China patent improvements increasing foreign filers’ confidence

Corporate confidence is growing in the Chinese patent system, particularly since the introduction of new offerings such as two dedicated IP courts and the hiring of more trained IP examiners into its patent office.

According to in-house sources, there are still challenges when it comes to registering, validating and litigating patents, but considerable improvements have been made that have smoothed the path to easier patent portfolio management in the region.

“The patenting system in China has become collectively robust,” says the patent lead at a Swiss confectionery company. “There was a time when most patent applications would have been challenged or questioned, but today most of our patents are granted.”

Many companies are still finding it difficult to determine whether they have freedom to operate in China, but overall its IP developments are helping it shed its anti-IP and protectionist reputation and beginning to cement it as a region for top-tier patent protection.

Non-Chinese businesses do continue to experience problems when it comes to registering patents in the country’s National IP Administration (CNIPA), according to in-house sources. A big complaint is that China’s fast-growing economy has set off to a patent boom that its IP office is struggling to keep up with.

Tom Duke, the UK Intellectual Property Office’s attaché to China and Hong Kong, explains that this growth has occurred partly because of increased foreign investment in the region but, more importantly, because domestic Chinese businesses are embracing IP.

He says that global patent applications from domestic Chinese businesses now significantly outnumber those from non-Chinese businesses in most major jurisdictions, including in China itself.

“These Chinese applications used to be dominated by a few companies in the IT sector and now you are seeing the long tail of Chinese businesses applying for patents overseas and monetising their portfolios. It is a much more diverse conversation than five years ago.”

The head of IP at a Netherlands-based factory tech manufacturer says that the downside for filers is that the CNIPA has found it difficult to recruit and train examiners quickly enough to meet the new demand.

“Examiners do not always understand our field particularly well and that can be a challenge for us,” he says. “We have sometimes had problems with examinations and subsequent appeals to get a patent granted because of the way that he or she reviews the patents using hindsight to decide that something is obvious.”

But sources say that while the Chinese patent-boom comes with its challenges, it is also indicative of growing confidence in the Chinese patent granting and validation system that has come about as China aims to buttress the quality of its patents.

“Over the past year, the way patents are considered in China has evolved and it has become much easier to get a patent granted or validated,” says the patent lead at a Swiss confectionary manufacturer.

The IPR manager for a tools and abrasives manufacturer and the head of IP transactions at a global telecoms firm agree, and adds that they now find little difficulty in getting a patent granted at the CNIPA.

Another traditionally uncertain part of having patents in China was the capability of the country’s courts – and non-Chinese businesses still exercise caution in the region when it comes to litigation.

“We follow up on infringements or potential infringements in China but have so far chosen not to take actions very far,” the tools and abrasives IPR manager tells Managing IP. “We are watching what happens and may progress actions in the future, but at the moment our sales are sufficient and it is too difficult to tell what the outcome of litigation might be.”

The head of IP transactions at a global telecoms firm adds that litigation is still a challenge because domestic companies are often still protected.

But China has taken enormous strides in this area as well, according to in house sources. The telecoms head of IP transactions says the recent introduction of IP courts in Beijing and Shanghai is a good sign that country is improving its IP litigation resource.

“Those courts have a very good knowledge of intellectual property. You might still find it tricky to litigate in the west of China and there is still a certain amount of protectionism over local companies there, but the IP system is going a good way.”

The senior IP counsel of a Netherlands-based automotive company says that China is showing a lot of ambition in its IP offering, particularly in the CNIPA’s efforts to attend international roadshows and demonstrate its new court resources.

“It may take them a few years to get to the same level as some more established IP courts, but they will get there,” he says. He adds, however, that his company is still planning to approach litigation in China was caution because its IP courts are so new and relatively untried and untested.

The head of IP at a Netherlands-based factory tech manufacturer says that his one experience of litigation in China was very positive. He explains that his firm sued a Japanese company for infringing its patent and the company filed invalidation proceedings. The Japanese firm won at first instance but lost at appeal.

“I was extremely impressed by the decision because they found in our favour for the right reasons and their arguments were legally sound – it was not just a matter of finding for us because of a dislike for Japanese companies.

“The reasoning in the judgment looked as though it could have come from the European Patent Office.”

Ensuring freedom to operate (FTO) in China is where non-Chinese businesses still tend to get stuck. The telecoms head of IP transactions says the recent wave of patent applications, particularly from local companies filing utility models after the company has established the product in China, makes ensuring FTO challenging.

“Those applications make it difficult to prove that the company is the owner of a technology before the priority date of the utility model or to invalidate that utility model,” he says.

He adds that his company has responded by implementing sophisticated processes for monitoring newly granted patents and product clearing.

But as the tools and abrasives IPR manager points out, a company that is perhaps not well-established in China and does not know the complexities of the system can still have trouble ensuring FTO. He says that his biggest problems are that the patent offices in China are not as accessible and the language barrier prevents an effective analysis of the patent landscape.

The Swiss confectionery patent lead agrees, and adds that developing a sound knowledge of the Chinese patent system is top of his firm’s agenda to ensure it has FTO.

“Local patents are in Mandarin or Cantonese and that hinders direct access to the significance of the patent. That creates a foggy landscape where we do not know what is valid and what is not.”

But even here, the country is making efforts to improve the openness and transparency of its patent offices. UKIPO China attaché Duke says he has been working with Chinese authorities and UK-based businesses to help them better understand the system and ensure FTO.

While China still has some way to go in developing its patent system, its progress is impressive. The introduction of dedicated IP courts and better trained IP examiners into the CNIPA is translating into smoother portfolio management for non-Chinese businesses in the region and slowly eroding its reputation for protectionism.

A big job for Chinese IP authorities now is to better educate businesses on the various complexities of its system – which it has already started to do.