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Innovated In China: China’s Aggressive Innovation and Patent Development Policy

Innovated In China: China’s Aggressive Innovation and Patent Development Policy

The year 2006 proved to be a landmark in the history of Chinese Economy development. This was the year in which the Chinese Government pledged its commitment for fostering future innovations in the country by encouraging the development of technology and science in primary fields. In the document, National Medium- and Long-Term Plan for Science and Technology Development (2006-2020) that was laid out by the State Council, China had registered its pledge for exceeding its research and development expenses above 2.5% of the total GDP by the end of 2020. This impetus towards growth in science and technology would be contributing to almost 60% of the development of the Chinese economy.

In a bid to achieve the same, China has centered its efforts on increasing the number of intellectual property fillings registered with the State Intellectual Property Office (SIPO). This has been done on behalf of the People’s Republic of China as well as of the Chinese inventors and business houses. Although aspects like patent quality and their scope of enforcement domestically and internationally still remain major concerns, the SIPO went ahead and published the National Patent Development Strategy on behalf of the PRC in 2010. This document went on to project the number of annual patent fillings in China to hit the 2 million mark by 2015! Further, the SIPO has also published data in support of this projection which indicates a 20% growth in patent filings from 2005 through 2010. It also mentioned that the total number of patent applications that were filed in China during 2009 exceeded the 300,000 mark.

In addition to this, the Chinese government now subsidizes the Chinese corporation foreign and Patent Cooperation Treaty (PCT) filings. Hence, China fared among the top 4 companies that were ranked in PCT filings through 2010 and 2011. Huawei Technologies and ZTE Corporation were two among the top five applicants that were using PCT for patent protection. In another interesting development, the Patent Prosecution Highway Pilot Program has been extended between the United States Patent and Trademark Office (USPTO) and the SIPO of the People’s Republic of China. According to the program, “an applicant receiving a written opinion or an international preliminary examination report from either the SIPO or the USPTO that at least one claim in a PCT application has novelty, inventive step, and industrial applicability may request that the other office fast track or expedite examination of corresponding claims in corresponding applications.”

China has also amended the Patent Law with an intention to revamp the Chinese National Patent System. This has brought forth a twofold impact. First, it would improve the position of China and help to achieve the aforementioned goals. Second, this amendment is a formidable step for alignment of the patent practices prevalent in China along with international standards. For instance, a recent amendment has seen China retaining a utility model patent that is already available in several Western Countries apart from the US. This model patent protects the shape or structure of the product or the combination between the two for an extended period of 10 years right from the date of filing.

Utility models have scored above patent rights because of their cost effectiveness, non requirements of substantive application and also because of the fact that the rights would be normally granted within a year from the date of filing. The amendment introduced in 2009, also included regulations that provide for exploitation of these model patents singularly and also in association with the more traditional forms of invention patents. Although model patents aren’t primarily exploited by filers of foreign origin, they have found plenty of takers among the Chinese themselves. A prominent example here could be a case of patent infringement based on model patent that was decided in favor of the Chint Group and resulted in a compensation of 335 million Yuan against Schneider Electric Company of French origin. This case is a huge eye opener for foreign entities keen on operating in the Chinese markets. They certainly need to analyze the aspects of model patents before taking the plunge.

Apart from the above, there were several other changes introduced in the Patent Law for assuaging the fears of technology driven and focused foreign entities keen on doing business in China. In this respect, China has emerged as the first nation to change its patent law completely. Therefore, if a party theoretically seeks patent protection for an invention that has already been disclosed outside the Chinese markets under the fear of patent hijacking, would now be considered illegal in China. Therefore, the amendments that have been introduced into the patent law in 2009, have managed to improve the position of China as partner in global trade. It has also managed to raise hopes that can encourage foreign investors for pumping money into innovation and technology in China.

It can be deduced, therefore, that China is truly driving its IP system at the neck, breaking speed for aligning itself with the global IP systems at large. While this might proves to be encouraging for most, the recent evolution in laws, regulations and rules could pose certain risks in terms of complexities and confusions. The next couple of decades are slated to be crucial for the Chinese IP system and substantial development is truly on the cards. Therefore, foreign investors are advised to refrain from focusing on the current state of Chinese IP systems alone for making investment decisions. They should also take the future evolution of the IP system into reckoning as well, in order to make a wise call. The challenge lies in assisting clients in becoming more and more successful and competitive for doing business in the Chinese cities, depending on a firm and substantial IP strategy that takes the Chinese regulatory, legal and business environment into perspective.

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The New Asia Innovation Team