SIPO released a 71-page report on the 2012 National IP Development Situation (2012年全国知识产权发展状况报告) on June 5, 2013, the fifth anniversary of SIPO’s adoption of the National IP Strategy Outline. Although this is the first report of this nature, it is contemplated that the report will be updated annually.
The report focuses on four separate baskets of IP-related data to assess China’s IP development: IP creation, IP utilization, IP protection and the IP environment. Different weighted values are given to various criteria used to support these evaluations. According to this report the top regions for overall IP development in China were: Guangdong, Shanghai, Beijing, Zhejiang, followed closely by Jiangsu, Shandong and Fujian (p. 17). The regions that showed the fastest overall development were Jiangsu, Zhejiang, Shanghai, Guangdong and Hubei (p. 16).
I recently blogged about China’s Report on the situation regarding National Patent Strength, which also took a quantitative and uniform approach. This report also creates uniform criteria that do not account for the relative advantages of different Chinese regions, thereby impairing their comparative advantages and may misestimate to true nature of China’s IP developments. This “one size fits all” approach has had unfortunate consequences for China’s IP development by creating difficult to refute biases towards uniform assessments of grants, rights and regions.
One needs to read between the lines of a report like this to determine what kind of innovation or IP creation is taking place in a given region. For example, the leading overall role of Beijing, Shanghai and Guangdong suggests they share important similarities, but this may also obscure the well-documented strengths of each locality, with Beijing deriving considerable strength from government funded R&D and the role of the university district in Haidian, and Southern China tending to be more enterprise driven. Another example of the manner in which the report obscures differences is in the dominant role of Beijing and Yunnan in developing plant varieties. Beiing does not enjoy the rich genetic resources of Yunnan Province, however it is a base for agricultural research.
The Report’s utility for foreigners is also limited. As I stated in my earlier blog on the patent report: “The report should be used cautiously by foreign investors and rights holders as there is much of concern to foreigners that is not utilized in the report, for example: numbers of foreign-related civil or administrative cases, availability of provisional measures, receptivity and accessibility of local complaint centers (including trade fairs) to foreign complainants, availability of expert foreign language lawyers and service providers, presence and engagement of foreign-related civil society (INTA, QBPC, RDPAC, AmCham’s, etc.), existence of policies that on their face discriminate or support foreign rights holders [etc]…”,
I hope that SIPO will consider highlighting policies in future reports that promote fair treatment of foreigners, and that also serve to encourage cross-border collaboration. For example, the important role of Beijing No. 1 Intermediate court as a forum for foreign-related IP litigation could be a positive factor in Beijing’s assessment. The availability of English language materials for processing IP complaints by administrative agencies and compliance centers might also be a factor in assessing local government support of foreign IP rights. Given continuing complaints about discriminatory policies that favor locally innovated products, SIPO might also have used as a negative factor the continued presence of such policies. These are but a few of the numerous foreign-related factors that can also be developed for a more comprehensive reflection of the IP environment for foreign rightsholders.
One glaring absence in the report is trade secret protection (TRIPS Art. 39), which has received so much bilateral attention. SIPO could have used data such as numbers of civil, criminal and administrative trade secret cases in a region, or the existence of policies that clarify the relationship between non-compete agreements and trade secret protection, or that promote protection of technical trade secret as data points to further enhance the report. Similarly, SIPO could have looked at granting of clinical data exclusivity protection as one criterion for IPR development (TRIPS Art. 39.3), which could also have had a positive impact on encouraging developments in this important area.
Another troubling aspect of the Report is the maintenance of bureaucratic models that may have little to do with quality. For example, copyright registrations are weighted on an equal basis with patent and trademark grants. However, a copyright registration is completely optional, and is not the result of examination of the underlying content for its quality or creativity. The likely end-result of this metric will be increased registrations of copyrights, and a diversion of needed resources from more important goals for a resource stretched National Copyright Administration.
SIPO’s efforts to find quantitative surrogates for qualitative developments can have other adverse impacts. For example, SIPO has looked to the numbers of invention patents granted as a percentage of total patents as a quality benchmark. However, not all invention patents have the same value. Patents for new pharma compounds are more likely to be of a high value, pioneering nature than patents for ICT products. Another one of the report’s metrics – of invention patents granted per RMB of research is similarly likely to discriminate against more expensive and riskier R&D cycles, such as pharma and biotech. To correct that bias, SIPO might also consider looking at patent filings for new chemical entities in the pharma sector and regulatory approvals as important patent surrogates that would give pharma-related patenting a fairer shake in this report.
Another potentially problematic criterion is numbers of recorded license agreements – this information could encourage registration of licenses that have no commercial significance, such as between a parent company and its subsidiary.
In enforcement, SIPO could also have helped encourage greater quality by benchmarking the percentage of cases adjudicated to the publication of these cases, thereby also encouraging transparency and accountability.
One useful data point, which I have blogged about as an indication of the knowledge of the IP System that SIPO also uses is the number of visits to IP websites. A more nuanced view however would look also to duration of page views. Additionally SIPO might also provide information on the availability of English language content on local government IPR websites, including how much English content is available and how often there are updates.
As the above suggests, numerical targets in IP have the potential of distorting and undercutting qualitative improvements. As these criteria are incorporated into planning mechanisms of local governments, structural changes may be made in a range of related areas, such as by establishing related criteria civil service promotions, diverting funds for education and training to support meeting the defined metrics, subsidizing IP applications, and diverting R&D funding into areas where more patents – rather than higher value patents – are created. These distortions that arise from planning metrics are not unique to IPR and are well known in other legal areas. My colleague Prof. Carl Minzner noted similar problems regarding legal education matrices in his recent article “The Rise and Fall of Chinese Legal Education” (36 Fordham International Law Journal 335 (2013), which I digest below:
“Heavy use by central authorities of target-intensive, one-size-fits-all evaluation mechanisms … have created severe institutional distortions… First they have encouraged massive overexpansion… Second, they have pushed [institutions]…to uniformly model themselves… regardless of whether this is appropriate for their…communities…. Third, topic-down evaluation mechanisms have led to an intense focus on “making target” …Pressure to hit designated numerical targets has helped fuel a widespread culture of academic corruption and junk research.”
SIPO’s efforts to find ways to quantify China’s efforts to create a better IPR environment is innovative in its own right. As this pioneering effort is further refined, it is my hope that these analytical tools will have an important positive effect of encouraging respect and use of the IP system and that any adverse impacts will be minimized.