Business

China heads for top spot in patent application

By Zhang Yuwei (China Daily)
Updated: 2010-10-26 10:36

NEW YORK - Patent experts are not surprised that China is poised to overtake the United States and Japan as the country with the most patent applications next year - a quarter of a century after the country set up its patents system.

Carsten Fink, chief economist at the World Intellectual Property Organization (WIPO) in Geneva, said China's economic growth over the past two decades has been a driving factor of this spurt.

A report by Thompson Reuters earlier this month said China's patent filings grew by 26.1 percent a year between 2003 and last year, while growth in the US was 5.5 percent, South Korea 4.8 percent and Japan 1 percent.

The report said the No 1 position will be achieved one year earlier than projected in a report published in 2008. China set up its patents system in 1985.

"The large savings pool generated by rapidly expanding economic output in China has (partly) been invested in research and development (R&D) activities and it is only natural for patent filings to increase as well," Fink told China Daily.

But in China's case, the "remarkable" fact is that patent filings have grown much faster than economic output, Fink said.

This, in a way, reflects increased recognition of Chinese companies. Patents are important instruments to benefit from innovation and they create a competitive edge.

"This embrace of the patent system is historically not unprecedented, but the pace at which this has occurred in China probably is," Fink said.

One other driving force behind this patent boom in China, the report said, is the shift from agricultural to high technology.

In digital computing, for example, Chinese companies, not multinational parent companies, are on the rise.

As well, there was a 4,861 percent increase in domestic Chinese patent applications in digital computers from 1998 to 2008, while a much slower increase of 552 percent in natural products, the report said.

The financial crisis and the slow economic recovery caused many companies outside China to reduce research and development spending. Many are Japanese. However, a number of Chinese companies are expanding their R&D budgets.

Last year, Huawei, a major telecommunications solutions provider in China, increased its R&D investment by 27.4 percent to $1.95 billion from the previous year. It also operates a network of 17 R&D facilities in the US, Germany, France, Russia, India and other countries.

Despite the rapid development in technology innovation in China, the lack of equipment infrastructure, a requirement to make the technologies widely available, is still an obstacle for China to overcome.

"Normally, China will have to purchase these machines from foreign countries to make the technologies viable," said Zhang Zhaodong, a patent attorney with the China Council for the Promotion of International Trade's Patent and Trademark Law Office in New York.

"It is a trend that China will outpace the US and Japan in patent applications; it will happen sooner or later. But Chinese companies should step up efforts on this to catch up and operate at the global technology frontier."

Government policy that encourages innovation also contributes to the boom.

In 2006, China issued a report, Guidelines on National Medium- and Long-Term Program for Science and Technology Development (2006-2020), and set the proportion of R&D expenditures at 2.5 percent of the GDP.

"The government also provides innovation incentives, such as R&D tax deductions, and it helps the acceleration," Zhang said.

Fink thinks China, as an emerging economy, sets a good example to its peers as the patent surge reflects the rapid transformation of the economy toward one where knowledge production is a core activity.

Meanwhile, more and more Chinese companies are tapping into foreign markets. A recent WIPO report shows that between 2008 and last year, China filed about 30 percent more international patents than the previous year, while Japan filed 4 percent more.

But Fink said compared to Japan and the US, international patent filing activity of Chinese companies is "still relatively nascent".

The level of Chinese international patent filings under the WIPO-administered Patent Cooperation Treaty (PCT) is still far below the Japanese and US levels.

"Even though Chinese growth rates are much higher, it will still take some time until there will be convergence in the number of PCT applications," Fink said.

China Daily