CNIPA Does A Statistical Switcheroo

About a dozen years ago while reviewing SIPO monthly statistics, I noticed that the percentage of foreign applications for invention patents for the prior year had shrunk to the point where they were only slightly in excess of domestic patents.  A week or so later in January, I read a report from SIPO that reversed the foreign and domestic positions.  No explanation was offered.  I had not saved a copy of that earlier report.  To this day, I have no way of verifying if there had been a mistake or if the adjustment had been made for propaganda purposes.  I have come to believe that SIPO had physically moved a group of patent applications form the current year to the prior year in order to make a useful propaganda point about China’s IP system – that Chinese patent applicants now were the dominant source of patent applications in China.

There has now been another unexplained change in data reporting on patents. CNIPA, SIPO’s successor, changed its practices at year-end 2020 to omit the numbers of applications and include only the numbers of granted patents.  This significantly reduces the appearance of growth in patent applications from Chinese filers to a work load based assessment based on grants.  It hides the rapid growth in filings, particularly of lower-quality utility model patent filings.  I was not the only one to have noticed the change.  On January 25, a reporter asked a  Ministry of Foreign Affairs (MOFA) spokesperson what was the significance of  the data on granted patent applications as reported by CNIPA and how to evaluate it? MOFA referred the reporter back to CNIPA.  A Chinese blogger on a site called IP ForeFront, has similarly asked: “How many patent applications were there really  in 2020?” (2020年中国专利申请量到底有多少).  The author attributes the change in part to American pressure on China to reduce the large number of low-quality patents.  See my prior blog for a recap of those developments.  

Comparing IP Forefront projections with CNIPA data for 2018 would show: an 11.4% increase for invention patents; a 31.5% increase in utility model patents; and an 8% increase for designs.  Using October 2020 data, I had previously calculated similar increases of 12.8%, 33.6% and 7.4%, respectively.  I had also anticipated an increase in overall patent filings in 2020 based on October data, with a surge in utility model patents. These changes may have been a response to the pandemic, and were similar to the increase in provisional patent applications in the United States.   The IP Forefront article author similarly looked at pandemic-driven adjustments in Chinese patent filing behavior.

Perhaps, as IP ForeFront suggests, CNIPA is taking steps to rein in patent data in light of US criticisms that China’s patenting regime had too long been driven by market externalities.  I believe this explanation attributes too much motivation for the “switcheroo” to US pressure.  The data was certainly also adjusted due to  various domestic policy initiatives to improve patent quality, including from the highest levels of the Chinese government. If the application data were published at this time, it would have offered a sharp contrast to the goals articulated in the near contemporaneous publication of General Secretary  Xi Jinping’s far-reaching article in the authoritative journal Seeking Truth (求是·) “Comprehensively Strengthen Intellectual Property Protection, Stimulate Innovation and Promote the Construction of a New Development Pattern” (全面加强知识产权保护工作 激发创新活力推动构建新发展格局) of January 31, 2021.  The Chinese characters for quality 质量 appear 11 times in that speech. Leader Xi specifically stated that “the overall quality and efficiency of intellectual property rights is not high enough, nor are there enough high-quality and high-value intellectual property rights” ( “知识产权整体质量效益还不够高,高质量高价值知识产权偏少”).  The contents of that article were likely also known to CNIPA’s leadership as it was derived from a speech given on November 30, 2020.  For political reasons, data reporting may have needed to be adjusted to minimize an apparent conflict.

Many foreigners criticize Chinese data as being unreliable.  I believe that if data that previously been made consistently available it can at least be used to observe changes made over the reporting period using what are presumably identical collection methods. CNIPA’s data has no longer been made consistently available.  This now casts doubt on the data going forward. This was my reaction a dozen or more years ago when I observed a shift in foreign patent filing data.  I anticipate, however, that 2020 application data will be made available at a more propitious time.  The pressure may come from external actors, such as the IP-5, WIPO, and Chinese or foreign journalists.  Most likely,  China had a dramatic increase in utility model patent filings during the pandemic.  It is also clear that China is now  taking steps to reduce its high volume of patent filings.  We should all continue to support consistent reporting of data from CNIPA to better understand these developments and have a fact-based approach to China’s IP regime.

Update of Feb. 23, 2021: CNIPA Commissioner Shen Changyu also wrote an article in Qiushi to accompany Xi Jinping’s article, with a similar focus on IP quality and economic development.   The article has been translated by CNIPA.

Note: Statistical chart above from IP-5 2019 Report.

IPO’s Comments on Draft Amendments to Patent Law Implementing Regulations

On January 14, 2021, IPO submitted comments to the China National Intellectual Property Administration on its Draft Amendments to the Implementing Regulations of the Patent Law. IPO’s comments included suggestions regarding: foreign filing licenses; mandatory patent contract recordals; industrial designs;  “good faith” patent prosecution obligations; inventor remuneration; pharmaceutical issues; and other areas.  Here are some highlights:

Foreign filing licenses (FFL’s): IPO suggests that patent FFL’s be combined with MofCOM export licenses.  This would make the FFL process in China similar to the USPTO/BIS process. Reducing redundancy in licensing approvals and export controls has been a long-standing concern which has become of increasing importance as China becomes a technology exporter and an important overseas patent filer.

Patent license recordals: IPO seeks to limit the legal effect of a patent contract recordal in infringement cases and in limiting the scope of the actual license. 

Design patent practice: IPO seeks clarification on patent drafting considering changes to Chinese law regarding protection of partial designs. 

Good faith:  IPO seeks to limit the draft regulations concerning proposed good faith requirements in patent prosecution.  In IPO’s views, the mere act of copying or piecing together content from other sources should not be the basis for invalidating a patent.  Rather, IPO  recommends  that “plagiarizing” and “piecing together” be replaced instead with “plagiarizing an invention.”  As mentioned in my other blogs, “good faith” has become an increasingly important aspect of China’s IP regime and is generally in need of a more expansive application in Chinese law.  I believe that the issue is complicated by the lack of a meaningful duty of candor by applicants to the Chinese patent office. If a design is copied from a third party which may already benefit from other protections (such as applied art in copyright or a three-dimensional trademark),  in my view it may be strong evidence of “plagiarizing an invention”,  as it may constitute an effort to defraud the rights holder. Similarly, if language is copied from another person’s patent application and the source of that language is not disclosed, the “plagiarizing” and “piecing together” might be evidence of a willful failure to disclose relevant prior art and mislead the patent office.  Perhaps one effective solution to this problem may be a more expansive concept of “duty of candor” or fraud before the patent office to CNIPA, which would mandate disclosure of potentially relevant prior art.

Inventor remuneration:  This has been a long discussed issue  A recent court case involving inventor remuneration in Shanghai is discussed here.    IPO seeks clarification of the role of “by-laws” as another type of agreement with an inventor creator.

Supplemental patent term certificates: IPO urges that CNIPA make the critical clarification that patent terms may be extended for drugs that are new to China, not to the world.  Consistent with the English text of the Phase 1 Trade Agreement IPO also urges CNIPA to recognize that patent term adjustment should be granted when relevant conditions are met.  The current draft of the regulation states that it “can” (可以)be granted.  IPO also disagrees with proposals to permit third parties to contest supplemental patent term decisions. 

Thank you, IPO, for sharing these excellent comments!

China Passes the One Million Patent Milestone — Is it Yesterday’s News?

patentfilingchart

Several news outlets have reported on the recent WIPO World Intellectual Property Indicators 2016 report on IP filings, noting that China’s surpassing a milestone of one million patent applications in 2015, and that this may, according to WIPO reflect “’extraordinary’ levels of innovation.”

There are two significant problems with the reporting.

The first is that the news of one million invention patent filings is about one year old.  SIPO publishes its patent filing data on a monthly basis, which is available to all, at no cost.  The chart at the top of this blog is from the SIPO website statistics web page  as of November 27, 2016 and covers patent filings through the end of September 2016.  In other words, the news about China surpassing the one million benchmark was probably available sometime in the first quarter of 2016 – making it hardly news.

The second point though is the more troubling one:   Bigness does not mean “strength”, as China has itself noted in State Council documents.  Moreover, bigness does not necessarily mean innovation.

Let’s tease apart five of the hidden data of what the WIPO:

  1. WIPO Contradicts Itself on China’s efforts to Innovate: Some studies show China lags considerably on its efforts to innovate.  While WIPO’s Francis Gurry notes that “Innovators in China powered global patent applications to a new record in 2015”  another WIPO-commissioned Global Innovation Index looking at a broader range of factors, suggested that China is number 25 in global innovation, and number 72nd in technology payments, despite holding a top position in high tech exports.  The data suggests that what is made in China is disproportionately not innovated in China.  Indeed some would argue that the large overhang of unexamined utility model and design patents in particular is making it more difficult to innovate, by making it difficult to conduct freedom to operate analyses in China’s market.
  2. The Rising Tide Is Not Raising All Boats: China’s rapid increase in patent filings are overwhelmingly from Chinese domestic filers only. For example, according to the more up to date SIPO data above only 10.6 % of the invention patents filed through end of September 2016 were from foreign filers.  For design and utility model patents, the foreign numbers are even lower: about 3% for designs and about 1% for UMP’s.   Possible reason: subsidies for domestic patent filings may be more generally available than subsidies or other incentives to file overseas.
  3. China’s Patent Tide Stops at its Boundary Waters: China is not a major international filer. As the WIPO report notes:  “around 96% of total applications from China are filed in China and only 4% of the total are filed abroad. In contrast, filings abroad constitute around 45% of the total in the case of applicants from Japan and the U.S.”  As I have detailed elsewhere, when China does file overseas – such as at the USPTO – the quality of the patents is high.  However these overseas-filed patents still are a limited cohort of China’s domestic filings, even if it may represent its most innovative and high quality patents.
  4. China Is A Big IP Country, But Not Necessarily A Strong One = Particularly When Other Comparative Data is Introduced.     When patents per capita or patents per unit of GDP are compared or patents in force are calculated, China does not come out on top.  Japan, Korea, Switzerland,  the United States and other countries all have their strengths when comparative data is introduced. In fact, the United States has 2.5 million patents in fact, and China is behind Japan in the number three slot (1.4 million patents in force), despite the rapid growing number of its invention patent applications.
  5. Is China “Pulling out the Stalks to Make the Plants Grow”: A system that is overly geared to easy metrics? No less dramatic than the 1,000,000 patent benchmark are the areas where China so outstrips other countries as to suggest that there may be fundamental problems in the value proposition of its IP system. China’s 1.1 million utility model applications are about 127 times second-ranked Germany’s (chart A55).   China’s design patents constituted nearly 94% of global filings (p. 127)   The data suggests that China is indeed strongest where the government can most actively support registration activity.  Quantitative data also works to the disfavor of economies that have strong pharma sectors, which are dependent on fewer patents, and industries that rely on proprietary/unpatented technology. This blog has also repeatedly reported on both these SIPO filing data, and some of the distortions that have accompanied this dramatic ramp-up in patent filings, including  subsidies, “get out of jail” free subsidies, and end of year acceleration in patent filings to take advantage of incentives.   These incentives have helped increase patent quantity, but their impact on quality is harder to measure.

Summary: Judging the extent to which China’s rapidly evolving system is contributing to China and global innovation requires more careful thought than simply looking at the explosive growth in China’s IP filings.  In addition to the problems noted, it also requires looking at other data such as commercialization, citation rates, relationship to manufacturing and exports, licensing and assignment rates, adoption by standards setting organizations, etc. Nonetheless, the quantitative curve is obvious and impressive (see below).  patentofficetrends