Sail across the sea

Chapter 330 Who Cares About Ants

After hearing what Zhao Zhaoxin said, Ogier and Lassiter exchanged glances. Ogier was silent for a second, then nodded and said, "In that case, we can exclude Chinese companies, but we also need to reduce the patent fees paid."

Just as Zhao Zhaoxin guessed, Ogel and Lassiter came to China this time just for the two-step fermentation method of the Institute of Microbiology.

The two-step fermentation process was invented by Chinese scientists. It was applied in several pharmaceutical factories in China as early as ten years ago and achieved certain results. Related papers have also been published in several international academic journals.

In this era, China's scientific research level ranks relatively low internationally. After the publication of papers by Chinese scholars, they attracted some attention in the international academic community, but the industry did not pay too much attention to them.

The Lysse fermentation method is the main process for producing vitamin C nowadays. After nearly 50 years of development, this process has become very mature. In the international market, the production of vitamin C is mainly monopolized by a few companies such as Lowe's. Although a number of small companies, including several pharmaceutical factories in China, can also produce a small amount of vitamin C, they do not pose any threat to international giants such as Lowe's.

Lowe's regards vitamin C production as a "cash cow" that can continuously provide profits, and does not intend to invest more energy in process development. When Lowe's's technical department first saw the paper published by Chinese scientists on the two-step fermentation method, they just laughed it off and did not think it was a new technology worthy of attention. After all, the Chinese scientists also mentioned in the paper that this process still has many defects.

This went on for several years until last year, when Chinese scientists applied for a patent for the two-step fermentation method at the International Patent Organization and published a new paper introducing some process improvements in the application of the two-step fermentation method. This attracted the attention of Lowe's management, which then instructed the technical department to evaluate the application prospects of this process.

Lowe's technical department carefully studied the papers and patent documents of Chinese scientists and submitted a report stating that the two-step fermentation method "has a certain possibility" of becoming a competitive new process. If Lowe's competitors use this process first, it will pose a threat to Lowe's position in the vitamin C market.

With this conclusion, Lowe's could no longer ignore the two-step fermentation method. After discussion, the management proposed a plan, which was to buy out the patent and put it aside.

Using the two-step fermentation method to replace the Lyle fermentation method would require replacing a large number of equipment, which was uneconomical for Lowe's. All Lowe's had to do was prevent other companies from adopting this process.

The management has also discussed the cost of buying out the patent. The annual market size of vitamin C is $10 billion. It is reasonable to estimate the patent value of a new process that can effectively reduce production costs and improve production efficiency to tens of millions of dollars.

However, considering that China is a developing country and has a reputation in the international industry for not paying attention to the value of patents, Lowe's management set a broad price for this patent purchase and instructed its chief representative in Asia, Ogel, to negotiate with the Chinese side and act accordingly.

The purpose of Lowe's acquisition of the two-step fermentation patent is to prevent competitors from using this patent. In Lowe's mind, the competitors are nothing more than several pharmaceutical giants in the United States, Europe, and Japan. Chinese companies are not within their consideration. As the chief representative of the Asia region, Ogel is based in Japan, but he has also studied the situation in China. Before leaving, he discussed with Lassiter that it is possible for them to buy out the patent from the Chinese and prohibit several international pharmaceutical giants from using this patent, but it is somewhat difficult to prevent Chinese companies from using this patent.

The reason is very simple. China is a country where state-owned enterprises are the majority. The Institute of Microbiology and several pharmaceutical factories in China are all state-owned institutions. They are equivalent to being one family. How could patent prohibitions target their own family members?

Regarding this point, the headquarters also explained when giving them the task, that is, they do not care about the authorization of Chinese companies, because... several Chinese pharmaceutical companies are nothing more than ants in front of Law's. Who cares whether ants can do calculus?
Of course, as a negotiation strategy, Ogel still needs to make prohibiting Chinese companies from using this patent a condition at the beginning. This is also a bargaining chip, right?
Hearing that Zhao Zhaoxin was indeed concerned about the licensing issues of Chinese companies, Ogel pretended to be reluctant. On the one hand, he agreed to Zhao Zhaoxin's request, and on the other hand, he lowered the licensing price, which was already seriously underestimated.

"To what extent should it be reduced?" asked Zhao Zhaoxin.

“Eighty thousand dollars,” Ogle said.

Zhao Zhaoxin smiled: "Mr. Ogel, I'm afraid that Lowe's offer is not sincere. We have calculated that the two-step fermentation process can reduce the production cost of vitamin C by more than 15%, and this is based on the current immature process and small-batch production.

“Low’s is a large enterprise with a large production scale and strong process optimization capabilities. I believe that after adopting the two-step fermentation method, Lowe’s can reduce production costs by at least 20%.

"Low's current annual vitamin C production is 5 tons. Based on the production cost of $7000 per ton, a 20% reduction in production costs means a savings of $7000 million per year. Isn't the exclusive licensing fee of only $8 too low?"

Ogel frowned. Zhao Zhaoxin's algorithm was not much different from Lowe's internal algorithm. If this technology was proposed by American or Japanese scientists, Lowe's would need to pay tens of millions of dollars to obtain exclusive authorization. If they told others about the offer of $10 or $8, they would be embarrassed, not to mention whether the other party would be annoyed.

The reason why Ogle proposed such a low price was that he thought the Chinese were not good at the business and would happily agree to the price of $10. Lowe's is a large company with annual sales of more than $300 billion, but why not save money if you can? Why not bully the honest people if you can bully them?

But who would have thought that this Chinese man, whose entire outfit cost no more than 30 US dollars, was actually an knowledgeable person and could calculate the bill clearly just by opening his mouth. How could he be fooled?
"So, according to Mr. Zhao, how much do you want?" Ogel changed his strategy and decided to listen to the other party's offer.

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(End of this chapter)