Can China’s IP System Match the Growth in its Economy?

This article was included in our Spring/Summer 2011 edition of Inside IP magazine.

China’s economy is growing fast.  In 2010 alone, it grew by 10.3% and by the end of the year was worth US$5.8 trillion, overtaking Japan to become the world’s second largest economy behind the USA.  In February of this year, it was also announced that China had overtaken Germany as the world’s largest exporter.  Many experts are predicting that China’s current growth rate puts it on course to become the largest economy in the world.

The manufacturing sector is one area which has seen particular growth, and the increase in development in Chinese technology has seen a corresponding increase in the number of patent applications which have been filed.  Last year, the number of domestic patent applications reached 293,000, an increase of nearly 28% compared with 2009, according to China’s State Intellectual Property Office (SIPO).  China is expected to surpass both the US and Japan to become the world's largest filer of patent applications in 2011 and two Chinese companies are already present in the top four filers of international patent applications, based on statistics from the World Intellectual Property Office (WIPO) for 2010.

The rise in the number of patent applications, however, is not simply a consequence of economic growth.  In the most recent modification of China’s patent law in 2010, a series of financial incentives were designed to encourage filing of patent applications.  For technology deemed particularly beneficial to the Chinese economy as a whole, as much as 100,000 RMB is available to a domestic applicant from the Chinese government per PCT patent application.  Compensation of employee inventors has also become a statutory provision, with as much as 3000 RMB or a percentage of royalties being available for patent applications meeting the criteria under which applications are deemed to be beneficial.

The rise in patent filings has resulted in the inevitable question of whether SIPO has the resources to cope.  While SIPO is now generally regarded as a world-class organisation, it is relatively young compared with its equivalents in Europe and the USA, and so has been supported in its development by foreign expertise.  Europe has offered guidance to SIPO as part of the EU-China Project on the Protection of Intellectual Property Rights, launched in 2007 by the European Commission and the Government of the People's Republic of China as part of a longer-term plan to develop a sustainable environment for effective IPR enforcement in China. 

The current project, known as IPR2, is due to conclude in the summer of 2011, and follows the previous project (IPR1) which ran between 1999 and 2004, in providing support for China’s legislative, judicial and administrative reforms, with a focus on improving the effectiveness of IPR enforcement in China.  Accordingly, 2011 is an ideal time at which to reflect on the development of China’s intellectual property system as a whole.  A large number of seminars, workshops and courses have been provided by the EPO over the last four years, primarily for staff in Chinese institutions working in the field of intellectual property rights (such as SIPO patent examiners), in order to develop skills and infrastructure, and with the aim of further developing the existing framework of intellectual property laws in China.

Recent developments in China’s technology sector would suggest that the project has been worthy of the substantial investment (€10.85m) that has been provided by the EU.  In addition to helping China meet a new demand for prosecution and enforcement of patents, the improvement of the intellectual property system as a whole is also seen as a way in which China’s association with counterfeiting problems can be addressed, reassuring applicants that the Chinese intellectual property system really does work, and that it should be used to obtain trade mark registrations as well as patents. 

In summary, China is set to see continued growth and development in its intellectual property systems, and as China’s economy grows closer to becoming the largest in the world, the value of protecting technology via Chinese intellectual property rights is ever-increasing.  China’s intellectual property system seems well placed to cope with the challenge.

Jonathan Hewett 24 May 2011

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