Image by © Dreamstime

Image by © Dreamstime

by James Woudhuysen

Chinese patents are burgeoning. But how ‘Chinese’ are they? Of the millions of patents China has filed, how many are original and how many owe much to the assistance and investment of foreign or multinational companies? GIS guest expert Professor James Woudhuysen sheds light on the complex world of patenting and outlines the prospects for Chinese innovation.

What a difference seven months makes. In May 2014, The Economist lauded China’s patents. Endorsing an upbeat report by the World Intellectual Property Organisation (WIPO) on China’s international patenting, the magazine ran the headline, ‘Ever more inventive’.

Fast-forward to December 2014. Now, on the same subject, the same publication wrote the headline, ‘Patent fiction’. The Economist was attacking a second upbeat report on China’s patents – this time, from Thomson Reuters.

It accused Chinese bureaucrats of imposing targets which led China to go ‘merely churning out patents’. That kind of approach, it concluded, ‘does little to advance innovation’.

Clearly, Chinese patents are a tricky issue. So what is the true picture?

Market share

First, take patents filed domestically. Between 2000-2012 they multiplied 10 times, getting on for 2.5 million filings. Over the same period, China’s world market share of patents rose from four to 28 per cent – chiefly at the expense of Japan, whose share fell from 31 to 15 per cent.

China’s State Intellectual Property Office (SIPO), with 6,000 staff, has been the largest in the world since 2012.

China’s domestic patenting is not all froth. SIPO says, 869,000 of the applications it received in 2014 were for ‘utility model’ patents, which relate only to novelty in shapes and structures, and which are taken out to gain short-term protection. About 600,000 other applications were for design patents, which again rarely feature genuine breakthroughs.

Nevertheless, ‘invention’ patents, which protect real inventive leaps for 20 years, were 12 per cent up on 2013, at 928,000 applications.

About 800,000 came from Chinese sources – more than 80 per cent from companies, rather than lone inventors or universities. Foreign firms, however, took an unmistakable 70,000 of 223,000 invention patents actually granted.

Triple output

Neither China’s patents statistics nor its invention patents are perfect. But which country can fairly claim such laurels? Yes, China’s government subsidises invention patents… just as the UK, the Netherlands and Spain will go on giving new patenting firms tax breaks until June 2016.

And yes, since 2012, Chinese-owned firms, rather than the subsidiaries of multinationals, have filed four in every five applications in China – zealously pursuing, no doubt, directives laid down in the 12th Five Year Plan.

In December 2014, the Chinese State Council’s Action Plan for Deepening the Implementation of National IP Strategies announced that it wanted China to triple its patent output, taking the number of invention patents per 10,000 inhabitants from four in 2013 to 14 in 2020.

This prompted some derision. So, too, have those Chinese convicts, or those Chinese about to go to jail, who have cut their jail terms by developing patents, or even by buying them from other people.

Yet if derision sometimes attends patents registered in China, firms based there now win foreign patents, which are often weightier than domestic ones, in numbers that, though small, are rising fast.

Rapid growth

The WIPO found that China applied for about 25,000 patents abroad in 2012, more than half of them in the US. In 2009, nearly 90 per cent of China’s 10,000 foreign-orientated patent families – sets of interrelated patent applications filed to protect the same invention in both China and one or more other countries – were in the exacting ‘invention’ category. And in 2009, too, nearly 40 per cent of China’s international patent families covered more than one office overseas.

The rise in Chinese patenting abroad needs putting in perspective. China’s US patents have enjoyed rapid growth, but in 2013 they still lagged significantly behind the big players.

GIS-china

The number of Chinese patents in the US is dwarfed by its rivals

Given China’s vast population, its US patenting still has a long way to go. Its more broadly international patent families could also be much more numerous.

China filed only five per cent of its patent families abroad in 2008 against a German figure of 57 per cent – uncharacteristically low, for Germany – and a US figure of 50 per cent.

Promising inventions

China’s international patenting is not all about first steps. As Neil Wilkof has perceptively written on the intellectual property website IPKat, ‘Perhaps the low percentage of foreign filings might signal that only more promising inventions are being pursued abroad.’

The picture, however, is more complicated still – for China’s patenting in the US and Europe is not as Chinese as one might think.

Looking at patents granted to China by the US patent office in 2010, Leo Branstetter and his colleagues at Carnegie Mellon university found that just a quarter were purely Chinese-invented and assigned to indigenous firms.

However, 30 per cent were Chinese-invented, but assigned to foreign multinationals; and a dominating 37 per cent were assigned to foreign multinationals, but were the product of ‘international co-invention’ – the Carnegie term for intra-firm collaboration, across borders, in patents.

Mixed origins

Much of this collaboration is aimed at bringing innovations not just to China, but also to global markets. A similar, global complexion to Chinese patents is registered, according to the Branstetter team, among the patents Europe grants China.

As the Carnegie Mellon academics note, the mixed national origins of China’s US patenting effort mark it off from Japan, Taiwan and South Korea, whose international patents have long been both produced and owned on a purely indigenous basis.

Branstetter’s team says, ‘China opened its borders more completely to foreign companies and did so earlier in its economic development than did many of its Asian forebears.

‘Second, China’s vast size and rapid growth motivated multinationals to establish research and development centres in China at an early stage, to ensure their success in this key emerging market.

‘Third, the internet made it possible for engineers based in China to collaborate on research projects with colleagues all over the world in something approaching real time.’

Foreign firms

This account is convincing. It brings out how China has nothing to be ashamed about over that part of its US patents which derives from international divisions of labour established inside foreign-based multinationals.

If Chinese firms closely participate in patenting efforts which are so clearly international, the suggestion is that they can sometimes, if not always, punch their weight in innovation as much as the West.

In an earlier, 2013 paper again using data up to 2010, Branstetter and colleagues add that Taiwanese and US firms are behind most of China’s US patents. By undertaking R&D in China, where science and technology graduates and PhDs are plentiful, they can get innovations to global markets at low cost, and can adapt them to Chinese and other emerging markets.

However, co-invented and multinational-sponsored patents are more sophisticated and lucrative than indigenous ones, and ambitious Chinese researchers prefer to work at foreign firms rather than indigenous ones.

Leadership positions

Despite the non-Chinese component of China’s US patents, the Carnegie Mellon evidence up to 2010 suggests that China still benefits from multinational subsidiaries performing R&D there.

It is true that, among those which are allowed to do their own thing in R&D, it was those Chinese staff possessing extensive educational and work experience in the US which were often in leadership positions. But multinational companies’ patents in China were as good as those they generate at home.

More significantly, after doing R&D in China for 10 years, the quality of a multinational’s patents there, in terms of subsequent citations, is actuall