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China is about to Overtake Japan in Patent Applications

China is about to Overtake Japan in Patent Applications

In a recent article in the Economist, titled, “Innovation In Asia, Trading Places”, the writer brings out that China is edging out Japan in the numbers of new patent filings per year. R&D expenditure in China is now much higher than that in Japan. In spite of once being at the forefront of technological innovation, Japan is seeing its position erode. What is at the heart of this decline, and why is Japan letting its industry be overtaken so easily?

Japan seems to be losing its pre-eminent position in patent filings according to a recent study published in The Economist. China, a late entrant in the game has begun to overtake Japan in the number of filings per year. Japan’s eroding technological dominance can also be seen in the reducing number of Japanese components in modern technical equipment. While the iPod had a large number of key components built in Japan, the iPad is mostly built in South Korea or Taiwan.

Patents can indicate a measure of the innovative capabilities of a country. While the numbers of patents filed between 2006 – 2009 was steady for America, Europe and South Korea, it dropped for Japan and increased sharply for China. The Chinese increase is a combination of domestic patents and those filed by global companies in China seeking to protect their IPR as they set up manufacturing bases. Even Japanese firms have increased their patenting activity in China while they have reduced them in Japan itself.

A trend for international filing is visible in China. According to data provided by the World Intellectual Property Organization (WIPO), 2008-09 saw a 4% increase in Japanese international patents filed under the Patent Cooperation Treaty whereas Chinese filings under the same period increased by 30%. However Japanese filings were more successful and cited more often by other patents.

While the economic crisis made many firms cut R&D spending, several Chinese companies increased theirs by 30 – 50% and in PPP terms, Chinese domestic R&D spending is poised to overtake Japan. The effect of low R&D can be seen in the declining fortunes of Japanese companies. Last year, Korean giant Samsung posted higher profits that all nine of top electronics firms in Japan combined.

Another trend to watch is the internationalization of R&D. The number of foreign co-inventors in patents has risen from being just 10% in 1990 to nearly 25% currently. The corresponding figure for the US is 40% and for Japan it is just 4%. Nevertheless, Japan still leads worldwide in the numbers of patents in force.

On a final humorous note, the report brings out that most patents are being filed in tax havens to save on licensing revenue. This is one innovation that needs to be curbed.

Note: The preceding is a summary of an article found though our research, and is provided here with editorial comment for members only. Please see the full article at the following link for full original content.

The New Asia Innovation Team