The Chinese Patent Office (SIPO) was the first to break a remarkable record of receiving more than a million applications in a single calendar year according to WIPO’s 2016 annual report. Exactly 1,101,864 Chinese applications were received throughout 2015, revealing an 18.7% growth rate when compared to the 928,177 received in 2014. Put into context this was more than ten times the filing growth rates in the US (1.8%) and in Germany (1.4%) or nearly fourfold the EPO’s 4.8% growth. Moreover, China accounted for 84% of the world’s growth in patent filings.
Over the past decade, patenting activity has been shifting gradually towards Asia. Asia’s share of patent applications has increased from 50.2% in 2005 to 61.9% in 2015. There is no doubt that China is in the driving seat with 38.1% of the world’s filings. In addition to its surging and competitive economy, the Chinese government has introduced attractive incentives for local patent filings and significant tax deductions for Chinese companies. This was reflected in the very fact that the vast majority (18%) of the 18.7% growth rate came from Chinese resident filings.
China’s new 5-year economic plan announced in 2016 set concrete goals to overturn its recent economic slowdown. Among these goals is to increase R&D expenditure from 2.05% of GDP in 2014 to 2.5% of GDP in 2020. We will have to wait to see how this translates into patent growth both in China and abroad. The 2015 figures already indicate that the number of patent applications filed at the UK Intellectual Property Office and the EPO originating from Chinese applicants is booming with growth rates of 93.2% and 22.6% respectively.
China continued to dominate in utility model (UM) filings, taking more than 90% of the world share. However, this number should be treated with caution as many jurisdictions do not offer UMs. Chinese UM filings experienced a 29.8% growth to 1,127,577 in 2015, almost eighty times Germany’s UM filings (14,274). The extreme popularity of UMs amongst domestic applicants can be contrasted with foreign businesses being suspicious of the real value and enforceability of a UM registration in China. This is reflected in more UMs filed than patent applications filed in China, whereas Germany and Japan showed ratios of 0.21 and 0.02 UM filings to patent filings in 2015.
Despite this record number of patent filings in China, the US and Japan still remained the leaders in the number of patents in force in 2015. It remains uncertain whether the increase in patenting activity will have an impact on the quality of individual applications, but it certainly raises some obstacles for foreign businesses attempting to penetrate the Chinese market. Not only will foreign companies have to be concerned about Chinese companies potentially infringing their intellectual property rights, but given the surge in patent and utility model filings they will need to be more wary of infringing IP owned by Chinese entities. More importantly, a pool of newly published prior art publications will likely increase the demand for freedom-to-operate searches in the Chinese market and will also serve as a useful resource for the SIPO and third parties during examination and invalidation procedures. China has already accounted for more active trade marks than any other country, for more than a third of the world’s design registrations in force, for more than 90% of utility models in force globally. With China’s share of patent activity growing rapidly, it remains to be seen whether all of this will encourage foreign businesses to focus more on China when it comes to their global patenting strategies.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.