U.S. innovators should not misconstrue the higher absolute number of patents filed in China in 2015 to imply anything about the strength of U.S. innovation or the U.S, IP marketplace.
The World Intellectual Property Organization (WIPO) announced this week that global patent applications rose to 2.9 million in 2015, up 7.8% from 2014. The announcement was punctuated by the fact that the Chinese patent office received 1,101,864 patent applications in 2015, making it the first national patent office to cross the one million application mark in a single year.
China received almost as many applications as the next three patent offices combined -- the U.S. (589,410), Japan (318,721) and the Republic of Korea (213,694). While the WIPO attempted to link the surge in patent filings with the increase in world economic activity and innovation, one should be cautious in drawing any conclusions as to the state of Chinese innovation vis-à-vis the US -- or any other country for that matter -- based on relative trends in patent filings alone.
The circumstances surrounding the increase in Chinese patent filings are unique and should have come as no surprise to anyone following the Chinese government’s five-year plan of 2011. Over the last 50 years, the Chinese Communist Party implemented a series of five-year plans which guided China’s rapid economic growth.
According to a KPMG study, the 2011 five-year plan’s themes of sustainable growth included some specific targets. One of these was an “innovation target” of 3.3 patents per 10,000 people, marking a significant increase over the 2011 level of 2 patents per 10,000 people.
The year 2015 is the fifth year of that plan, so the peak filing in that year is the direct result of a calculated government effort, enabled by an unprecedented allocation of legislative and administrative resources, as detailed in this report from China’s State IP Office. Thus the sharp rise in Chinese patent filings between 2010 and 2015 is very unique to China’s political circumstances, and is not at all correlated with the natural progression of innovation.
The vast majority of the patent filing in China is done by Chinese residents, a reflection of the weak enforcement regime in China. The percentage of foreign filings in a country (filings by non-residents) is a direct indication of the strength of the IP enforcement regime in that country which is also a very close proxy of patent value.
Patent filings by country show China (far left) lacks the balance in resident (red) and non-resident (pink) filings present in many other countries. (Image: WIPO)
The USPTO and the European Patent Office exhibit a ratio of resident to non-resident filings of about 50/50, attesing to the strength of IP enforcement regimes in those regions. The ratio in China is about 90% resident filers to 10% non-resident filers.
The successful implementation of China’s five-year plan came without a corresponding increase in non-resident filing activity. Thus the record filings in China should be seen as driven by local, not international, R&D spending.
The China government clearly identified enhanced IP protection as one of its strategic goals. There’s still a perception Chinese patent court system plays a protectionist role, but insufficient empirical evidence exists to support that claim.
A recent study by Santa Clara University School of Law Professor Brian Love actually concluded that there is little evidence of protectionism in a sample of litigation outcomes. More time and data are needed, but in the meantime, the perception of protectionism is driving foreign patent filers away from China.
While the efforts of the Chinese government to grow their IP filing and IP protection infrastructure should be applauded, it is too early to correlate this one-million-patent milestone with anything other than the desire to satisfy a ratio of patent per capita that has been laid in a five-year plan.
With the growing global emphasis on patent quality and enforcement, the U.S. patent market is still considered the strongest in the world, drawing a high percentage of non-resident patent filings. Filings in the U.S. by non-residents represents foreign R&D investments -- including Chinese R&D investments -- that get converted into U.S. IP rights.
--Efrat Kasznik is president of Silicon Valley-based IP firm Foresight Valuation Group, LLC, a lecturer at the Stanford Graduate School of Business and Secretary of the High Tech Sector, LES USA-Canada.