The Chinese government openly pursues the strategic aim of building up self-innovation capabilities and to become an innovative country by 2020.
The "Outline of the National Intellectual Property Strategy" issued by the State Council in June 2008 clearly states the importance of IPR from the Chinese perspective. "In the world today, with the development of the knowledge-based economy and economic globalization, intellectual property is increasingly becoming a strategic resource in national development and a core element in international competitiveness, an important force in building an innovative country and the key to hold the initiative in development."
Both Chinese and foreign entity applications in China have grown substantially during the last years, with domestic applications growing at a more rapid pace and outnumbered foreign applications by 2003. However, there was a clear difference in the quality of the patents, as the Chinese applicants often resort to the less strictly examined utility model or design patents for their products. The use of utility model patents, which are less rigorous, more a fordable forms of patents that provide 10 year of protection (versus 20 years for invention patents) in China has grown at a rate of 18 percent per annum since 2001. Utility models are also a potentially valuable strategy for foreign lings in China.
The Chinese government will continue to encourage as many patent applications as possible among Chinese enterprises. Furthermore, the Chinese government is well aware that future competitiveness is not only a question of innovation but also of international standards. According to the new IP strategy, the State Council seeks to "formulate and improve policies related to standards," and "regulate the process of turning a patent into a standard. Enterprises and industry organizations should be supported in actively participating in the formulation of international standards."
The patent offices of the US, Japan, Europe (EPO), South Korea and China account for 75% of all patents filed and 74% of patents granted worldwide.
Especially in the areas of telecommunications, semiconductors, pharmaceuticals and computers, Western countries hold between 70 to 90 percent of all patents. An analysis of patent volumes over the last five years from these five major offices shows that inventions from China have been growing at a faster rate than any other region.
Comparatively, more than 90 percent of all Chinese companies have no patent rights at all; about 60 percent do not even have a trademark. In realizing that the high costs of licenses are impeding competitiveness, the Chinese government is pursuing a policy of technology import. This policy often leads to a certain pressure on foreign companies to allow technology transfers, and thus transfers of valuable knowledge.
The most common ways these involuntary technology transfers take place are through obligatory cooperations in the form of joint ventures or with design institutes, patent registration procedures for pharmaceutical products, the definition of local content, or procedures and obligations in public tenders. In this competitive environment it is more important than ever for foreign companies to actively manage their intellectual assets and have their intellectual property rights adequately protected, before they enter the Chinese market.
China's effort to encourage innovation by strengthening its IP protection is reflected in its recent release of the "Draft Revision of the Patent Law of the People's Republic of China (Draft for Comments)" in August 2012. The key revisions are as follows: Authority to investigate and collect evidence In order to resolve the difficulties in collecting evidence in patent infringement cases, the Draft grants the People's Court the authority to investigate and collect evidence. Moreover, the Draft imposes liability on any party being investigated who obstructs the evidence collection procedure.
Discretion to determine the amount of damages Under the current Patent Law, only the People's Court has the right to determine the amount of damages for patent infringement. As such, while the Department of Patent Administration (DPA) has the right to handle and mediate patent infringement disputes, it does not have the authority to enforce the damage amount, and the infringed party will have to file a separate action regarding the damages. In order to safeguard the legitimate rights of patent holders, the Draft grants the DPA the discretion to determine the amount of damages in patent infringement cases.
Introduction of punitive damages The Draft acknowledges that compensating losses actually incurred by the infringed is not suficient to deter infringers. As such, the Draft introduces punitive compensation for intentional infringement, where the highest amount of compensation could triple the figure determined according to the relevant provisions under the current Patent Law.
Dispute handling in a timely manner The current Patent Law does not specify when the decision by the Patent Reexamination Board declaring a patent right invalid or upholding the patent right comes into effect. As a result, many patent disputes are prolonged. This occurs where, after a decision upholding a patent right is made, the infringer subsequently les an administrative action. During the administrative litigation period, which can last from six months to two years, the People's Court or the DPA will frequently suspend the case, and many patent infringement cases remain unresolved as a result. To improve the effciency of dispute handling, the Draft stipulates that, after the decision declaring the patent right invalid or upholding the patent right is made, the patent administrative department under the State Council should register and announce the decision in a timely manner, and the decision should come into effect on the date of the announcement.
