Chinese IP Law

KPMG Survey Predicts China’s Rise As an IT Innovator

The recently released KPMG 2012 Global Technology Innovation Survey of 668 geographically distributed technology business executives suggests that technology innovation may shift from Silicon Valley to another destination, with the most likely destination being China (44%), in the next four years.

Regarding future disruptive technologies the report notes that “China and the United States will be at the forefront, with Cloud enabling both the next indispensable consumer technology and business transformation for enterprises. Mobile technologies will continue to build on Cloud, providing the tech breakthrough that will transform businesses.”

In KPMG’s views, the 12th Five-Year Plan is helping to driving innovation in order to create a nationwide virtual environment in these technology sectors.  As the report notes, the Chinese Government is encouraging significant investment in three key areas – (1) shared services and outsourcing, (2) mobile payments and (3) cloud computing.

The summary link doesn’t discuss other efforts in these areas.  For example, the 15 year National Science and Technology Plan has a goal of developing modern server support technology and  necessary large server software.  The 2006-2020 Informatization Development Plan of MIIT notes the need to develop indigenous innovation in core information technologies, and that information search technology is a part of this.  The report also doesn’t look at the extensive patent mapping that has already been done in many of these areas, which can provide a more detailed analytical overview of China’s strength and weaknesses.  MIIT, SIPO, MoST and others have conducted many public studies on the patent and IP portfolios of Chinese and foreign innovators.  See, for example, the useful study published in China IP News – 8/11/10, p. 7, “Information Search technology patents” in China”  (Class: G06F17/30), as one example.

Another unanswered question: how much will China’s innovations be driven or constrained by its intellectual property environment? China faces continued challenges in making the lead to being a major global patentee in these areas.  China still needs to ramp up on its overseas patent filings in the IT sector, which are dominated by Huawei and ZTE.  Many believe that continued high business software piracy rates could also limit domestic investment in leading edge software technologies which could drive these breakthrough technologies.  Moreover, Chinese agencies such as China’s National Copyright Administration continue to be greatly understaffed in the face of huge challenges, including the astronomic growth in Internet use, civil copyright litigation, and on-line infringement.  The criminal law needs to be revised to address copyright infringements that are undertaken without profit motivation but which can cause widespread harm.   The heavy overhang of low quality or no quality unexamined patents can also be a constraint on technological development.  Finally, there are also discreet policy issues, such as the current denial of design patent protection for graphical user interfaces, which could impact a range of cloud and mobile based computing platforms, which we hope will change in the mid-term.

While China has certainly positioned itself as the leading manufacturer of IT-related products, can it also take a lead in IP-driven technologies as well?  Whatever the answer, corporate America should follow Jeff Immelt’s advice at General Electric, and look carefully at China’s economic and technology plans, and consider how to effectively engage in order to maintain their technological edge.

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