Restart life

Chapter 336 0333 [A 5000 million yuan R&D budget is enough]

ByteDance, CEO's office.

After hearing Chen Guiliang's explanation, Shi Qian, the company's legal director, couldn't help but laugh and said, "Those professors think you're foolish and rich, Mr. Chen. If you want to apply for any 863 Program, you must strictly follow the procedures and pay the usage fees."

Chen Guiliang asked, "Patent issues?"

Shi Qian nodded and said, "Anyway, the situation is extremely complicated. Generally, the patents for the results produced by school resources belong to the university, while ByteDance obtains an exclusive free license. For patents produced by mixed resources, the school and the company jointly hold the patents. Especially for mixed outputs, the patent entanglements are very troublesome."

Chen Guiliang asked, "Is it true that if you apply for the 863 Program, there will definitely be patent disputes?"

“Not necessarily, it depends on the specific circumstances,” Shi Qian said. “For some projects, a supplementary agreement to the 863 Program can be signed, stipulating that the project only covers the basic theoretical research part, and specifying that ‘the application layer development shall be completed by the enterprise at its own expense.’”

"Some of the equipment can be donated to the school in exchange for an exclusive patent license and sublicensing rights for the research results. The exclusive patent license can last until the patent expires, which means the patent still belongs to the company."

"For some, a patent escrow agreement can be signed, and the previous operation can be repeated."

Chen Guiliang asked, "Why don't I want to make it that complicated?"

Shi Qian said, "There are two options. The first is to jointly build a laboratory, which will be registered as a subsidiary of ByteDance. If the school provides the venue and equipment, the company will pay for the rental."

"The second option is for the three professors to set up their own studios, sign a technology development contract with ByteDance, and transfer the patents to ByteDance for 1 yuan. Alternatively, ByteDance could hold a controlling stake in those studios and thus naturally own the patent rights."

"Both of these methods must be separated from school resources. For national research equipment, equipment leasing agreements should be signed. Professors are prohibited from using government-funded projects for related research. Graduate students participating in research and development must sign internship agreements with companies and be paid wages."

"Understood," Chen Guiliang said.

Those professors probably didn't think much of it; they just did whatever was convenient. This kind of behavior, with its weak legal awareness, is very common these days, resulting in a host of patent disputes.

Chen Guiliang would never fall into such a trap.

During the final exams, Chen Guiliang received detailed budget lists for the projects from three professors.

He finally understood why it cost 3.5 million; some of the projects even incorporated science fiction elements!

"What is this pressure-sensitive touchscreen?" Chen Guiliang asked.

Pan Aiming said, "This is what Professor Chen Yu wants to do, which can break through Apple's touch technology patent barrier."

Chen Guiliang asked, "How many years will it take to make?"

“I don’t know,” Pan Aiming said. “When Professor Chen Yu was seconded to the First Academy of Aeronautics and Astronautics, he served as an advisor to the pressure sensor group of a military project. He has always wanted to develop civilian pressure touch technology.”

Chen Guiliang asked, "Who holds the relevant patents for this technology? Can it be directly transferred to civilian use? And who owns the patents after that?"

Pan Aiming said, "The relevant original patent is with the First Academy of Aerospace Science and Technology, which signed a 'Strategic Technology Transfer Agreement' with Tsinghua University in 2006. It can be legally transferred to civilian use. The patent for the smartphone developed based on this patent definitely belongs to the relevant patent holder. However, a patent fee must also be paid to the First Academy of Aerospace Science and Technology."

Chen Guiliang was unsure whether he should develop this.

If successful, that would be absolutely amazing, a direct breakthrough over Apple's most critical patent barrier. The question is, when will it be developed?
The relevant military technology is already in use, but it requires the use of individual tactical gloves. You can't exactly bundle a tactical glove with a phone, can you?

Playing Fruit Ninja while wearing individual tactical gloves is quite fun.

It’s so outrageous!
This technology was actually released by Taiwan Silicon Innovation Electronics as early as 2009. However, it required dedicated drivers and algorithms, making adaptation costs too high for developers. Furthermore, the supporting supply chain was immature, resulting in high procurement costs. It could only be used on small-sized screens; large-sized screens remained in the laboratory stage.

Therefore, after its release, it was mainly used in gaming devices from Nintendo, Sony, and other companies.

Huawei, Apple, and Samsung didn't commercialize it until after 2015. It wasn't until 2021 that it became widespread in the Android camp.

The idea is too ahead of its time.

But Professor Chen Yu believed it was entirely feasible and could be developed in a year or two. After all, the military already had them in use with individual tactical gloves.

There are quite a few similar R&D projects, all involving technologies that have emerged but are not yet mature. That's why the budget is a whopping 3.5 million!
“Professor Pan, I think we should be more realistic,” Chen Guiliang said.

Pan Aiming laughed and said, "We can discuss it. We teachers are just proposing projects that we think are feasible and helpful for mobile phone development. It's not like we have to force you to do it."

Chen Guiliang thought to himself: If I met someone who was rich but foolish, I might actually throw money at them and play along. You guys aren't fools, but you're clearly testing whether I am.

so bad!
Chen Guiliang said, "These advanced technologies are possible, but not right now. What I need now is a smartphone that can be mass-produced and that avoids Apple's patents as much as possible. As for other advanced technologies, we can work on them step by step after we make money from our phones. For example, we definitely need to work on this pressure-sensitive touchscreen in the future, otherwise we will be held back by Apple for life."

“Then I’ll discuss it with them again,” Pan Aiming said.

Chen Guiliang said, "Also, I don't want to complicate the patent ownership process. I want the patent rights to all non-basic theoretical achievements. Either I establish a joint laboratory with the university, and the laboratory is registered as a wholly-owned subsidiary of ByteDance, or you professors can set up a studio, and I will invest and hold more than 95% of the shares."

Pan Aiming nodded: "Okay, I'll discuss it with them."

Before Chen Guiliang had even finished his exam, Pan Aiming had already proposed a new solution.

The professors each established their own studios, with Chen Guiliang contributing 90% of the shares (the specific shareholding can be discussed further).

In addition, most R&D projects were cut, and three different budget options were offered—

The first type: the beggar's version.

The budget of only 2100 million yuan is less than the investment Huang Zhang made in developing Meizu. They could have made a smartphone; if they sold it cheaply, there would definitely be a market for it.

The second type: the upgraded version.

The budget is 5000 million yuan, 1.6 times the investment Huang Zhang made in developing Meizu phones. Some technologies require patent fees to foreign manufacturers, making them vulnerable to being cut off by Apple at any time. The third option: a deluxe version.

The budget is 1.5 million. Its R&D projects include: developing a real-time Linux kernel, bypassing Apple's scheduler patent, building an application-layer gesture SDK, military-to-civilian PMIC chips (power supplies), baseband time-sharing power supply technology, RF signal enhancement algorithms, and so on.

Once this solution is developed, there will be almost no need to pay patent fees to foreign manufacturers. However, the professors say the development cycle will be at least two years, and possibly three, four, or five years…

Chen Guiliang asked, "How long will the second plan take?"

Pan Aiming said, "It will take at least a year, and at most a year and a half."

“Let’s go with the second one,” Chen Guiliang said. “We’ll take it one step at a time for the third one.

If I come again next time, it will definitely cost more.

Pan Aiming asked, "Are you planning to develop all the applications yourself?"

Chen Guiliang said, "After you improve the mobile phone system, I will directly turn it into an open platform. Mobile phone manufacturers and third-party software companies can all use it. We will also create a forum-style website to encourage talented individuals to develop software."

“You have big ambitions,” Pan Aiming remarked.

Forum-style website development was something Huang Zhang was already doing when he launched Meizu. All sorts of random applications emerged, and some people even cracked and modified QQ2008, leading to a lawsuit from Tencent.

Chen Guiliang said, "I only have one requirement: the phone must be of high quality and not break down after a while."

“That involves quality control and production issues; you can’t force the development side to do the same,” Pan Aiming said.

"Just do your job well," Chen Guiliang said. "I've already designed the phone's appearance. If it causes development difficulties, you can make some adjustments."

This is a rendering that Chen Guiliang asked Xu Fengyin to draw. Specific appearance parameters were not given because he himself did not understand them.

Pan Aiming stared at the rendering for a while, then asked, "What are those three buttons at the bottom of the phone?"

Chen Guiliang said, "In order to circumvent Apple's Home button patent, this is the back button, which can return to the previous screen or exit the application. This is the home button, which quickly returns to the phone's home screen. This is the multitasking button, which can bring up the background task list and realize multitasking switching."

After careful consideration, Pan Aiming exclaimed in amazement, "This three-button design is brilliant! It's not just about circumventing Apple's patents; it also reduces the cost of phone manufacturing!"

Can it also reduce costs?

Chen Guiliang genuinely didn't know.

Damn it, I've patented the King Kong three-button design, and all non-Apple phone manufacturers will have to cooperate with me. Because I'm easier to talk to than Apple, we can exchange patents and make money together.

With just 5000 million in R&D investment, it should be easy to convince the company's board of directors and shareholders, right?
Investing in the mobile phone industry requires amending the company's articles of association; even with over 50% shareholding, it cannot be forced to proceed. A shareholder vote of 66.7% or higher is required to amend the articles of association.

Convincing some large companies to develop applications is actually relatively easy.

For example, Tencent, after completely abandoning its mobile strategy, would certainly be willing to cooperate in launching a corresponding mobile version of QQ.

Yes, Tencent is also developing smartphones!
Moreover, Tencent's QPhone mobile phone system, like Meizu's, is based on Windows CE 6.0 and heavily modified.

However, after the Meizu M8 was launched, it was sued by Microsoft for patent infringement. After a long legal battle, a settlement was reached, with Meizu paying Microsoft $8 in patent fees per phone, and some models being discontinued. The total settlement amount is unknown.

Tencent must be feeling overwhelmed, because their infringement goes far beyond just this.

Tencent's phone design copied BlackBerry's, resulting in a cease and desist letter from BlackBerry's lawyers. It also received a warning from Nokia due to its GSM-related patents. Furthermore, Tencent's choice of a resistive touchscreen contradicts the mainstream trend in smartphones. The standby time is also incredibly short.

The underlying reason actually lies within.

Tencent Research Institute demanded maximum self-development, but after departmental disputes, 80% of the budget was cut, leaving them with no choice but to cobble together a flawed product.

Oh, and they blindly demanded a low-price strategy (selling for 1999 yuan). Given the need to pay various patent fees, such a low price would only allow them to purchase second- or third-rate components.

Ultimately, Tencent abandoned its mobile phone strategy and sold its design team to Foxconn.

Then Tencent wanted to acquire Meizu, but Huang Zhang refused. So Tencent packaged and licensed its self-developed mobile phone patents to Meizu in exchange for Meizu M8 pre-installing QQ.

As long as Chen Guiliang's phones sell well, Tencent will actively seek cooperation to pre-install them.

Furthermore, the mobile operating system Chen Guiliang is developing is based on Linux. Microsoft can't sue him for that; he's completely unafraid of a lawsuit from Microsoft.

Last year, Microsoft claimed that Linux infringed on 235 of its patents, but it has never dared to file a formal lawsuit for fear of backlash from the GPL.

Chen Guiliang left Pan Aiming's place and went directly to Professor Wu, the independent director.

After ByteDance went public, its board of directors increased to nine members.

Chen Guiliang has one vote, Guo Feng has one vote, and Ao Yanzhen has one vote. The three of them are executive directors.

Professor Wu received one vote; he is an independent director added during the Series B financing round.

If you bring in the non-executive directors from the A and B rounds of venture capital, you can easily get more than half the votes, and the board vote can be passed smoothly.

The upcoming shareholders' meeting vote is the key event.

(End of this chapter)