Shanghai* Silicon Valley Singapore* Tokyo Washington, DC Wilmington Morgan Lewis *Our Beijing and Shanghai offices operate as representative offices of Morgan, Lewis & Bockius LLP. In Hong Kong, Morgan Lewis operates through Morgan, Lewis & Bockius, which is a separate Hong Kong general partnership registered with The Law Society of Hong Kong as a registered foreign law firm operating in Association with Luk & Partners. Morgan Lewis Stamford LLC is a Singapore law corporation affiliated with Morgan, Lewis & Bockius LLP.#68THANK YOU © 2020 Morgan, Lewis & Bockius LLP © 2020 Morgan Lewis Stamford LLC O2020 Morgan, Lewis & Bockius UK LLP Morgan, Lewis & Bockius UK LLP is a limited liability partnership registered in England and Wales under number OC378797 and is a law firm authorised and regulated by the Solicitors Regulation Authority. The SRA authorisation number is 615176. Our Beijing and Shanghai offices operate as representative offices of Morgan, Lewis & Bockius LLP. In Hong Kong, Morgan Lewis operates through Morgan, Lewis & Bockius, which is a separate Hong Kong general partnership registered with The Law Society of Hong Kong as a registered foreign law firm operating in Association with Luk & Partners. Morgan Lewis Stamford LLC is a Singapore law corporation affiliated with Morgan, Lewis & Bockius LLP. 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