E3G

Intellectual Property Rights in China: Myths versus Reality

By Ian Harvey and Jennifer Morgan

Myth 4: Foreign parties cannot access the enforcement system.
In 2004 there was more patent litigation in China than in any other country, including the USA. Only 2% of the patent litigation involved foreign parties and about 90% of those were found in favour of the foreign patent holder, compared with an estimate of 30-40% in the USA. The Chinese enforcement system is fast, which means that claimants have to respond rapidly (e.g. 5 days to agree an enforcement order). Many foreign companies lack IP representation in China, which means that proposed actions have to be sent to head office for approval. Consequently, injured companies fail to comply with the set timeframe.

Ongoing problems and challenges

There are a number of ongoing problems in China which include:

1. A continuing backlog of patent applications. This is due to the lack of qualified staff to deal with the number of applications growing at 30-40% per year driven by China’s economic growth. China currently has as many domestic patent applications as the USA, but with one third the number of patent examiners. Two thirds of examiners have less than two years experience, which, in turn, affects the quality of the patent assessment. Massive training will increase the number of examiners, but they are running hard to stand still.

2. Few international patents. China was previously filing only about 2% of its patent applications outside China. It has about 4% of the number of international patents that you would expect from its R&D spend. It is beginning to catch up and its international patent applications grew five-fold in 2006. This rapid growth in patents from China will soon cause major processing problems in the patent offices of the US, EU and Japan.

3. Lack of IP skills. Most countries have a strong base of professional service firms who provide IP services to companies. The development of this sector by foreign firms has been restricted in China, which therefore lacks a major source of expertise.

4. Inconsistencies in the courts’ dealings with patent cases. There are strong regional differences and 60% of judges have had no IP training. However, the government has started training programmes of which the EU has been the major supporter.