Action Plan for Further Implementation of the National IP Strategy (2014-2020) Approved

According to a Chinese Government website, on  December 29, the State Council reviewed and approved the Action Plan for Further Implementation of the National IP Strategy (2014-2020) (Action Plan). The Outline of the National IP Strategy (NIPS) had been implemented for 6 years.  Premier Li Keqiang, and SIPO Commissioner Shen are quoted in the this brief summary.

Chinese authorities have pointed to three key aspects of the NIPS Action Plan:

A.  First, to “Strive to Build A Strong IPR Country”  (努力建设知识产权强国).

B.  To improve IP utilization and protection (知识产权运用和保护).

C.  Practical new steps are to be announced, including plans to promote the development of IP intensive industries (知识产权密集型产业发展).  This  includes greater coordination amongst various branches of national and local government.  Interestingly, and perhaps of greater concern, it also includes “strengthening patent pilot projects,  joint utilization of patents and collective management of patents… to strengthen the competitive advantages of industries.” (强化专利导航、专利协同运用、专利集群管理等工作…增强产业竞争优势).

Here is how I read the tea leaves on this announcement:

First, the references to China becoming an IP “strong country” , and not merely an IP “big country” is a new concept in the NIPS, and likely reflects the observations and approaches of former Commissioner Tian Lipu.  In fact, many observers believe that too much patenting, particularly patenting of a low quality, can be harmful to innovation. I have often noted in this blog that patent quality is a continuing negative side effect of China’s metric-driven approaches to innovation.  In addition, innovation is largely a local phenomenon – China’s efforts to become a strong innovative country this time will also include programs to make strong IP provinces and cities in China.

Second, the reference to IP utilization directly quotes the negotiated language of the Third Plenum and its commitment to “Strengthen the Utilization and Protection of IP” (加 强知识产权的运用和保护).  This was also something that former Commissioner Tian discussed as a positive outcome of that meeting.

Third, the reference to IP intensive industries is new to China’s strategic planning, and, as noted by Commissioner Shen, reflects the influence of the influential US government  2012 report on Intellectual Property and the US Economy.   Reference is also made by Commissioner Shen to IP intensive industries being low on resource demands and low polluting.

The legislative basis for the National IP Strategy is the China Science and Technology Promotion Law (Dec 2007).  Article 7 of that law provides that China will establish a NIPS, in order to promote innovation, encourage indigenous innovation (激励自主创新), and raise the utilization protection and management of IP.  This 2007 law was famous for codifying the concept of indigenous innovation, which elicited considerable concern at the time over potential discrimination against the foreign technology community.  This Action Plan introduces several new and useful concepts which, if implemented fairly, will benefit foreign and domestic investors alike.

 

 

China’s Patent Domination?

Thomson Reuters just released a new report on China’s Innovation Quotient  (Trends in Patenting and China’s Trends in Global Innovation).  This is the fourth in a very useful multi-year series on Chinese patenting trends.

The report looks at Chinese domestic patent data to conclude that China has “risen in patent dominance” and, hence, innovation.  The report also notes that pharma is driving the patent boom.  China has nearly 80 percent of world share in patents for alkaloid/plant extracts, and around 60 percent of global share of pharmaceutical activity – general patents. However, the plant extract filings are held by thousands of individual inventors with a handful of patents each, rather than portfolios maintained by universities or corporate entities that would be seen stateside.  Many of these patents may also involve traditional Chinese medicine (TCM).  Low service invention rates, such as may be reflected in these patents,  may also reveal problems in patent quality.  A deeper analysis would need to correlate new patents with marketing approvals and actual patent maintenance and utilization rates.

The report also notes increasing numbers of forward-looking citations to Chinese data processing patents (1.17 times each).  This is far behind the United States (6.72 times forward looking citations), but exceeds South Korea and is close to Japan and Europe (p. 9).  To me this useful data suggests that the United States remains the source of pioneering innovations and corroborates Chinese notions that it has yet to achieve any breakthroughs in IT technology, despite it having become a manufacturing powerhouse and an overall increase in Chinese patenting activity.

The key weakness with this report is that it equates increases in patenting activity with “surge[s] in innovation.” (p. 6).  That assumption may apply in other countries, but it is less clear in China due to a number of factors including: low patent maintenance rates, patent subsidies and other government-supported market “distortions” such as awards to localities or enterprises, lower quality associated with the large number of non-service invention patents, lack of correlation with commercialization data, and the apparent disparity between low quality domestic patents and high quality overseas filings, amongst other factors.

The report also analyzes patent litigation data from the Ciela database (www.ciela.cn).   It properly notes that “Foreign plaintiffs in patent litigation win materially more often against domestic defendants than domestic plaintiffs do: a 75 percent win rate against a 63 percent win rate sinc 2006.”  However, the report does not underscore that this data – like the patenting data – needs to be treated critically. Foreigners are a disproportionately small percentage of the civil IPR docket.  Indeed, foreigners may only be filing a small share of cases out of concern for other risks of litigation, including low damages, government relations “costs,”difficulties of enforcing judgments, and difficulties in sustaining judgments on appeal.  This information might also be compared with data from the United States on foreign “win” rates .  In fact, the initial data that I collected showed that foreigners due worse on appeals in China than they do in the United States, and then they also do worse on appeal than they do in trials of first instance in China.

In an important but unrelated event, IPKey posted the presentations from its recent conference on IP and innovation.  The conference addressed many of the topics I outlined above, including the role of subsidies in China’s innovation strategies.

 

Withering Problems in China’s Patent Drive? – The Latest from SIPO

SIPO’s six month report on patent filings, available on line in China shows some surprising data for the first six months of 2014.

Regionally, Jiangsu and Beijing are in the number 1 and 2 slots in terms of patent applications.  Both regions showed continued growth (slide 3).  Guangdong, however, showed a slight decline.  Anhui, Guangxi and Guizhou showed the most increase in patent applications in percentage terms (70-90%).  Interestingly, while invention patent applications increased by about 4% from domestic applicants, foreign applications were down about 11% (slide 9).  In general, increases in  Chinese-origin invention patents applications in China were not offset by decreases in utility model and design patents, with an overall decrease of 8 percent for Chinese versus a 2% overall increase for foreigners.

In terms of patent grants, amongst foreign countries, the United States showed an increase of 12% from the same period last year, while Japan and Germany (number 1 and 3, respectively amongst foreign filers), both showed declines of about 4.5%, as reflected in the following chart:

foreignpatentrates

In this chart, the orange and blue bars represent 2014 and 2013 respectively.  Japan, the USA , Germany, Korea and France are the first countries listed to the far left on the x axis.    The y axis reveals the number of granted invention patents in 2014.  The chart shows that patent grants were down for all three top foreign applicants for the first half of 2014 (by the percentages at the top of this graph). However, this could be due to drops in applications from several years prior.

The problem of low maintenance rates for Chinese-source patent applications also remains acute.  As I have previously blogged, China already shows lower patent maintenance rates than other IP-5 jurisdictions.  This report makes it clear that Chinese filers appear to be the predominant parties in China who prematurely curtail patent protection (p. 15).

patentmaintenance

The green line represents domestic patent filers; the orange line is foreign patent filers.  The x axis shows the year of the patent, through its 20th year, while the y axis shows percentage of patents filed.  The close-up image in the upper right corner is of SIPO’s own preparation.

The report also identifies Beijing as the city with the highest density of patents per capita (nearly 5,000 per million people).  Shanghai and Tianjin follow.  This further underscores that innovation is an urban phenomenon (page 17).  Guangdong also remained the main filer of PCT applications with nearly 6,000 applications — outpacing second place Beijing with about four times the number of applications (p. 25).

Some of the more dramatic changes are in utility model patents and design patents.  UMP applications from China dropped by 7.5% and design applications dropped by 28%.  The most dramatic drops were in non-service applications for UMP’s and in service inventions for designs (24.5% and 34.9% respectively).  However, foreign applications for UMP’s and designs continue to grow from a modest base (p. 29).   Non-service inventions still play a large role in China’s domestic utility model and design patent application portfolios (about 26.4% and 50.7% respectively).

 

In summary, the data shows continuing dramatic changes in China’s patent system, including shifting trends amongst domestic and foreign filers.  My guess is that the report shows the impact of an increased focus on invention patents by the government, and a decline in subsidies for utility model and design patents in key patenting regions.  The increase in service inventions for UMP’s is significant as it may show a shift to patenting in UMP’s for enterprises that actually practice the invention.   The rapid increase in regions like Anhui may be due to active government support in those regions.  The drops in patent filings for foreigners are surprising considering China’s continuing economic growth.  The report also underscores a predictable rise in China’s cities as centers of patenting activity.  Although individual PCT filers are not identified, the growth in PCT filings is probably to continued growth of companies like Huawei and ZTE from Guangdong.

The Real Mischief of Tianjin’s Patenting Police Chief

Many media, including the Wall Street Journal, have reported on Tianjin  police chief, Wu Changshun 武長順, who seems to be following in the footsteps of Chengdu police chief Wang Lijun, 王立军 as a police officer/inventor who also ran afoul of Chinese law.

The story of Wu Changshun however seems to be a bit more complicated than simply being a police chief who scammed China’s innovation system. Wang Lijun, as I blogged before, may have been profiting off of patent subsidies to file low quality patents.  He had 150 patents to his name, and likely used a widespread subsidy mechanism to generate revenue and appear innovative.  It is unclear if he commercialized these patents.

As reported by SIPO’s newspaper, Wu seems to be of another stripe – the “scholar official”  or the “inventor official.”  In fact 34 of the 35 patents he obtained were transportation-related.  Wu worked in 18 institutes of higher education and research institutions, including as an adjunct professor and researcher.  He has credentials as an advanced engineer and he has a Ph.D.  Indeed, he was developing inventions that at first glance might be useful to him in his police work – precisely the type of employee/inventor that China wants to encourage.

The real trouble this may be elsewhere than in lower quality patents.  For example, of the four inventions in which he is listed as the sole inventor, three involve a paneled traffic light.  This paneled light has become a bit of an annoyance to Tianjin residents and out of town drivers, perhaps because as this picture shows, it had a unique design and functionality.   The problem of Wu was not only in what he invented, but in how he commercialized his inventions.  He apparently held power on certifying products for safety, standardization, as well as government procurement and through these efforts made it impossible for others to compete on Tianjin public road procurement projects where he had a personal stake.

Wang abused China’s petty patent system.  Many of these patents lapse after one year, because they are never commercialized.   Wu, however, seems to have showed considerable creativity in how to abuse the system for commercialization of patents.  His story may underscore the need for more transparent and competitive technical standards, open government procurement and clearer employer ownership/inventor rewards systems, without reference to where a product was innovated.

Funny, those are some of the issues that foreigners would like to see China focus on as well….