A Look At The Huge Upswing In China Patent Filings

By Michael Sneddon

While China’s reputation for producing imitations of everything from cars to computers continues to linger, it doesn’t appear to be a deterrent for foreign corporations as they increasingly seek protection for their innovations. In fact, according to the 2014 edition of the World Intellectual Property Indicators, for the third year, China’s State Intellectual Property Office (SIPO) led worldwide patent application filings by a large margin, with 825,136 filed in 2013. This margin is up 26.4 percent over 2012. Comparatively, the growth of the next three busiest patent offices lag far behind, with the United States only increasing by 5 percent with 571,612 filings, Japan down 4 percent with 328,436 and Korea up by 8 percent at 204,589.

Why the Growth?

Since the late 1990s, China’s dramatic economic growth has made apparent its need to integrate into the global IP system. The Chinese government has provided financial incentives to support patent filings by Chinese entities and the effort is clearly working.

Additionally, foreign corporations are increasingly seeking protection in China to hedge the risk of future infringement by Chinese companies. As China is set to become the largest marketplace in the world, this only makes sense. Patent rights can last for 20 years. While market trends will change dramatically over the next two decades, manufacturers don’t want to abandon China as a potential market for their core technologies.

Consider these latest trends reported by WIPO, along with some thoughts on how they are playing out in the translation industry:

Domestic filings in China

A Chinese language patent application at the PCT

While the Chinese government’s incentives to support patent filings have spurred growth, we still see many Chinese companies that do not fully comprehend the value of patents or IP in general. They see patents as trophies rather than tools to help secure market share and a competitive edge. We see that this incomplete understanding affects their current perceptions of cost, value and quality when translating patents for overseas filings. The translation cost is actually a fairly minor part of the international filing process and even more minor when considering the potential cost over the patent’s 20-year life span. It’s irrelevant, however, if companies don’t understand the value of their domestic patent portfolio, let alone their overseas filings.

While many, if not most, Chinese companies do not have a deep understanding of the potential value of IP, this knowledge is becoming more prevalent. This accounts for the increase in domestic applications. However, while the numbers of applications are increasing, a direct link to an equivalent increase in value has not been seen.

We predict these perceptions will mature as both domestic and global patents do – or do not – withstand litigation through their lifecycle. China entering the global IP system is important progress for IP rights being claimed and protected on a truly global basis.

Having someone on the ground that knows the language, culture and filing process is invaluable. This “best practice” reduces the risk of invalidation of the patent application as well as future possibility of litigation.

Global Filings in China

In 2013 (as in 2011 and 2012), SIPO accounted for the largest number of applications received by any single IP office. Of the 825,136 patents filed in 2013, nearly 705,000 of these were domestic/resident filings. That means the other 120,000+ filings came from foreign entities. As global enterprises continue to expand their businesses to emerging consumer-rich markets, such as China, or benefit from outsourcing manufacturing and other processes to China’s economy, they are compelled to file patents in China.

The complexities of patent filings are generally compounded by the Chinese language – one that uses ideographs – and therefore, is more challenging than other Latin-based languages. In fact, translations within Asian languages themselves are considered among the most difficult, as a recent study by the Steinbeis Transfer Institute in Germany confirmed. This means a greater need for high-quality patent translators with native linguistic expertise in an Asian language along with other required skills (i.e. technology expertise specific to the innovation for which the company seeks protection and the ability to navigate patents laws, legal reforms and business cultures).

Foreign Filings from China Residents

According to WIPO, Chinese applicants filed comparatively few applications abroad – only around 30,000. From our discussions with Chinese companies, many still decline the opportunity for foreign patent filings because the cost is prohibitive and they have not yet entered international markets. In 2012, however, the Chinese government added subsidies for foreign filings in addition to those already offered for domestic filings, although the filing costs for the patentees filing overseas can only be subsidized after the patent is granted.

Chinese companies filing globally view translation as a commodity and choose IP vendors and translations of patents for foreign filings on the basis of cost rather than value. One wonders if shortcuts in translation will lead to extra office actions. Or worse, reduced or incomplete patent coverage, which would reduce the value of the foreign portfolio and is a problem that often is not manifest until a future conflict arises. Foreign companies (such as MultiLing) are seeing success by instead selling valuable IP services – including translation – that help clients navigate patent prosecution in the United States and Europe. This strategy is applicable to any company trying to sell high-value services in an emerging market.

If these trends continue as we expect, there will be even greater opportunities for those who have the patience to build relationships and grow along with the expanding market.

I’d love to hear about your experience marketing your products or services in China. Have you successfully filed for patent protection – and if so, what did you find were the biggest challenges?

Michael Sneddon is the president & CEO of MultiLing (www.multiling.com), an innovative leader in IP translations and related services for foreign patent filings by Global 500 legal teams. Sneddon, who started the company in 1988, is an attorney and member of the American Intellectual Property and Law Association (AIPLA).