Rediscovering the Awakening Dragon: A Fast-growing Force in IPR

For the past decade, China’s miraculous economic growth and the increasing wealth of its people have attracted worldwide attention as well as curiosity. Then, what is the engine behind China’s economic success?

From the labor-intensive “Made in China” to an imaginably knowledge-based “Created in China”, China has embarked on an innovative journey to transform itself. However, to realize the transformation, there is a prerequisite, that is the Intellectual Property Right (IPR) protection.

IPR protection is the fundamental for a knowledge-based economy and safeguard for innovation. A sound and solid IPR system lays the foundation for a sustained, innovation-driven growth. Without IPR protection, innovative economic activities will not be possible.

Over the past decade, China’s IPR environment has been constantly improving, and beard substantial fruits for both China and the world.

The Patent Strength

Patents make up the principal part of IPR and are an important symbol of a country’s innovative capability.

China’s strength in innovation has greatly been improved since the 16th CPC National Congress, thanks largely to the Central Government’s resolution to enhance the country’s IPR environment.

The total number of China’s patent applications increased about eight-fold from 200,000 in 2001 to over 1.6 million in 2011, making the country surpass the United States and Japan to become the world’s top patent filer.

It is worth noting that these figures are not from the State Intellectual Property Office of China (SIPO) — a national government organization responsible for the examination of foreign and domestic patents and supervision of local SIPO bureaus — but from Thomson Reuters, a third-party professional information provider.

As soon as the figures were released, it soon attracted a wealth of global media’s attention.

Le Figaro, one of France’s largest national daily newspapers, wrote: “China enjoys a rapid development in the patents declaration, which indicates that the legal awareness of IPRs in China is increasing.”

It is rare for major Western media outlets, which hold prejudices toward China, to provide objective and impartial data and comments about the IPR landscape in China.

This reflects that China’s IPR environment has indeed improved greatly.

Dr. Donald Shi is a senior architect for a major American software corporation, which provides anti-piracy software protection solutions to companies around the globe, with China’s Huawei Technologies being one of the American corporation’s clients. Dr. Shi has acted as the American corporation’s senior adviser to Huawei since 2008.

The former lead architect of IBM, who has now worked in the software IPR protection business and has been commuting between China and the United States, has witnessed the big changes in China’s IPR landscape.

“From what I’ve seen, the IPR environment in China has gradually been changing for the better,” Dr. Shi said to this journalist. “The IPR-related laws and regulations, the law enforcement measures and the public’s awareness of IPR have all been improving.”

“More and more people in China have begun to purchase licensed software, and free software downloading services, software piracy, online piracy, pirated DVDs, etc., have all been decreasing,” Dr. Shi added.

A New Stage

Among all types of patents, invention patent is perhaps the most critical indicator of a country’s innovative capability.

China has maintained the world’s fastest growth in terms of the volume of invention patents granted.

As of July 16, 2012, China had granted a total of 1 million invention patents, according to official statistics.

It only took the nation 27 years from having zero patents to achieve that amount since China’s first patent law went into effect in 1985. China spent six years to see its 10,000th invention patent in 1991, and another 12 years to total 100,000 invention patents in 2003. But it only took the emerging power nine years to increase that number from 100,000 in 2003 to the 1 million in 2012.

Over the past decade, granted invention patents in China rose by an average of nearly 27 percent annually. The country granted 172,000 invention patents in 2011, nearly 11 times the number granted in 2001.

Furthermore, domestic invention patent applications grew at an average annual rate of nearly 37 percent over the past decade, twice faster than applications filed by foreign entities.

Of the total invention patents granted in China, the proportion of domestic applications rose from less than one-third in 2001 to more than 50 percent in 2009 and then to nearly two-thirds in 2011.

By the end of November 2011, a total of 684,163 valid patents had been authorized by the SIPO in China, among which 342,466 are domestic patents, amounting to 50.1% of the total number. This is the first time China’s domestic valid invention patents have surpassed those submitted by foreign applicants.

So far, the numbers of China’s domestic invention patent applications, granted invention patents and valid invention patents have all surpassed the foreign invention patent, marking that China’s development in the IPR sector has entered a new stage.

Topping the World

Over the last decade, companies have become China’s main force in invention patents.

Invention patents granted to companies in the country increased nearly 58 times from over 1,000 in 2001 to more than 58,000 in 2011.

Of all patents for on-duty inventions granted in China, the percentage of invention patents granted to companies rose from over 33 percent to over 61 percent in the past 10 years.

International patent applications filed by Chinese companies have increased markedly as they speed up overseas expansion.

Published Patent Cooperation Treaty (PCT) applications from China increased nearly 10-fold from 1,731 in 2001 to 16,402 in 2011, and their percentage of the world’s total rose from nearly 2 percent to 9 percent during the period, pushing China from 10th place to fourth in patent filings.

The number of China’s PCT applications, which has been growing faster than any other country in the world since 2009, grew over 33 percent in 2011 from the previous year, 12 percentage points faster than the growth rate of Japan, the second fastest growing patent filer in 2011.

China’s Huawei Technologies, with 1,737 published PCP applications, ranked the first in the world in terms of PCT applications numbers in 2008.

In 2011, ZTE Corporation, another Chinese telecom equipment maker, with 2,826 published applications, became the world’s top PCT applicant in 2011, once again showing Chinese companies’ innovative capabilities.

Local Roots Bearing Global Fruits

“China’s fast development in the intellectual property sector contributed to the world’s innovation cause, and the nation has encouraged the whole world by making remarkable progress in IPR protection in a short time.”

This was the remark of Francis Gurry, Director General of the World Intellectual Property Organization (WIPO), when he commented on China’s development in the intellectual property sector in April 2009.

Since joining the World Trade Organization in 2001, China has strengthened its legal framework and amended its IPR laws and regulations to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

“China has established a trademark law system that suited both China and international regulations,” said Tian Lipu, Director of the SIPO.

The protection of international trademarks has especially been reinforced. By 2008, more than 530,000 foreign trademarks from more than 130 countries or regions had been registered in China, according to the SIPO. The figure was more than 100 times more than that in 1979.

John Duggan, a longtime China watcher and established American attorney, knew what he was talking about.

“As a practitioner in the industry, I observed the Chinese governments’ resolution to enhance China’s over all IPR system, and I did see some effective measures the governments had taken to provide better IPR services to our businesses in the country,” Duggan, who has visited China for neatly 20 times, told this journalist.

“The perception is evolving and the money that U.S. companies lose to piracy in China has dwindled. China will enhance its position in contract manufacturing and private labeling by developing an international reputation for protecting intellectual property.”

Currently, China is the third largest market for U.S. technological export, and IPR has been an important issue in Sino-US trade.

In the eyes of Shi Mingshen, one of China’s most influential business commentators, “poor IPR protection” has often been used as the West’s easy excuse to bash China and build trade barriers against the country.

“Most countries placed on the American ‘Priority Watch List’ for IPR violations are major trading partners of the United States,” Ms. Shi, China’s top 20 most influential media people in the financial and economic sector, told this journalist.

“China is a latecomer in IPR protection, but has made considerable progress. The United States is good at using its laws and regulations to pick on competitors that may pose a threat.”

“IPR is fundamental to fair treatment of the State’s knowledge-intensive industries and services,” said Dr. Shi. “The IPR environment for foreign businesses in China just keeps getting better and better.”

Causes for the Thriving Cause

China’s rapid development of the IPR cause was built on a solid foundation of a legal system with Chinese characteristics, and propelled by the Central Government’s resolution and persistent efforts to freshen up the sector.

Externally, since joining the World Intellectual Property Organization (WIPO) in 1980 and the World Trade Organization (WTO) in 2001, China has become a member of more than 10 international conventions, treaties, and organizations related to the intellectual property rights.

Internally, over 600 patent agencies and ever-increasing practitioners brought a sound legal and administrative system of patents censorship, law enforcement and transformation into existence.

These combined constituted a solid basis, but the biggest factor that contributed to China’s fast development of the intellectual property sector was the Central Government’s persistent efforts.

Over the last 10 years, the Chinese central government has taken a series of effective measures to combat the IPR infringement.

On Feb. 4, 2002, the “Regulations on the Protection of the Olympic Symbol” was announced by the State Council.

On Aug. 2, 2002, the “Regulations for the Implementation of the Copyright Law” was promulgated by the State Council.

On Aug. 3, 2002, the “Enforcement Regulations on the Trademark Law” was issued by the State Council.

On Dec. 28, 2002, the State Council made a decision on amending the “Implementing Rules of the Patent Law of the People’s Republic of China.”

On Nov. 2, 2003, the State Council of China issued the regulations on customs protection of intellectual property rights.

On Sept. 17, 2004, the “National Defense Patent Ordinance” was published.

On May 18, 2006, the State Council of China promulgated the “Conservation Regulations on Information Network Transmission Rights.”

On Dec. 27, 2008, the sixth session of the 11th Standing Committee of the National People’s Congress approved the amendment of the patent law.

Since then, the Chinese government has ratcheted up its efforts in IPR protection, which were fast and efficient.

In October, 2010, the government initiated a nationwide six-month campaign to beef up the enforcement of IPR regulations and fight against piracy and protect patents, trademarks and copyright for a wide range of domestic and foreign goods. This was seen as the biggest “war” against counterfeiting in China waged by the government.

Since October 2011, the SIPO carried out a series of special actions to crack down on the IPR infringement and production, and selling of counterfeit and shoddy goods across the country.

Despite the fast development, China’s intellectual property sector still has much room for improvement.

According to Chinese Commerce Minister Chen Deming, China has still lagged behind in IPR protection, and counterfeiting in some regions is still rampant.

“In the future, China will draw lessons from Western countries and place more emphasis on fighting against piracy,” Mr. Chen said.

The Finishing Touch

10 glorious years after the 16th CPC National Congress when a new golden decade is lying ahead, some might wonder, what the engine behind China’s fast growth is.

Thomson Reuters gave a glimpse of the answer — China’s changes and development come from its shifted focus from traditional agriculture and manufacturing toward innovation-oriented activities.

From “Made in China” to “Created in China”, China has embarked on a golden journey to reposition itself.

Author: Li Zhenyu
Source: People’s Daily Online