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China Is Taking Patents Seriously. The World Should Take Notice.

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China Power | Economy | East Asia

China Is Taking Patents Seriously. The World Should Take Notice.

China has spent 35 years quietly building a patent system that BRI is now helping to extend.

China Is Taking Patents Seriously. The World Should Take Notice.
Credit: Flickr/ Max Braun

By now, the Belt and Road Initiative (BRI) is a familiar term to anyone with even a passing knowledge of China, Asia, Africa, global affairs, and trade. The BRI is correctly associated with infrastructure building, investment, potential debt traps, and in general an overarching plan to deeply extend China’s influence around the world.

President Xi Jinping is thought to believe that the BRI will stamp his legacy on Chinese history.

Probably few have considered, however, that the BRI would also offer an opportunity for China to inspect and absorb for its own benefit the patent and IP protection schemes in all of the BRI target countries to which it is extending its financial and political reach.

But indeed, “The Chinese are studying the IP regimes of all the countries along the way [of the BRI], and we can expect that the Chinese will be looking at the IP aspects of all those countries.”

So say the experts on LexisNexis’ December 3 Webinar, “How China is Changing the Global Patent System.” LexisNexis is “a provider of legal, government, business and high-tech information sources.”

In retrospect, there is little surprise that China is relying on foreign sources of knowledge and experience to build out its own IP and patent regime.

It has been a pattern for decades that China uses models of Western and international legal and regulatory frameworks and content to establish its own protocols. Doing so gives investors and other foreign stakeholders something recognizable to feel they can rely on, whether or not the reality bears out that confidence.

Therefore, during all of the years, now decades, that the world has been denigrating China’s intellectual property protection enforcement, China itself has been quietly building its capability to not only protect IP in China, but to “build a court and patent system that is pro-innovator.”

“China is the new IP super-power,” said LexisNexis experts.

As with other legal frameworks, such as contract law, China had no patent system a few decades ago. But now China is “poised to take over the IP systems of the world.”

Where did China’s budding patent system come from? Likely even some China hands will be surprised to learn that Germany has been training China in patent examination since 1985.

“The more you understand the German patent system, the more you understand the Chinese patent system,” said LexisNexis analysts.

China’s choice of Germany as a foundation for its own patent system was not arbitrary.

“Two-thirds of all patent infringement cases in Europe are brought to Germany,” says Anette Gaertner for Reed Smith.

Why Germany? “It has courts with specialized judges who exclusively practice patent law.” In addition, for patent-holders, “injunctions are granted as of right: If the court finds in favor of the patentee, it will issue an injunction.”

Time is a factor, as well, says Gaertner. “As a rule of thumb, first-instance proceedings only take between eight and 24 months.”

Why do China’s growing capabilities in patent process, law, and enforcement matter?

Because, as reported by Reuters in October, “China accounted for nearly half of global patent filings last year,” according to the United Nations World Intellectual Property Organization (WIPO).

The report goes on to say that in 2018, China recorded “1.54 million applications, led by telecom and computer technology.”

Fully 10 percent of those applications came from outside of China, showing the growing awareness of the global community to protect their IP inside of China. According to Erick Robinson at the Beijing office of law firm Dunlap Bennett and Ludwig, injunction rates are high; Chinese injunctions themselves are severe:

Chinese law also bans infringing goods from leaving the country. Permanent injunction rates range from 90 percent to nearly 100 percent. Patent owners are not required to provide a basis or explain why an injunction is needed; it is simply part of the patent law, much like in Germany.

Win rates are nearly as impressive, Robinson writes. “Win rates average around 80 percent.”

However, he warns, “most patents in China are still of low quality. Most Chinese lawyers present no or very minimal trial graphics or demonstrative exhibits; the arguments are not as refined.”

Weighing in on the issue is former U.S. Court of Appeals for the Federal Circuit (CFAC) Judge Randall Rader, considered to be one of the world’s leading authorities in patent law.

“I think there is a real commitment to intellectual property as a path to economic development” in China, Randall is quoted as saying by IP Watchdog.

That commitment is not limited to paper, Randall says. His work in China, as well as other Asian countries, “tells me that… companies… are quite delighted to pick up the slack where American companies don’t have quite the protections that they do under their law.”

The analysts at LexisNexis go farther.

“If you’re going to enforce your patents around the world, [those countries] are going to use Chinese prior art to enforce” in those jurisdictions. Therefore, “if the Chinese innovators get ahead technically, then Chinese prior art could be even more important.”

In layman’s terms, “Prior art is any evidence that your invention was already publicly known or available, in whole or in part, before the effective filing date of your patent application,” writes Michael Henry.

He continues, “One of the most common reasons the USPTO [in the United States] gives for rejecting claims in patent applications is prior art. Prior art can be used to show that your invention is not ‘new’ or ‘non-obvious’ — and these are two of the most important requirements that determine whether your invention is patentable.”

The ramifications of China’s tidal wave of patent filings is thus obvious. China’s patents, in a global system of patents, need to be accessed and searched as much as, and now possibly more than, the patents held in other nations. Patent seekers need to know what the patented “prior art” to their invention may be in China as much as in the United States.

China’s development of a patent system, and its corresponding use of that system to outstrip the rest of the world in patent filings, presents a major challenge to the global patent system overall. China’s increasing knowledge of the nations from Asia to Europe that are receiving BRI investment projects gives it greater opportunity and incentive to study for its own benefit those nations’ IP regimes as it has done with the United States, Germany, and others.

China may have been weak and even cynical about the value and importance of intellectual property in the first four decades of its modernization. Indeed, that attitude may still be said to exist in the minds of many in China. What is clear, however, is that even if they don’t believe in it, the Chinese government has clearly understood that IP is a path to further secure their development goals, and to that end, they will use, and improve upon if possible, the systems of their competitors.