The Greater China IP Updates ˇV November 2021

By Lyndon 

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Chinese Companies Ramp up IP Litigation

Foreign businesses in China are facing rising number of intellectual property lawsuits filed by Chinese companies.  As local companies have become more protective of their IP rights, the number of IP-related lawsuits filed in China in 2020 was more than 3 times the number for 2016.  Previously, IP cases involved complaints by foreign firms about alleged infringements by Chinese parties.  As well as the growing amount of IP owned by Chinese businesses, another factor explaining this increase is the revised trademark, patent and copyright laws in 2019 and 2020.  The new laws meant that the total amount of damages were raised by combining actual and punitive damages in a potential case.  Also, the revised patent law reduced the burden of proof for plaintiffs which has added to the motivation for local companies to pursue litigation.  If China continues to excel in 5G wireless communication technology and AI, then itˇ¦s likely that they will defend their IP in those areas aggressively.  Some key areas that need attention are:

1. The Trademark Law now bans unfairly applying for trademarks without plans for actual use.
2. The Anti-unfair Competition Law means leakers of trade secrets are likely to lose legal disputes unless they prove no infringement occurred.
3. The Patent Law reduces the burden of proof for plaintiffs.
4. The Copyright Law raises the maximum damages tenfold to 5 million yuan.

Some well-known companies are already involved in disputes.  For example, Apple has been sued by a Chinese artificial intelligence company that claims the US tech groupˇ¦s voice recognition technology Siri infringes on its patent.  Companies are advised to do internal simulations and develop processes to deal with any potential lawsuits.

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Commercialization Rate of Current Patents in China Reaches over 30%

The latest figures for the commercialization rate of valid invention patents in China reached 34.7% in 2020, sustaining a level above 30% for five years in a row according to the 2020 China Patent Investigation Report issued by the China National Intellectual Property Administration (CNIPA).  Also, the Patent Transfer and Transformation Index (PTI), a weighted sum of data including patent industrialization rate, licensing rate, transfer rate, export amount of IP royalties and amount of financing through patent pledging, showed steady growth. The PTI, with a value of 50 as a threshold, reached 54.7 in 2020, up 3.6 points from 2019.  Part of the reason was that companies are more willing to invest in Research and Development, with 16.5% of Chinaˇ¦s valid invention patents receiving R&D investments of more than 1 million yuan in 2020, which was up 4.4% year on year.  According to the report, nearly 80% of Chinese corporate patentees had worked with others in innovation, 52.1% had worked with their upstream or downstream customers on innovative projects, which shows a strong trend towards cooperation as a business strategy to maximize IP.  As for the future, nearly 80% of the companies surveyed said they feel confident about future revenue generated by their patents, with 49.5% saying they were definitely confident that revenue derived from their patents would increase in the next year.  In addition, 73.9% of Chinese corporate patentees took measures to protect their rights after suspecting infringement which shows a much stronger awareness about the necessity for being proactive in this field.

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