LI Dawei: Senior research fellow at the Chinese Academy of Macroeconomic Research.
Chen Dapeng: Research fellow at the Chinese Academy of Macroeconomic Research.
Intellectual property protection is of great significance to the high-quality development of China's economy. An economy that has shifted from a stage of high-speed growth to one of high-quality development.
The traditional development mode which relies on large-scale input of factors to achieve economic growth is no longer sustainable. Improvement of total factor productivity has become the major pillar of the high-quality development of China’s economy, as a growing contributor to overall economic growth.
As technological progress is a fundamental driving force for the improvement of total factor productivity, China attaches great importance to the building of innovation capacity. In the outline of the 14th Five-Year Plan, it is clearly stated that innovation should remain at the core of China's modernization to make China a strong power in science and technology at a faster pace.
Global historical experience shows that high-level intellectual property protection is a necessity for the improvement of innovation capacity. With uncertainties regarding the future evolution of technologies and innovations, disruptive technological innovations can be both costly and risky. Only when companies have the ability to secure the potential benefits of their innovations will they be incentivized to make such investments.
Intellectual property protection guarantees a fair return for companies with successful innovations, thus enhances their incentives to innovate, especially when a new round of technological revolution unfolds.
That is the reason why economies with higher-level intellectual property protection are better positioned to take advantage of new technological revolutions. Research shows that the improvement of intellectual property protection in the US with modifications to the Patent Law incentivized US companies and researchers to conduct original innovations, which contributed to the US’s leading position in electric power and internal combustion engine technologies. China has shifted from imitative innovation in the early stage of the Reform and Opening up to high-level integrate innovation and original innovation, with a rapidly increasing number of international patents applications. In 2020, Chinese applicants submitted 69,000 applications through the Patent Cooperation Treaty (PCT) mechanism, 3.8 times the level in 2012. China's contribution to global innovation keeps rising, especially in areas such as 5G and artificial intelligence. In 2020, Huawei, a leading global provider of information and communications technology (ICT) infrastructure and smart devices, applied for 5,464 PCT patents, ranking first in the world for four consecutive years.
According to data company IPLytics, as of November 2021, Huawei holds 16% of all valid patents in the ICT industry, higher than LG Electronics (11%) Samsung Electronics (11%), Qualcomm (10%) and Nokia (10%) Besides Huawei, BOE, a LCD panel manufacturer, and OPPO, a smartphone manufacturer, also ranked among the top ten in the world in terms of PCT patents applications. The 2020 comprehensive score of Artificial Intelligence Innovation Index, published by the Chinese Institute of Scientific and Technological Information and Peking University, reveals that China now ranks second in the world in terms of AI innovations, with the largest number of research papers published and patents applied as well as the second largest number of AI-related companies. Only by further strengthening intellectual property protection can China translate innovations into the upgrade of production processes and the improvement of management level, which in turn makes substantial contributions to the steady growth of total factor productivity and new impetus for high-quality economic development.
China has made great progress in protecting intellectual property rights. In recent years, with the long-term goal of becoming a top scientific and technological innovation power in the world, China has been constantly improving its intellectual property protection system and raising the overall level of protection.
During this process, intellectual property protection demands and claims from all kinds of innovation- oriented entities including transnational enterprises are fully understood and respected, which can be seen from the process of several important amendments to the Patents Law.
Government agencies conducted multiple rounds of communications with different types of companies before finalizing the text. For example, many companies claimed that most innovations are based on design improvement and upgrade in some parts of the product, rather than complete disruptive innovations. The idea was incorporated into the law through a partial design protection system following advanced economies such as the US and Japan to better protect this particular type of innovations.
Another example lies in the increased intensity of punitive damages with the upper limit of compensation raised to five times of the illicit gains, which effectively addresses the concerns of multinational enterprises on low patent infringement costs.
In terms of intellectual property applications, the average examination period for invention patents has been shortened to 20 months from 22 months at the beginning of the 13th Five-Year Plan period, which significantly improves the efficiency of intellectual property applications. For high- value patents, examinations can even be done in 14 months. More importantly, the Chinese government has been actively addressing the problem of low compensation for different types of infringements. The latest revision of the Patent Law explicitly introduced provisions on punitive compensations for malicious infringement. Shenzhen Special Economic Zone has taken the leading role in forming the judicial operating rules and practice modes of intellectual property punitive compensation system, with accelerated promotion all over China.
In terms of intellectual property law enforcement, four special courts for intellectual property rights protection have been set up in Beijing, Shanghai, Guangzhou and Hainan, which vigorously promotes the integration among civil, administrative and criminal trials and greatly improves the efficiency of intellectual property protection enforcement.
The Chinese government attaches great importance to the protection of intellectual property rights in international trade. During 2020, the Customs seized 61,900 batches or 56.2 million items of goods with suspicions of intellectual property infringement, an increase of more than 20% year- on-year, safeguarding the legitimate rights and interests of nearly 1,000 intellectual property rights holders in 45 countries and regions. According to the survey data of the State Intellectual Property Office of China, in 2020, the total social satisfaction score of China's intellectual property protection exceeded 80 points for the first time, reaching 80.05 points, an increase of 16.36 points compared with 2012. The Chinese government will continue to align domestic intellectual property protection rules with international high-level standards.
With in-depth development of cross-border trade and investment cooperation in various high-tech products and services, intellectual property protection rules have become a vital part of the global rules for international trade and investment. The Chinese government has always focused on strengthening international cooperation in intellectual property rights. For example, China formally signed the China-EU Geographical Indications Agreement; finalized the negotiations of intellectual property chapter in RCEP, which is ready for execution, and implemented intellectual-property-related provisions in the First Phase of the China-US Economic and Trade Agreement in an orderly manner. Moreover, the Chinese government has applied to join CPTPP and decided to further align with the high-level intellectual property protection rules in CPTPP.
China will keep improving domestic laws and regulations, enhancing law enforcement capabilities, as well as strengthening the protection of all kinds of intellectual property rights such as copyright, trademarks, geographical indications and experimental data. Taking full advantages of the vast domestic market potential, China will better match scientific and technological innovation with domestic demands, and further inject long-lasting impetus into innovation activities in both China and the world.
(Originally published on UKNCC website in January, 2022.)