“STAR” is the abbreviation of “Sci-Tech innovAtion boaRd.” STAR
Market, as China’s counterpart to NASDAQ, has become a new board in the
Shanghai Stock Exchange (SSE) since 13 June 2019. In its continued
effort to increase the size and depth of its financial market, China
launched the STAR Market with the aim of addressing the needs of the
According to SSE, the mission of the STAR Market is to:
- Enhance the capability to serve technology innovation and promote high-quality development of China's economy;
Support the establishment of Shanghai International Financial Center
and Innovation Center of Science and Technology, and promote the joint
development of the two centers; and
- Promote a market-oriented reform of the capital market and improve a multi-tier capital market.
the establishment of STAR Market carries positive implications for IP
monetization. The listing rules of STAR Market support innovative
companies which have impressive IPs but not enough revenues to obtain
financing in the traditional capital markets. In other words, the STAR
Market provides an additional and more structured option to early-stage
investors seeking to monetize their IPs in China.
end, certain listing rules set out specific disclosure requirements for
the underlying IPs of companies seeking to list in the STAR Market. In
addition, these rules request a detailed elaboration on how the IPs are
essential to the potential growth of the companies. The scope of these
most significant disclosure rules covers, among other things, a
1. Key technology staff members;
2. Competitive advantages in connection with its underlying IPs; and
Key intangible assets and their composition, with classification into
the respective IP categories, such as a patent, a trademark, a
copyright, or trade secret, etc.
Because of its special focus
and purpose, the STAR Market has become an indispensable sector of
China’s innovation regime. As such, for deal makers pursuing
opportunities in IP monetization in China, it can serve as a valuable
window to observe the development and dynamics among various driving
forces. The STAR Market is offering information otherwise unavailable
or used to be difficult to collect in China.
Observers now may
investigate the market’s trade volumes, total number and composition of
the listed companies, and their financial performance to get a sense of
the innovation activities in China. For example, in December 2019,
among the 64 companies listed in the STAR Market, 14 companies belong to
the health industry, amounting to 21% of the listing pool; and 10 out
of these 14 listed companies (71%) are in the medical device industry.
This profile provides a bird’s-eye view to deal makers seeking for “hot
zones” to monetize their IPs.
Observers may also investigate
the trading regulations, rules, or administrative orders, as enacted by
SSE for the Star Market, to understand the current regulatory intent.
The SSE adopts a new regulatory regime in response to the contemporary
issues. The regulatory intent, therefore, is like a mirror that
reflects the goals or challenges at different stages of the development
in the innovative industries in China. Such regulatory move particularly
provides insights in the IP areas. For example, the relevant listing
rules cover in length the connection between companies’ IP portfolio and
their competitiveness in the market. The listing rules scrutinize this
aspect in response to a common but misleading practice where Chinese
companies often claim themselves to be “innovative companies” based on a
sizable patent portfolio which, however, does not have any genuine
In short, IP monetization deals in China benefit from
the growth of the STAR Market. Like a thermometer in the hand of an
ordinary observer, it provides a quick impression on the innovative
activities in China; while in the hand of a professional deal maker, it
provides rich and detailed information at fingertips to identify risks
and opportunities for IP monetization deals.