Patent filing drive creates quality, biz concerns

Patent filing drive creates quality, biz concerns

Summary: Last year saw record number of patents filed globally, with China leading growth, but industry observers note concerns over quality of patents and higher cost of doing business.

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International patent fillings hit a record high in 2011 with 181,900 applications, with China accounting for the highest growth rate. However, some market watchers believe the drive toward patent filing may ultimately lead to quality issues and higher global costs of doing business.

According to the World Intellectual Property Organization (WIPO) in a statement released March, China, Japan and the United States accounted for 82 percent of total growth in the number of patents filed last year. "The recovery in international patent filings that we saw in 2010 gained strength in 2011," said WIPO director-general Francis Gurry. "This underlines the important role played by the PCT (Patent Cooperation Treaty) system in a world where innovation is an increasingly important feature of economic strategy."

Rise of China
Worldwide, the Chinese recorded the highest growth in the number of patents filed at 33 percent, ahead of Japan which was the second-highest at 21 percent.

PCT International Applications - Top 5
Country2011 est.Growth
United States48,5968%
Japan38,88821%
Germany18,8585.7%
China16,40433.4%
South Korea10,4478%
Source: WIPO

However, market watchers point out that China's growth here may not be driven by a rise in innovation.

Song Zhu, partner at law firm Hogan Lovells, noted that the rise in patents was primarily the result of "industrial, technological transformation" and increased investment in research and development.

He added that the Chinese government had also encouraged Chinese companies to obtain patents. "The government provides various incentives, including direct financial support, to companies that acquire patents.

"The performance of local governments is evaluated in part by the number of patents acquired by local companies. In the pursuit of numbers, the quality of patents will probably suffer to some extent," added Song.

This view was shared by David Llewelyn, deputy dean-designate of the school of law at the Singapore Management University (SMU).

The professor noted that although there was "undoubtedly a significant increase in genuine innovation in China", the number of patents filed was only one indicator as many applications eventually were not granted.

Doubts over patent quality
"There are many financial incentives offered to file for patents and the [Chinese] government encourages so-called 'indigenous innovation'," Llewelyn explained. "The real question is the quality of the results and what is done with it."

He noted that owning a patent is a liability until it is commercialized, and only when it is will it become an asset.

In China, the number of patents and patent applications has become "a sign of corporate virility", he said, where businesses aim to be able to proclaim "my pile is bigger than yours".

"But, as we all know, size is not everything," noted Llewelyn.

Doubts over patent quality, however, were played down by Robert Stephen, partner at law firm Olswang.

Although he noted that some companies might have filed simply to "take advantage of movies on offer", applications were still formally examined by China's State Intellectual Property Office (SIPO).

Stephen said: "SIPO appears to be reasonably strict on patentability--at least, that's our experience with SIPO--so patents granted from China should not have quality issues. It may be the case that the pool of pending patent applications has a quality issue, but the substandard cases will be weeded out by SIPO."

A very low percentage of Chinese applications go on to be filed outside of China, noted the lawyer, who added that he would be "looking with interest to see if that number will increase".

Higher business costs and patent trolling
Amid the rising number of high-profile patent spats between tech companies such as Facebook and Yahoo, as well as Apple and Samsung, market watchers told ZDNet Asia that the global drive toward patent filing generally could mean higher costs for businesses.

According to Olswang's Stephen, the more patents a company owns, the higher the change one of its patent could be asserted by a non-practicing entity, or a patent troll, to as a way to generate income.

SMU's Llewelyn agreed: "The more the number of patents, the higher the number of court cases. Playing the IP (intellectual property) game has become increasingly important in China and for that, you need patents, trademarks and copyrights. And deep pockets."

Topics: IT Employment, CXO, Legal, China, SMBs

About

Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

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