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Innovation in China – An IP Overview

Innovation in China – An IP Overview

Until 1985, there was nothing such as patent law in China. Quite rightly, the reputation of the nation had been of one of constantly violating rights of intellectual property. However, these trends are slated to change soon. The Chinese Government now finds immense potential in its domestic innovations and is all geared up to encourage the development of newer technology driven product ideas. Therefore, it has decided to create lucrative gains and incentive schemes for all those who are willing to file patents in this country.

So, professors have been contemplating to file patents for long. They can now do so in exchange for extended tenure. Similarly, students and workers dedicated to domestic innovations and seeking patents for the same would now be awarded residence permit or the right to live in their city of choice. While the government offers to pay cash bonus as a mark of appreciation to certain patent filers, others are compensated by providing for the cost of filing patents.

What’s more, patent filing would also prove beneficial for corporate houses. A rebate of around 15% to 25% in corporate taxes is on the cards for corporate firms filing patents. Furthermore, they are given preference for government contracts. Company owners have also decided to follow the footsteps of the Chinese Government in their drive to encourage domestic innovations. Some have even gone ahead and declared monetary incentives for employees who are willing to come up with innovative product ideas that are worth patenting. A classic case in point is Huawei, which has strengthened its global reputation and chances of winning government contracts by encouraging innovative thinking among employees. This telecom equipment manufacturing company has decided to pay anything from $1,500 to $15,000 as bonus for patent filing. And, the results were for everyone to see.

In 2008, Huawei topped the charts by filing the maximum number international patents among firms worldwide. The efforts made towards motivating employees for generating fresh concepts had surely borne fruit. The overall rate of patent filing in China also grew by almost 26% between 2003 and 2009, as stated in a Thomson Reuters’ report. This has been phenomenal in comparison to the performances of other major economic power centers across the world. While American patent filing rates grew by a mere 6%, Europe grew by 4%, South Korea by 5% and the Land of the Rising Sun by a very insignificant 1%.

Therefore, it can be easily concluded that China would, in fact, lead the list of nations publishing fresh patents in the year to come. However, such direct deductions may not always prove to be as reliable. According to Dave Brown, Head of the division catering to Intellectual Property Rights, these trends are pretty dependable. If China truly emerges as the world leader for patent generations, it is bound to create a lot of frenzy among the press.

Of course, skeptical views cannot be ignored completely. According to the local lawyers, the officials employed in patent offices of China will be paid more if they approve of larger number of patents. So, they might be getting tempted towards granting patents to ideas that are not truly original. Also, because the Chinese Government chooses to be extra generous towards those filing patents in this country, it might actually motivate people to seek patents for ideas which wouldn’t prove worthwhile in the long run. Therefore, what accumulates in the name of patent filings would be mounds of junk from which true gems would have to be mined.

Today, patent filing has evolved as a lucrative business venture in China. In China, sites, such as eBay, would have contacts of patent filers and writers who would be willing to file patents for as low as 700 Yuan for individuals and 2000 Yuan for corporations. Therefore, it so appears, that patent filing is steadily becoming a farcical activity. In most cases, the filers of such frivolous patents probably know that their application would be rejected. However, they choose to file in order to avail the associated advantages.

Thomson Reuters has attempted a detailed analysis of the same by distinguishing between “utility model patents” and “invention patents”. Utility model patents would be the ones registered sans thorough inspection, seeking protection for a period of 10 years instead of the common 20 years. On the other hand, invention patents represent filings which require complete inspection for checking whether the idea is indeed novel. Recent trends state that the number of filings for utility model patents has increased remarkably in China over the past few years. In fact, it is at an equal footing with invention patents now, with respect to numbers. Furthermore, only 20% professionals dealing with patents who had been surveyed believed that Chinese patents hold the promise of high quality.

Despite these negative and seemingly unstable trends, Chinese are definitely becoming more and more innovative as a nation. Also, the fact that right to intellectual property is also being given immense importance by the governing bodies is a huge plus. Successful settlement of cases pertaining to patent infringement in the recent past has proven to be trendsetting exemplifiers. A German manufacturer won a $3million claim in Beijing. The case involved infringement of a bus design. A British firm also won claims against unauthorized copying of design for a heating element fitted in a kettle. Infringement of sulphur cleaning process has been settled in favor of the company claiming compensation for infringement. The claim settled was worth $7 million. Adequate protection of ideas would encourage the Chinese to file more and more original patents in the years to come.

Note: This is a summary of an article found though our research. It is provided here with editorial comment for members only. To read the complete article, go to the following link: http://www.economist.com

The New Asia Innovation Team

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