“An incident that causes a ‘significant international adverse impact’ would lead to a maximum point deduction from the relevant agency.”
The China National Intellectual Property Administration (CNIPA) released a draft of new measures that would downgrade the ratings of Chinese patent agencies that approve abnormal or fraudulent patents. CNIPA released the draft on October 8, which expands on a trial started in January 2022 in four provinces.
The draft sets out to “crack down on illegal and untrustworthy acts” carried out by Chinese patent agencies and promote a healthier development of Chinese intellectual property. The latest developments only apply to Chinese patent agencies and not trademark agencies.
The draft lays out points systems with four grades: A, B, C and D. Deductions are handed out if agencies are found to be working as an agent to file “abnormal patent applications” either domestically or abroad. The draft is subject to public comments until October 24.
International Impact
While the draft is limited to Chinese patent agencies, the language in the document makes clear that the CNIPA wants to limit exposure to negative international press. If the draft’s policies are implemented, an incident that causes a “significant international adverse impact” would lead to a maximum point deduction from the relevant agency. Additionally, incidences of abnormal patent applications overseas would carry a harsher penalty than domestic cases.
According to a 2020 report from the World Intellectual Property Organization, China leads the world in patent filings since 2011 and accounted for 43.4% of the world’s patent filings in 2018 and 2019. The rapid rise in patent filings from China is largely thanks to a government plan that issues subsidies to individuals and companies who filed patents and trademarks abroad.
The increase in Chinese patent filings domestically and abroad has been a growing topic of study in recent years. The USPTO released a report in 2021 that found patent applicants were eligible for up to $3 million in foreign patent subsidies each year. According to the report, the subsidies “appear to motivate strategic filing behavior, including the practice of splitting a single patent application into multiple applications in an effort to reach specific innovation metrics.”
Such practices increase the number of Chinese patents filed, but it also potentially decrease the value of the Chinese patent market. The USPTO found that the commercial value of patents issued in China is low compared with that of patents issued in the United States.”
Additionally, Chinese trademark applications regularly make the news for high-profile cases of irregularity. The USPTO has issued dozens of sanctions against Chinese individuals and firms in 2022 for trademark fraud and violations against USPTO rules.
In response to a lowly valued patent market and high-profile cases of fraud, the Chinese government has attempted to crack down on corruption. In late 2020, an individual was sentenced to a six-year and eight-month jail sentence for defrauding the Chinese government of more than $100,000 from 231 fraudulent patent applications.
Proposed System
CNIPA’s proposed system plans to strengthen the Chinese intellectual property market following the country’s blueprint released in 2021, titled “Guidelines for Building a Powerful Intellectual Property Nation”. The organization wants to fast-track a credit-based regulatory mechanism to increase adherence to intellectual property law and decrease fraud.
Under the proposed draft, every patent agency would start with 100 points, with points being reduced based on any negative information connected to the agency. Patent agencies can also regain points or surpass 100 based on awards handed out by the government or “social contributions.” The system would also rank patent attorneys and deduct points in a similar manner to patent agencies.
China has been fighting against so-called “bad-faith” patent filings in recent years in an attempt to increase the prestige and value of its patent industry. In 2020, China’s Patent Law was reformed to include phrasing about applications “in good faith.” The October 8 draft includes similar language; the CNIPA wants to “promote patent agencies and patent attorneys to practice in accordance with the law and in good faith.”
In the background of these developments is the increasing tension between China and the United States in the realm of technology, trade and intellectual property. Attempts to resolve the intellectual property issues between the two countries have had mixed results. And despite the Chinese government’s most recent moves and talk of reducing bad-faith patent applications, the country’s position as the leader in patent filings only has strengthened in recent years. According to CNIPA’s annual report, invention applications increased by 5.9%, utility model patent applications decreased by 2.8%, and design applications increased by 4.6%.
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