China Is Now #3 in the World in Patent Filings

[The following is excerpted from an article by Rachel Armstrong posted by Reuters, Thursday August 25 2011]

Patent filings are soaring across most sectors in China -- last year there were 313,854 patents registered in the country according to the Thomson Reuters Derwent World Patents Index, a 12 percent rise from 2009.  China was the third highest filer of patents in 2010, just behind the U.S., which registered 326,945 and Japan with 337,497. Japan has been the leading patent filer in the world for the past decade but its lead is narrowing, with its filings volume down 12 percent since 2006. China is up 83 percent.

"A lot of know-how flows through the contract manufacturer. The next logical step for these contract manufacturers is to climb up the value chain," said Elliot Papageorgiou a partner at intellectual property law firm Rouse in Shanghai.  And as they move up the value chain, they use patents to protect some of the knowledge and ideas they've picked up as contract manufacturers in order to give them room to manoeuvre in the increasingly competitive market.

"In the last year and especially this year, demand for IP work is growing very fast," said Anthony Chen, a patent lawyer for Jones Day in Shanghai.  Douglas Clark, a barrister specialising in intellectual property cases who has worked in China since 1993 says the size of the industry has surged in recent years. 

The surge in the size of patent portfolios is causing a corresponding rise in litigation.  ... These lawsuits are hardly surprising given that their foreign counterparts such as Apple, Google and Samsung are all trying to use an armory of patents to [control] competition in the global smartphone industry.  Google Inc's biggest deal ever, the agreement to buy Motorola Mobility Holdings Inc this month for $12.5 billion, is an attempt to buy insurance against increasingly aggressive legal attacks from rivals such as Apple Inc.

The influx of patents not only underscores China's growing strength in the telecom sector, it also reveals a change afoot in the country's attitude toward intellectual property.  While the change is hardly air-tight, China is moving more toward recognising ideas and their origins, rather than copying and proliferating.  Intellectual property civil litigation cases filed in China rose by 37 percent to 41,718 last year according to the country's Supreme People's Court. 

This is driven in part by China's plan to become a high-tech power house, with a target for 2.5 percent of its gross domestic product to come from research and development by 2020. It's trying to reach this goal by subsidising the cost of patents for Chinese companies and stricter enforcement of intellectual property rights.

"While traditionally in China you are supposed to share knowledge, the government is also aware that if you don't protect IP rights you don't attract investors and the nation can't develop the high-tech industries it wants," said Isabella Liu, a partner at Baker & McKenzie in Hong Kong.


[Leighton's comments:]
The above underscores the unmistakable trend in China to recognize and manage intellectual property rights in the landscape of business competition, both domestically in China and abroad in export markets.  As I have noted in my previous blog articles, Hawaii technology companies and innovation businesses should protect their intellectual property rights in the U.S. through patent filings, and also consider whether to acquire foreign patent rights through timely international filings in countries with booming markets such as China for possible value in tech transfer transactions.