Patents in China – a new chapter

In 2008, a lucrative patent subsidies system was introduced in China to boost research and technological development. Ever since, the amount of patents in China has increased explosively. However, in January 2021, the Chinese patent authorities, CNIPA, announced a plan to phase out the subsidies system in order to end it completely by 2025. A new chapter for patents in China lies ahead.

China has taken the lead over the last couple of years, compared to e.g. Europe and the United States, in developing a number of new and groundbreaking technologies – a leading position which should also be seen in view of a unique approach to the patent system taken by the Chinese, including the introduction of a number of rather profitable patent subsidies systems back in 2008.

In addition to the explosive increase in the number of Chinese patent applications over the last decade, the number of international applications (PCT-applications) originating from Chinese applicants have skyrocketed as well.

Accordingly, China surpassed the United States in 2019 to become the world’s number one filer of PCT-applications – a development which continued in 2020 , despite of the COVID19 pandemic, with an impressive 16% increase over 2019 in the number of PCT-applications filed (PCT-applications filed by Chinese applicants: 2019: 58.990, 2020: 68.720 (Source: WIPO)).

European Patent Attorney, Lasse Ringhofer

As mentioned, one of the major reasons behind China’s many patent applications and patents is to be found in China’s patent subsidies system, which typically more than covers the costs associated with the filing of patent applications and grant of patents in China, thereby giving Chinese applicants a strong financial incentive and a direct monetary reward to/by seeking to patent protect their inventions.

However, on 27 January 2021, the China National Intellectual Property Administration, CNIPA, announced that China plans to phase out and eventually cancel all patent subsidies systems before 2025.

The Chinese patent subsidies systems as we know them will be phased out and eventually abolished completely

As a first step to achieve the above goal, all patent subsidies relating to patent application filings by Chinese applicants and other stages of the patent prosecution process will be abolished as per 30 June 2021.

Similarly, the patent subsidies systems, which hitherto have been associated with patent agency service fees and patent renewal fees will be abolished.

In the period up until 2025, Chinese applicants will, however, still be entitled to receive the types of subsidies relating to the patent granting process.

Finally, in CNIPA’s notice of 27 January 2021 (“Notice of the CNIPA on Further Strictly Regulating Patent Application Behavior”), CNIPA announced that the total amount of patent subsidies at all levels and types received by the grantees shall not exceed 50% of the official fees paid for obtaining patent rights.

These changes will presumably apply to all 31 Chinese provinces having patent subsidy measures.

Transformation from quantity to quality

The intention of introducing the first Chinese patent subsidies systems in 2008, was primarily to encourage small- and medium sized companies to focus on research and development. Secondly, since 2008, the Chinese government has provided financial incentives to Chinese nationals and Chinese companies by subsidizing e.g. various official fees and attorney fees in order to increase the awareness of intellectual property rights, like patents, in China and to encourage Chinese innovators to learn how to protect their inventions.

The fact that China’s patent subsidies measures typically exceed the costs associated with the filing of patent applications and grant of patents in China, inevitably (and not entirely surprisingly) led to abuse resulting in a massive surge in low-quality patent filings (so-called “junk patents” and “irregular filings”), including filings based on fraudulent technology and data, filed for the sole purpose of obtaining as many subsidies as possible.

In 2019, aiming at improving the quality of patent applications (and patents) originating from Chinese applicants and providing an inventive to file high-quality PCT-applications, both the powerful Shanghai and Beijing governments massively raised the per applicant maximum annual subsidy for international patent filings and for entering into national phase with said PCT-applications – the latter subsidies, however, were only to be granted if the nationalized PCT-applications matured into national patents.

Now, CNIPA’s recent announcement of 27 January 2021, aiming at a gradual phasing out and an eventually complete abolishment of all patent subsidies measures before 2025, would appear to be somewhat contradictory to the above 2019-strategy, but should nevertheless be seen as a further  initiative to improve the quality of patent applications (and patents) originating from Chinese applicants.

Will China still be the world’s number one PCT-filer?

In this context and assuming that the Chinese actually accomplish a complete abolishment of all patent subsidies measure before 2025, one would obviously expect that (at least) low-quality patent filings submitted for the sole purpose of obtaining subsidies will be eliminated.

The big question, however, is whether and to what extent Chinese companies – in a patent system void of any subsidies – can and will be ready to establish self-financed quality patent portfolios in order to protect their innovation. It also remains to be seen whether Chinese applicants will be forced into thinking more carefully about their IP strategy, which in turn could result in increased quality – and a decreased number – of future patent applications and patents.

We will have the first indication in that regard in a years’ time once WIPO’s “PCT yearly review 2022”, showing the key filing numbers for 2021, is published. Will China still be the world’s number one PCT-filer?

Curious about patents in China?

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