Justin Simpson of RWS explains recent filing trends in China and outlines why if the rest of the world can’t beat China, it should join it.
Fluctuations in market trends and domestic policies can cause dramatic shifts in the intellectual property landscape year after year, making it difficult to track considerations beyond one’s own borders. Analysing the context of relevant data and identifying key marketplace indicators, such as filing trends, can help guide decisions of where to focus attention and resources. Markets indicating decline or even stability should not be ignored, but markets indicating consistent growth deserve a second look with respect to how they factor into long-term IP strategy.
Consider the example of China, which has posted stable growth for the past 10 years. In 2017, China surpassed Japan as the number two patent cooperation treaty (PCT) filer according to recent data published by the World IP Organization (WIPO). With 48,882 PCT applications filed, China now trails only the US, which filed 56,624 applications in 2017.
In the last decade, China has never posted PCT application totals less than 13 percent over the prior year, and its 2017 numbers reflect a nearly 700 percent increase over its 2008 filings. The greatest changes in percentage filed over prior year during that 10-year stretch occurred in 2010 and 2016, in which China posted 56 percentage—12,301 (2010) over 7,900 (2009)—and 44 percent increases—43,091(2016) over 29,838 (2015).
In part, China has modelled its strategy after another one of the most successful patent-filing nations in the world—Japan. When two Japanese companies have a patent fight they do not get into the minutiae of the breadth of the claims of patents. Instead, they say, for example, you have 845 granted patents, we have 950 granted patents, therefore you need to pay us royalties on the difference. In Japan, with patent portfolios, size does matter and the company with the biggest portfolio wins. China’s aim to become the world’s largest patent filer is based not just upon the inherent status of such a claim, but upon the associated commercial bargaining power it brings.
Looking at the data, it is clear that 2010 was a turning point for China in terms of filing. Both 2010 and 2016 were outliers for growth in filings relative to the other years since 2008. You may remember that the third revision of China’s Patent Law, also known as China’s National Intellectual Property Strategy, was released in June 2008, adopted in December 2008, and took effect in October 2009. The third revision saw the change from domestic (relative) disclosure to international (absolute) disclosure, the cutting back of avenues for “patent hijacking” and the encouragement of Chinese residents to file abroad. As reflected in the sudden growth of PCT filings during the 2008-2010 timeframe, the newly placed importance on international awareness was not lost on China’s IP holders. Growth in recent years has been unwisely written off by some outsiders as artificial; this is a dangerous assumption to rely upon given the observed data trends.
The relevancy of PCT application filings trends should not be understated. Simply looking at the raw output of a country’s IP authority in terms of domestic IP filings paints an incomplete picture of that country’s participation on the international stage and strong IP is rarely confined to the country from which it originated. While an application on its own is not necessarily an indicator of quality, it does demonstrate a high level of confidence in one’s IP, especially when considering cost and time commitments. China is set to become the number one filer of PCT applications in the next three years. For those outside of China, it is increasingly important that you secure your rights there, as the flow of interdependency between securing priority and developing business continues to grow in China’s direction. From a high-level overview, one should consider three key takeaways: understand the process, amend when you can and the importance of translation quality.
Understanding the system
While parts of China’s reformed approach to patent law are borrowed from Japan, others, such as the application process, more closely mirror that of the European model. To start an application in China you can either file directly via a Paris Convention filing within your 12-month priority period or a PCT application entering China at the 30-month date (with a 2-month grace period for translations). Within three years of the priority date, you must request examination, with options for voluntary amendments and then office actions are issued until grant or rejection.
You have opportunities at two points in the above process to amend your patent and you should carefully consider using both of them given the fair basis rules, which closely align with European patent law and differ quite greatly from the US process. The first opportunity comes when you request examination and the second lasts three months from notice that substantive examination has begun. It is imperative that you use these opportunities to your advantage and carefully review whether you need to amend or not; doing so after the fact will be extremely difficult.
You will also want to consider translations and the problems they can present. Before you even start the filing process, you will want to ensure that any relevant foreign-language prior art is accurately translated, including translations for foreign competitor patent claims. While machine translations can serve as a functional starting point, a poor translation can severely hinder the timeliness of your filing. Differences between languages are often technically complex and errors quickly compound, given most patents are already technically complex in subject matter. For example China does not use articles such as ‘a’ or ‘the’, and no distinction is made between singular and plural nouns. Word for word translations between English and Chinese can result in a translation that does not read properly, and in the other direction, too much subjectivity can stray from the intent of the source document. A literal approach of conveying meaning without broadening the scope of patent, striking a balance between the obvious challenges, is preferred. Improper translations are one of the most common barriers to timely securing IP rights outside of your native country.
With the rapid pace at which Chinese patent applications are being filed, how do the rest of us compete?
One approach is filing a very narrow sets of claims. This results not only in faster prosecution and grant, but also allows three or four applications to be filed for an invention that could quite comfortably sit in one broad set of claims. This also builds out your patent portfolio in size, impressing both investors and competitors alike.
A helpful question to ask might be: would the CEO of your competitor be more impressed that you held 50 granted patents or five very broad patents?
While an IP practitioner who toiled for many hours crafting a perfect claims set might find it crude, the commercial reality is that 10 narrow patents are valued more highly than two very broad patents.
Or perhaps you should consider a strategy used by Kia Silverbrook, one of the most prolific inventors of all time. According to former in-house counsel, one such strategy utilised by Silverbrook was to file 300-page priority documents covering an array of inventions, and then comb through that for specific inventions, filing as many divisional applications as possible. Once again, the commercial realities of the marketplace simply do not wait for creativity and inspiration. Find a strategy that works and use it.
For the rest of the world watching China’s IP acceleration this is the takeaway: we cannot beat them, so we might as well join them. Even more, you need to understand both what they are doing and how to operate within their system. The numbers do not lie—if you have not been paying attention to what China is doing, you should be, because it is working for them, and it can work for you too. IPPro
“For the rest of the world watching China’s IP acceleration this is the takeaway: we cannot beat them, so we might as well join them.” – Justin Simpson, RWS
To read more, click here for IPPro Patents issue #56.