Pursuing intellectual property rights in China

Australian companies, particularly those which have products manufactured in China, often ask the question: ‘Is there really any point in trying to protect our IP in China when our product is likely to be copied anyway?’

This question is often posed because China has been accused of being one of the biggest counterfeit and piracy markets in the world, and that enforcement of IP rights in China is difficult and expensive. Delegations from Chinese government authorities have been reassuring the Australian legal profession for many years that their IP system is improving. But is it really?

In 2010 the Chinese government launched an antipiracy campaign – a nationwide crackdown on fake goods and copyright piracy. It was initially set to last for six months but was extended. Chinese law firms observed that it did actually make a difference. So it seems the Authorities are indeed more determined than in the past to achieve results.

Promoting innovation by Chinese companies is also one of the government’s main policy goals. The government recognises that being the world’s low cost workshop for manufacturing high-tech products designed elsewhere has its limits. The policies also encourage ‘indigenous innovation’ by providing incentives for Chinese companies to file patent applications.

The National Patent Development Strategy (2011-2020) was published in November 2010 and outlines specific targets for 2015 and 2020. For example, by 2020, the number of patents for inventions, and the number of patent applications in foreign countries will quadruple, and core patents will be acquired. The government clearly regards patents as a vital business asset which will play a key role in the country’s development.

The policies seem to be working. China is now the world’s top ranking patent country – in 2011 there were more inventions patent applications filed in China than in Japan or the US. According to the State Intellectual Property Office of China (SIPO) there were 526,000 invention patent applications filed in China, up 34.5% from 2010. The US was second with 504,000 applications filed for their fiscal year to Sept 2011.

And most of the applications filed in China were by Chinese entities. Indeed, applications by Chinese applicants have been growing much faster than those by foreign applicants, and have outnumbered foreign applicants since 2003.

Chinese applicants are also filing patents overseas. Statistics from the World Intellectual Property Organisation (WIPO) show that China was the fourth highest country of origin for international patent applications in 2011 (behind only the US, Japan and Germany) having grown 33% that year. Chinese telecommunications companies now occupy the first and third applicant positions (ZTE Corporation and Huawei Technologies, respectively).

The 12th Five Year Plan (2011-2015), approved in March 2011, also emphasises innovation. Indeed, the word appears in the document 39 times. The Plan promotes indigenous research and innovation in science and technology to support the transformation of China into an innovation country.

The Chinese government’s policies to encourage innovation and the filing of patent applications are working, both domestically and internationally. This means that the enforcement of IP rights within China will be increasingly important to Chinese companies and the local economy. Willing or not, the legal system is being forced to catch up and change. And that is good for all IP rights owners in China, whether Chinese or foreign, including Australian.

So, what’s the answer to the question? For Australian based companies that do business in China, the answer is ‘Yes’. There is a point in registering your IP in China. IP is a priority for the Chinese government, and enforcement of IP rights is improving, both for locals and for foreigners.