China over the last thirty years has transformed from a manufacturing to innovation-driven economy. In this first blog in our series on intellectual property trends in China, we look at how Chinese corporations are taking steps to use the IP they create to drive revenue, gain market share and enter new international markets.
China’s patent landscape
In 2015 China made 30,000 international applications under the Patent Corporation Treaty (PCT) system, a significant proportion of the 218,000 international (PCT) patents applied for in 2015 (only the USA and Japan filed more). Of the top 50 PCT applicants in 2015, six companies are Chinese. Including Huawei Technologies Co. which published most applications (3,898).
The growth of China’s patents overseas began to significantly increase in 2009 and by the end of 2016 China’s overseas patents will reach nearly 70,000, of which more than half are filed in the US. This number is expected to grow, with estimates of 120,000 applications in 2020, of which almost 60,000 will be in the US.
Investing in innovation
As Chinese entities embrace IP as a key driver in an innovation-based economy, its perceived economic importance also increases. According to statistics from R&D Magazine, China’s R&D investment exceeded Germany’s in 2008, will exceed Japan’s in 2018, and is expected to match that of the United States by 2022, making it the largest spender on R&D in the world. China has made remarkable progress in a short time frame and shown commitment to improving its IP system.
Obstacles to globalisation
China introduced robust laws, regulations and court systems needed to protect IP rights at the turn of the century. To encourage domestic companies to develop IP, the Chinese government provided incentives to grow their patent portfolios: subsidisation of patent prosecution fees; underwriting of litigation expenses. However, this led to concerns around patent quality in China and whether Chinese patents could reach similar IP value as overseas patents.
Dick Thurston – former Senior Vice President and General Counsel at Taiwan Semiconductor – points out: “Until IP courts in China are prepared to award damages at a higher level than is currently the case and eventually at levels comparable to those in the United States or Germany, the economic importance of Chinese patents will remain relatively low”.
Challenges still persist but companies in China are making concerted efforts to enhance the quality of IP assets, revamp their legal systems and improve access to capital. Additionally, important steps are being taken to train IP professionals and to promote greater awareness of the value of IP. These efforts should increase the value of Chinese IP in global IP markets and streamline the globalisation process for the future.
