Liu Minxia

SOMETIMES, an invention can spawn an industry and a lawsuit can impact on many people's values. G. Frank Deng, founder and president of Shenzhen-based Netac Technology Co. Ltd., is someone who has been involved in both.

In 1999, together with Cheng Xiaohua, another Netac founder, Deng invented the flash memory U disk, marking the beginning of a new era for computer memory. Deng was accordingly named the Father of Flash Memory. For the first time, "the father of computer technology" appeared in China, commented industry insiders.

Since obtaining the patent for flash memory in July 2002, Deng has thrown himself into an intellectual property rights (IPR) protection campaign. In September 2002, Netac sued five companies, including Beijing Huaqi Information Digital Technology Co. Ltd., a Beijing-based high-tech company, for unauthorized use of its flash memory technology.

"I'm like a paranoid person," said Deng. "I work against the clock when I research and develop a product. I always keep a stiff upper lip when it comes to either research and develop or applying for a patent or protecting our patents."

As his idol Andrew S. Grove, founder of the Intel Corp., had observed, only the paranoid survive. Deng, with his Don Quixotian belief in IPR, survived the battles and will, sooner or later, bring on the full awareness of IPR in China.

The 37-year-old Deng is a millionaire now, but he wasn't born with a silver spoon. His family lived in Shimen County, Hunan Province, where he went to school on foot with mended clothes. During three years of high school, he walked more than 5,000 kilometers to save on fares.

In July 1985, he was admitted to Guangzhou-based Sun Yat-sen University, where he majored in computational mathematics and applied software. He supported himself during the last two years of college. In July 1992, he obtained his Science Master's degree in computing technology from the Institute of Computing Technology at the Chinese Academy of Sciences.

After graduation, he worked for Lenovo Group (formerly known as Legend Group), China's largest personal computer maker. In the spring of 1993, he became one of the three people recruited by Aztech Systems Ltd., a Singapore-based ODM/OEM producer and Electronics Design and Contract manufacturer. After he went to Singapore in April in 1993, he first worked as a software developer for Aztech. After a year or so, he assumed a technical service job in Digital Resources, a smaller Singapore IT firm. Exceptional work experience and attitude led him to a position in Royal Philips Electronics, a reputable international electronics company. He worked as system manager for Philips' Asia-Pacific division.

In 1999, Deng, who had become a permanent resident of Singapore, returned to Shenzhen with his friend and alumni Cheng. On April 29, 1999, with 300,000 yuan, they founded Netac, a pioneer in the USB flash drive industry.

"I was competent in every area of work I'd done, so I thought I needed to carve out a career for myself," said Deng. "We thought of making a new kind of memory disk because we had trouble with floppy disks. They were inconvenient and incompatible with the whole fast-upgrading industry. We wanted to make a smaller disk that was more stable with a more storage capacity. I named it U disk."

Before setting up the company, they spent a year and four computers on developing the new disk. "I still keep those four broken computers. They encourage me to do better," said Deng.

After the first 8 megabyte flash memory came into being, Deng submitted the patent application to the State Intellectual Property Office in December 1999. In September 2002, Netac launched its first products.

"The new disk was no bigger than a thumb and weighed less than 20 grams, but can store more than a few floppy disks do. It was a bit too amazing for the customers at the beginning. But we tried to teach them how to use it to foster the market," Deng said. "It took us four years to grow into a company with more than 400 employees and millions of yuan in revenue."

All successful companies are alike but each unsuccessful company is unsuccessful in its own way. Deng, through his years of overseas experience, has realized the importance of IPR and long-range strategies for a successful company.

At the initial stage of Netac's development, he put forward three strategies: IPR strategy, human resources strategy and internalization strategy. He made a thorough investigation of successful companies and found that those that respected and upheld IPR tended to be more recognized.

"There are two types of companies in China, one that makes their own things and applies for patents, and the other that learns from others. Netac chose to be the first type," said Deng.

"We encourage our employees to be innovative and we have systematic rules. An innovation can be dealt with at a top-level meeting within three days. Even a primitive idea underwent many revisions, the invention would still belong to the person who originally brought it forward. We have bonuses for inventors," Deng said.

"We know it's costly to carry out these strategies. Usually only about two or three products out of every 10 research projects can be put on the market. It might not only waste a lot of time, but also incur millions in losses," said Deng. "But without resolution, IPR strategies would only be a useless slogan."

Netac invests more than 50 million yuan on R&D every year, which excludes the patent application fees and maintenance expenses. It had sent patent application forms to dozens of countries and is still sending them at an average speed of one patent a month.

"I want to build Netac into a time-honored company instead of a transitory star company. That means we need an enterprising team that maintains lifelong learning," said Deng. "Netac provides every employee with heaps of opportunities. We listen to what he or she says first, and then observe what he or she does. Finally we'll turn to the result of his or her actions."

"We have many on-the-job training programs, such as Harvard Online and Shenzhen University Series. We want to hone our employees' abilities and keep them updated in the fast-changing industry. This is the meaning of Netac to its employees."

Favorable conditions prompted innovation. As of March 2004, Netac had applied for more than 125 patents and for the whole of last year it had applied for more than another 100. As the vanguard of the industry, Netac realized 100 million yuan in sales in 2001 and recorded more than 1 billion yuan in sales last year.

When one industry seems profitable, it will never find itself lacking in competitors. However, there were not just competitors for Netac.

In April 2001, Netac instigated its first lawsuit against a then leading company -- which went bankrupt soon after ---- for its unauthorized use of its flash memory technology. It was before Netac's first patent was approved, and was a time when people were not as aware of IPRs.

Since the approval of his firm's first patent July 24, 2002, Deng has focused his attention on the unauthorized use of the patent by major companies while endeavoring to develop more new products and apply for more patents.

"I don't want to monopolize the industry, and the market is too huge for Netac alone to satisfy," Deng said. "But anyone who uses our patent needs to respect it."

The lawsuits brought Netac to the center of attention and also cost Netac good money. But Deng never wavered in his decision. "We'll benefit from it sooner or later," he said.

Actually, Netac has already begun to see the other side of the coin. It has become the primary choice of some world-famous companies like IBM and Samsung Electronics Co. because they trust its standards of business practice. Even some companies it sued have started cooperation projects with Netac. It's no surprise that some authorities commented that Deng had not only initiated a new industry, but also influenced the value of Chinese IT practitioners.

"We want to be a permanent pacemaker in this industry, and a competitive international corporation with strong innovation capability," said Deng.

"We don't have time to look around...our goal is far ahead."