The aphorism ‘your reputation precedes you’ is unlikely to be popular among the Chinese Patent Office staff. For an organisation tasked with preserving innovation, the fact that Chinese industry is more associated with piracy and theft must be disheartening, or at least dispiriting.
Roundly seen by commentators in the West as representing nothing of value, Chinese patents have historically been viewed with suspicion. This disdain has only intensified due to the explosion of Chinese patents since the mid 1990’s. From 1997 to 2007, China moved from filing 13,038 patents per year to 161,390, overtaking Germany in the process. Most of these were arguably of poor quality.
However, to judge current Chinese intellectual property laws on their track record would be a mistake. To understand why, it is necessary to analyse these laws within the context of the broader Chinese economy.
By any measure, the Chinese economy is booming. Of course, we should not discount problems associated with shrivelling external demand, a trend that is plaguing other developing economies, nor should we ignore the lack of inclusiveness within the Chinese economy itself. These are serious issues that will need to be overcome.
These obstacles, however, are mere speed-wobbles for a Chinese economy predicted to increase its GDP by 7.25% over the coming year, with an average approaching 8% for the decade. With Europe contracting and the US clipping along at a little over 2% per year, it is clear where finance is set to reign supreme. Indeed, most current estimates suggest that China will attain economic ascendancy in GDP terms well before 2020. It is within this economic dynamic that China’s surge in patent applications is best understood.
In order to keep economic activity buoyant, the Chinese government has been forced into recognising that its legal system has hitherto been unsatisfactory. Without proper institutions in place, continued Chinese growth is unfeasible. Accordingly, the government has begun tailoring its laws to better reflect commercial undertakings.
A robust, transparent and codified patent law forms a fundamental part of this legal architecture, and it is therefore no surprise to see this evolve. The implementation in October 2009 of 36 various amendments to existing patent laws is indicative of a government increasingly concerned with the protection of innovation. It is innovation that will form the bedrock of the modern Chinese economy.
We have already seen the first signs of innovation. Guided by the government, high value research and development (R&D) is flourishing. Major investment by the Chinese state into the university sector over the last decade is reflective of this. This investment is clearly paying off with Peking University, China’s first modern university, filing a staggering 92 patent applications in 2012.
The private sector is responding similarly well to government incentive. Lured by state subsidies, the telecommunications behemoth ZTE is relentlessly pursuing the creation of more innovative products. The quite remarkable 3,906 patent applications filed in 2012 – almost 1000 more than their nearest rival, Panasonic – is evidence of this. With huge benefits to be had from investing in R&D, corporations like ZTE are set to continue this trend.
Moreover, with a pledge to begin tackling its alarming environmental problems, Chinese expenditure in pioneering new products and processes is set to continue. Such a project will necessarily involve both public and private sectors, so this is definitely an area of innovation to watch. It will be interesting to follow the respective changes in patent and environmental law as this unfolds. Expect a disproportionate emphasis placed on patent reform with only marginal revisions to environmental law.
Despite China’s pledge to redeem its intellectual property reputation, lingering doubts remain. Most of this resentment centres on the ‘ecosystem of incentives’ that has promoted innovation. It has been suggested that Chinese businesses are simply filing patents for the sake of filing patents, as it’s an easy way to profit. This may be beneficial for a select number of Chinese firms and universities but delivers little in the way of authentic innovation.
In support of this, critics cite the very slim proportion of patents granted abroad, which comes in at 5,817 in 2011, in comparison to 112,347 granted domestically. The implications of this statistic are far from positive. Generally speaking, if a patent is highly sought after, a corporation will want exclusive rights in as many jurisdictions as possible. A low proportion of Chinese firms applying for patents abroad would suggest that these firms don’t genuinely value their patents. Instead, they are solely seeking to accrue state benefits.
Reservations surrounding Chinese patents further concern their apparent affinity with Utility Model patents (UM). This type of patent is seen as inferior to a traditional patent for the granting process is far less exacting. The lack of comprehensive product examination is the primary reason for this. The UN’s Intellectual Property Office has criticised China for its seeming reliance on UM patents with the rationale that the Chinese government has been too willing to grant them. Such sentiment has been echoed by a variety of other states and organisations.
While scepticism over China’s patent regime certainly has merit, it is worth remembering its relative infancy. Only since 1985 has it been able to issue patents – a definite hangover from Mao’s rule, where artists and innovators weren’t exactly fawned over. As China’s economy continues to grow, its systems and institutions for protecting wealth will similarly develop.
Patent law represents a key element of this evolution, and in order to refashion their reputation, the Chinese Patent Office will be seeking to embrace, rather than scare off, innovation.