Reduction of China’s Patent Fees Increases Challenges For Patent Quality

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Since 2011, China is the world leader in the number of published invention patent applications (also the number of utility model and design patents is rising). China is in the process of doubling its number of patent applications (from more than 1 million patent applications in 2015). Subsidies and further fee reductions strengthen the incentive to apply for patents, thereby putting more pressure on the State Intellectual Property Office (SIPO) to assess patent quality.

According to China IP News, the Ministry of Finance and National Development and Reform Commission issued the Regulations on Reducing Patent Fees (Regulations) that became effective on 1 September 2016. The budget for the fee reduction is planned to be increased to RMb 4.1 billion per year as of 2016. Compare the budget for 2015 of RMB 3.5 billion.

The rationale behind this reduction is to decrease the threshold for inventors and companies to patent their inventions, and one measure to implement the Promotion Plan for the Implementation of the National Intellectual Property Strategy and acceleration of building an IP powerhouse in 2016, see SIPO’s July announcement here.

 

Article 4 Regulations states that the following groups are eligible for an 85 percent reduction of the patent application fee, excluding announcement printing fee and additional application fee; substantive examination fee for invention patent applications; annual fee for six years from the year the patent is granted; and re-examination fee:

  • Article 3(1) Regulations: Individuals whose average monthly income was less than RMB 3,500 (RMB 42,000 annually) in the previous year;
  • Article 3(2) Enterprises, business units, social organizations and non-profit making scientific research institutes whose corporate taxable income was less than RMB 300,000 in the previous year;

In case two or more individuals or units are co-applications or co-owners of a patent, the fees could be reduced to 70 percent (Article 4 Regulations).

 

Big discounts, big challenges for patent quality

These reductions of patent fees, together with provincial or city subsidies, will lead to an even stronger surge in patent applications and grants, and therefore an even stronger pressure for SIPO to guarantee a sufficient standard of quality.

There probably must be a soft spot between motivating innovators to apply for a patent that without subsidy or fee reductions would never do so, and those patent filers that have claims that are neither novel nor inventive, but try to get a patent anyway. When the SIPO is overwhelmed with patent applications, subpar patents will slip through.

 

“The generosity of China’s incentives for patent-filing may make it worthwhile… to patent even worthless ideas… Patents are easy to file,… but gems are hard to find in a mountain of junk.”Patents, yes; ideas, maybe The Economist, 14 October 2010.

 

See earlier IP Dragon articles about the same topic:

 


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Hong Kong will probably get independent patent, China’s SIPO will teach HK how to examine

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After some welcome words of Professor Michael Hor (photo middle), the relatively new Dean of the Faculty of Law of HKU, Professor Paul Cheung (photo: right), Associate Vice President, Director of HKU Tech Transfer Office, talked briefly about the relationship of patents and innovation in China. He argued that the growth in the Chinese patents was indicative of the growth in innovation. (I would like to add to Professor Cheung’s words that the lion’s share of the patents or utility model patents and not invention patents, and that the quality of the patents might be very low since provincial and municipal governments provide subsidies for patents. A better yardstick might be the registration of patents by Chinese persons and companies abroad).

Then Ms Ada Leung (photo), the new Director of Hong Kong Intellectual Property Department (IPD) spoke about the 2011 public consultation on plans for the introduction of an Original Grant Patent (OGP) system in Hong Kong. At the moment the IPD can only re-register patents that were examined and granted by the Office for the Harmonisation of the Internal Market (OHIM), United Kingdom’s Intellectual Property Office (IPO) or China’s State Intellectual Property Office (SIPO). Via the public consultation the IPD is listening to the arguments of scholars, practitioners, interested parties and the public to find out the following: – whether Hong Kong IPD should be able to register OGPs, next to re-registering patents that have been granted by OHIM, IPO or SIPO; – and in case the answer is yes, whether Hong Kong should be able to do the examination themselves, which means acquire the knowledge and experience, or outsource it to a place that has the knowledge and experience. Ms Leung announced that in the first half of 2015 a new bill will be announced, which takes into account the comments of the public consultation. It seems that Hong Kong will choose for an OGP system next to the possibility of re-registration and is willing to build up the expertise in examination from scratch. Ms Leung told that the plan is that SIPO will help IPD with building up the expertise. This is a surprising choice given SIPO’s backlog and the alternatives of places that can help Hong Kong up to speed to set high standards of examination so that quality patents will be granted. See more of the Worldwide Patent Law Reform and Hong Kong’s Response Workshop here: http://www.ipdragon.org/2015/01/17/worldwide-patent-law-reform-and-hong-kongs-response-hku-workshop/.


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Imbalance in China’s IP Development Points to Relevance of Location, Location and Location

Where in China are my intellectual property rights most safe, or where in China can I enforce my IPRs best in case of an infringement or commercial dispute? To answer these questions one should ask first where is intellectual property most developed in China? You mean where in China do they most apply for patents registration, trademark registration or software copyright registrations? Or where these were most granted? Or where they enforce intellectual property infringements the most? But if they enforce intellectual property the most, does that mean that that region has the most infringements? Each question poses new questions. To be able to answer the first question “where is IP most developed in China” will remain complex.  One can argue that it has to do for the most part with the experience, education and fairness of the People’s courts; are they prone to corruption or local protectionism (localism), can they make impartial independent non-political decisions?

 

To reduce the complexity and come up with a workable answer IP Dragon has consistently written that Beijing, Shanghai and Shenzhen have the best People’s courts for IP litigation, based on research and experiments of people in the field. The National Intellectual Property Development and Research Center (国家知识产权发展研究中心) of the State Intellectual Property Office (SIPO) seems to confirm this. It published a report about the intellectual property development in different regions in China in the five years between 2007 and 2012.

 

The report ranked provinces and cities based on:

 

  • 4 primary indicators (creation, utilization, protection, environment); 10 secondary indicators and 40 tertiary indicators.
The results are not surprising:
Top 10 ranking
1. Guangdong province
2. Shanghai
3. Beijing
4. Zhejiang
5. Jiangsu
6. Shandong
7. Fujian
8. Hubei
9. Anhui
10. Sichuan
Numbers 1 to 7 (except for the capital Beijing) are all located at the east coast of China, and which are most economically developed. There is a clear parallel between the inequality between economic development in the east and west of China (Candelaria, Daly and Hale wrote more about the persistent regional inequality in China here (2013)  and the imbalance between the IP development in the east and west of China which can be expressed in IP development indices.
Wages are of course lowest in the regions that are less economically developed. Therefore, the choice for certain activities such as manufacturing at a location with low wages should always be weighed against the concomitant IP risks.

 

Read the 2012 National Intellectual Property Development Report (2012 年全国知识产权发展状况报告) here in Chinese.

 


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Bear and Dragon Try the Water for Fast Patent Examination Stream

After the U.S.A (USPTO)., Germany (DPMA), Korean (KIPO) and Japan (JPO), Russia might become the fifth country to have a patent prosecution highway with China.

 

State Intellectual Property Office (SIPO)’s commissioner Tian Lipu signed a Memorandum of Understanding with Boris Simonov, director general of the Intellectual Property Office of the Russian Federation (RFIPO) on a pilot of a patent examination highway between SIPO and RFIPO.


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