The rise of IP in China — Exporter Magazine

Opinions are frequently offered about the difficulty of obtaining IP rights in China; how they are likely to be ignored and are next to impossible to enforce.

I shouldn’t be surprised, therefore, when clients question whether it is worth getting IP rights in China, but I am.

Why wouldn’t anyone with intellectual property rights to exploit, want to do so in China? China offers so much opportunity now and greater opportunities in the future. Consider these facts:

• China is the second largest economic power in the world and it will shortly eclipse the US.
• Just the growth in China’s economy in the past 12 months is equivalent to that of Italy’s entire economy.
• The average wages in China have more than doubled since 2007.
• China’s household income is forecast to grow by 50 percent by 2015.
• Dairy demand will double every five years.
• There are 18 million babies born in China every year.
• New Zealand has a free trade agreement with China.

Given that patent rights last 20 years and trade mark rights are perpetual, it doesn’t seem sensible to ignore that kind of potential now – especially as the IP system in China is improving rapidly.

While China has had a reputation for producing cheap copies of Western products with apparent impunity, that reputation is becoming outdated. China’s economy has shifted focus, moving away from traditional agriculture and manufacturing, towards an innovation-oriented economy.

The Chinese Government’s science and technology plan has set a goal of becoming an innovation-oriented society by 2020. This is an all encompassing plan. China intends to increase R&D expenditure to reach 2.5 percent of GDP by 2020.

Greater and easier tax deductions for R&D expenses are becoming available and there will be increased Government-backed lending and discounted interest rates for R&D investments.

The Chinese Government understands that core technology cannot be bought, and only through strong innovation and by obtaining its own IP rights can China promote the country’s competitiveness and win respect in the international community.

China’s science and technology policy encourages local innovation in order to reduce reliance on foreign technologies, and encourages patenting of that local innovation to ensure royalty payments come into China (for local inventors) rather than leave the country.

Subsidies and reimbursements of fees for patents are provided to stimulate patent applications and ensure that innovators in China receive true financial returns for good new technology. In some regions, inventors receive funding for 100 percent of their patent costs.

As a consequence, China is experiencing rapid growth in the rate at which local businesses patent new technologies, far outstripping the rest of the world. Chinese companies are among the highest patent filers in the world. Very soon China will be the source of more patented technologies than any other country.

Greater respect for IP

As China moves from an economy based on cheap manufacture, copying or importing foreign technologies, to a country founded on innovation and licensing out technologies, it is inevitably becoming more respectful of intellectual property rights. This is necessary if China expects the intellectual property rights it is investing in, to be respected and of value.

This has been seen in the support the Chinese Government is giving to cracking down on the manufacture of counterfeit product and the abuse of foreign intellectual property rights. Many areas of China now provide for specialist Courts which deal only with IP rights.

While it must be accepted that China is a very large country and respect for, and the enforceability of, intellectual property rights will vary from region to region, my experience is that it is becoming easier and easier to prevent IP infringement, with the main difficulty now being the sheer size of the market.

The reality is that with a population of over a billion people, it is difficult to stamp out the abuse of all rights, but then that holds true for many cities in the world, including New York, where itinerant street vendors will still try to sell you counterfeit watches and sunglasses on busy streets.

Intellectual property rights are not difficult to obtain in China. There is no unwillingness on the part of the Chinese Intellectual Property Office to grant those rights. There is, however, a lack of experience on the part of examiners and the Chinese attorneys you must use as agents, many of whom don’t yet appreciate such things as the complexities of patent claim drafting or who for cultural reasons are reluctant to challenge official assessments of the validity of an application. It is important to know your IP agents well in China to ensure you are obtaining strong enforceable rights.

New Zealand businesses with products or technology which could be manufactured and/or sold in China, will miss huge opportunities during the life of their intellectual property rights if they do not own and control those rights in China. New Zealand companies will find it difficult to licence the manufacture of a product without some IP rights, and even more difficult to do so without getting ripped off.

Businesses who question the value of obtaining IP rights based on old prejudices, need to think again.

The importance of IP is rapidly being appreciated in China and this is being matched by a Chinese IP community which is just as quickly growing in size and competence. This growth is enabling local and foreign companies doing business in China to more easily identify, capture, protect and exploit their new ideas and innovative products and services.

Expert IP advice from a specialist IP firm with proven experience in China is essential to help businesses develop their IP strategies to gain maximum advantage from what will be New Zealand’s most important market in the future.

Ceri Wells is a partner at James & Wells Intellectual Property and an outspoken champion of innovative businesses. Ceri has more than 25 years’ specialist IP experience in trade mark and copyright matters including patent work and litigation. He represents New Zealand on the Trade Marks Committee of the Asian Patent Attorney Association.

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Magazine Issue 

Exporter Magazine Mar/April 2013 issue 27