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Quality over Quantity in Patent Stakes, Says Expert

China should brush up on intellectual property (IP) protection to propel innovation-led economic growth, as this would encourage higher quality patent filings, according to an international law firm.

The Chinese mainland set a record in patent applications in 2015, becoming the first economy in the world to file more than 1 million patent applications in a single year, the World Intellectual Property Organization (WIPO) said last month.

Most of the 1.1 million filings by mainland enterprises were from the telecoms, computing, semiconductors and medical technology industries.

The number of patent registrations submitted by mainland companies is more than the top three runners-up combined. The US was second with 578,000 applications, followed by Japan (325,000) and South Korea (214,000).

"While the Chinese mainland continues to drive global increases, IP use grew in most countries in 2015, reflecting its increasing importance in a globalized knowledge economy," WIPO Director General Francis Gurry said last month.

The number of patent applications shows that China is gradually transforming into an innovative-led economy amid rising worldwide demand for intellectual property rights, with focus on fostering research and development to stimulate economic growth by reinforcing protection for IP rights.

But, international law firm DLA Piper Partner Edward Chatterton cautioned that the number of patent filings is not the sole benchmark in measuring the mainland's innovative capability.

"The large quantity of these applications does not necessarily suggest all the filings are of quality," said Chatterton, who's also the company's co-head of intellectual property and technology in Asia.

Some of these applications can be attributed to local companies responding to patent subsidies provided by the government, according to Intellectual Property Watch.

Chatterton said the quality of patent applications is mainly enshrined in two aspects.

"Firstly, most of the mainland patent applications are done domestically and the number of overseas filings by mainland companies is significantly lower than that of enterprises from Japan and South Korea. Patent application on a per capita basis is also significantly lower than those of the US, Japan, South Korea, Germany and Switzerland," he said.

WIPO Chief Economist Carsten Fink agreed, saying: "If you look at its patent filings per head of population, there are still fewer patents being filed there (China) than in the US. There is clearly a discussion out there as to what is the quality of mainland patents."

According to WIPO, Chinese enterprises lodged 42,000 patent applications outside its borders, with most filed domestically. This compared to 238,000 overseas patent applications by US companies, with China also lagging behind Japan and South Korea.

Another weakness of China's patent applications is that any income generated is often not related to IP protection.

"Revenue derived from licensing and other forms of technological payments on the mainland are still low compared with the US," Chatterton said.

"Technology exported to the Chinese mainland tends to be research and development items that are utilized as a basis for manufacturing, rather than being utilized for generating licensing incomes."

To encourage more Chinese enterprises to file patents overseas, Chatterton said they must be able to see the benefits of doing so.

"This relates to the central government's ability to reinforce IP protection in the country and enterprises' capability to reap revenues derived from technological innovations," he said.

Chatterton said much more needs to be done in relation to IP protection in China.

"The recurrent problem of bad faith trademark filings remains one of the biggest challenges for IP owners on the mainland, as does the relatively weak protection given to trade secrets," he said.

"The mainland should look into using the existing provisions of the Trademark Law to reduce the number of bad faith filings, and focus on improving the quality, rather than quantity, of patent filings."

About 2.9 million patent applications were filed worldwide last year - up 7.8 percent from 2014. This is higher than the 4.5-percent growth rate in 2014, according to WIPO data. The three top areas of innovation worldwide were computer technology, electrical machinery and digital communication.