Home > Topics > Putting Intellectual Property to Work: Experiences from Around the World > IP Rights in China: Spurring Invention and Driving Innovation in Health and Agriculture > Editor's Summary, Implications and Best Practices

As China continues its rapid industrialization and economic development, it is increasingly investing in R&D and implementing policies to foster commercial technological innovation inside China, thereby creating a role for itself within the global knowledge economy. Central to this is the creation and implementation of IP rights. Because of China’s size and the economic significance of its domestic market, IP rights in China have unique significance and are not necessarily a model for other developing countries. Yet, at the same time, China has confronted several issues and patterns commonly encountered by developing countries when putting IP rights into practice. While these issues and patterns may be less obvious in other developing countries, they stand out starkly in China precisely because of the size and significance of its economy.

First and foremost has been the rapid rise in patent applications. This can in part be explained by the sheer size of the domestic market in China and the proportion of global manufacturing and export that is conducted in China. As inventors around the world consider in which countries they want to apply for IP protection, they now often rank China as one of their first priorities, alongside the U.S., Europe, Japan, Australia, and/or Canada. The new political commitment to the IP rights regime in China—even if not yet thoroughly tested—has become attractive to inventors. However, in any system where a new opportunity is introduced there is likely to be an initial surge of activity. Many inventors may be filing for inventions that have been held in secrecy for some years. There also may be an element of “exuberance” as an IP “gold rush” sweeps into this newly-opened economic frontier. In time, the system might stabilize as patent examiners develop and implement policies with more consistency, and as inventors come to understand which sorts of inventions are worth filing on and which are not.

Second is the proportion of Chinese domestic inventors filing for and receiving Chinese patents. At roughly 40 percent, the proportion of domestic participation is closer to those of advanced industrial countries like the US, where domestic inventors account for around 50 percent, and less like typical developing countries, where domestic inventors account for 10 percent or less. The strength of domestic invention in China is fueled in part by the government’s sustained commitment to funding higher education and public research and in part by the robust growing market economy where competition is driving even domestic firms to innovate. Importantly, the new commitment to IP rights is attracting foreign firms to invest in R&D inside China, which also contributes to domestic invention. In the final analysis, the government’s political commitment to strengthening IP rights necessarily finds its root in a domestic constituency of inventors/creators: those who have something to protect will want a means by which to protect it.

The third important pattern is that—despite the sheer numbers of domestic filings—in some classes of technology there are important qualitative differences between domestic and foreign inventions. For example, in pharmaceuticals Chinese inventors are almost exclusively filing inventions based upon traditional Chinese medicine and not on non-traditional or “creative” (that is, research-derived) pharmaceutical compounds. By contrast, foreign inventors account for almost all of the research-derived pharmaceutical compounds being patented in China. This pattern will change only as Chinese pharmaceutical companies become actively engaged and globally competitive in drug discovery and development.

The fourth phenomenon is related to the third: China appears to have answered for itself the question of protecting and exploiting the commercial potential of its own traditional knowledge by aggressively utilizing its new IP rights regime. The surge of domestic patent filings based on Chinese traditional medicines is accomplishing two things: it is creating a large registry of the actual and potential uses of Chinese traditional knowledge; and it is creating incentives for entrepreneurs to develop those with significant commercial potential into active pharmaceuticals for the Chinese and potentially the global market.

The fifth and final issue, after implementing an IP rights system and opening it up to both domestic and foreign filers, is making the difficult transition toward innovative competitiveness, where a country becomes a significant inventor and exporter of technologies. There is no other way to achieve this transition other than through the cumulative result of investments in R&D both by the government and by companies. China appears to be approaching innovative competitiveness in agricultural biotechnologies. Chinese companies are investing over 80 percent of the R&D that leads to patented plant varieties. In several areas, including insect resistant cotton and hybrid rice, China is globally competitive, if not the outright leader in the technology. Areas of innovative competitiveness are also emerging in medicine, particularly in patenting discoveries based on genomic analysis. When using IP rights to achieve intellectual competitiveness, the transition can be helped by exploiting available home-field advantages: whether it be in hybrid rice or in Chinese traditional medicines.

Over the last decade, led by a cadre of world-class scientists and researchers, China’s investment in biotechnological R&D has dramatically increased. This has generated remarkable developments and successes, benefiting the people of China in many ways. However, in order to sustain and continue to drive this great leap forward, greater human and institutional capacity in IP law and management will be necessary. Such capacity will serve to further foster and encourage even more inventive activities, innovative initiatives, and the development of the next generation of advances in health and agriculture, for the benefit of the people of China.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policy-makers

• A government’s political commitment to strengthening IP rights typically is rooted in a domestic constituency of inventors/creators: those who have something to protect will want a means by which to protect it.
• After implementing an IP rights system and opening it up to both domestic and foreign filers, comes the difficult transition toward innovative competitiveness, where a country becomes a significant inventor and exporter of technologies. There is no other way to achieve this transition other than through investments in R&D by the government and by companies, coupled with a credible/reliable system of best practices in IP management.
• Protect and exploit the commercial potential of traditional knowledge by utilizing the IP rights regime to register, protect, and commercialize traditional medicines. The vast resources of biodiversity and traditional knowledge can thereby be rationally valued, conserved, protected and commercialized.

For Senior Management (university president, R&D manager, etc)

• Filing patent applications, in and of itself, is insufficient. A global IP strategy is required. This is where best practices in IP management become critically important, that is, understanding the role of filing patent applications within the context of the institution’s mission, and then developing a system for assessing when, where and what to file.

For Scientists

• Patenting by Chinese inventors is increasing. Be sure to have agreements in place with any collaborators in China specifying the patenting of your joint work.
• Pay attention to the Chinese patent literature for publication of relevant work in your field.

For Technology Transfer Officers

• As you consider in which countries you want to apply for IP protection, consider the sheer size of the domestic market in China and the proportion of global manufacturing and export that is conducted in China. Many now rank China as one of their first filing priorities, alongside the U.S., Europe, Japan, Australia, and/or Canada. The new political commitment to the IP rights regime in China—even if not yet thoroughly tested—has made Chinese patents attractive.
• Building IP management capacity requires a comprehensive, interdisciplinary, integrated approach. Filing patent applications is only one part of the system of best practices in IP management. Other important components include IP valuation, forging R&D partnerships and market research and evaluation.