On Wednesday, September 26th, business news publication Bloomberg published an article providing data analysis on Chinese patent applications to claim that, while China receives more patent applications than any country, “most are worthless.” Although the data supports the fact that a large number of Chinese design and utility patent applications are abandoned, the article misses the larger point that such an attrition rate is a natural result of China’s attempts to build a thriving patent system over a long period of time.
Indeed, if you were trying to usher in a culture change, moving from no patent system just a few decades ago to a thriving and high functioning patent system, you would look to incentivize your own citizens and corporations to file patent applications. That is precisely what China has done and is continuing to do. Thus, the mantra about Chinese patent applications being worthless, or nothing of a concern because they are overwhelmingly only filed in China, completely misses the enormity of the change taking place in China, and why it bodes well for the Chinese moving forward.
Patent Applications Soaring in China
Patent application filing activities have soared in China in recent years, with the World Intellectual Property Organization (WIPO) reporting last December that China’s State Intellectual Property Office (SIPO) received 1.3 million patent applications in 2016, more than one-third of the total 3.1 million patent applications filed worldwide that year. While patent application filings grew between 2015 and 2016 at a rate of 8.1 percent, China accounted for 98 percent of that filing increase.
The aforementioned recent Bloomberg article relies heavily on two pieces of data to draw the conclusion that the patent applications being filed at SIPO aren’t valuable and therefore must cover weak innovations. First, Bloomberg points out that 91 percent of design patents are abandoned within five years. Second, the article notes that, while utility patents experience a somewhat better fate, about 61 percent of those filings in China are also abandoned after five years.
To be fair, there is every indication that these data points are correct and that abandonment rates are very high among Chinese design and utility patent applications. That’s probably very comforting to anyone who wants to buy into the notion that, despite all we’ve heard in recent years about China’s increased patent application filings, the sheer number of filings don’t pose any threat to America’s supremacy in the intellectual property or innovation realms. But the more important point regarding the long-term fortunes of China’s patent system is simply missed by Bloomberg. China, a Communist country, is creating a patent system from scratch.
Initiatives like Made in China 2025 aims to quickly turn China into a nation that can compete and succeed against any other technologically developed nation. Even if it takes a generation or two for China to create a thriving, functioning patent system by Western standards, any country trying to build a patent system from absolute zero would want to encourage the filing of patent applications and the expectation would be that application filings would get stronger over time, and therefore fewer would become abandoned over time. So, at best the story that Chinese patent applications are abandoned in high numbers tells only half the story, and not the most impressive part of the story.
China has gone from no patent system to the world’s largest patent system based on volume. And China is buying up old U.S. utility patent models and encouraging individuals to dream of becoming inventors. This is going to be a recipe for success for the Chinese the same way it was a recipe for success for America some 225 years ago when the decision was made by the Founding Fathers to keep America’s patent system reasonably priced and easily approachable by individuals; including individuals with little or no education.
What’s the Problem with Weak Patents Anyway?
Further, if these patent applications and any result patents are weak, the only true issue with them being weak wouldn’t be that they were being abandoned, it would rather be in the Chinese courts allowing any weak patents to be enforced against companies. In the U.S., nefarious actors trying to enforce weak patents and extorting settlements from companies — settlements lower than the cost of fighting the infringement charges in court — is a problem.
This problem brought about by the nefarious actors is not a problem with the patent asset itself, because a weak or worthless patent isn’t worth enforcing. Instead, the enforcement of weak patents is a problem for a judiciary that does not adequately punish those engaging in extortion-like behavior is the problem. Nefarious actors exploit judicial inefficiencies using weak or worthless patents. Without exploitable judicial inefficiencies issuing weak or worthless patents isn’t a problem.
Up until recently, the U.S. patent system had little to no issue with the grant of weak patents because there was very little chance that such patents would ever be asserted. That is why historically the U.S. Patent Office viewed it as far more problematic to bury innovations that should be patented than to patent innovations that should have been rejected. Absent a true threat of bad actors because there is no exploited or exploitable judicial inefficiencies to game, China won’t have the same or similar problem. Indeed, given the operation of the IP courts in China it seems rather unlikely that supposedly “weak” patents would be the problem that Bloomberg supposes.