Chinese dragon face

Carry on innovating – or you’ll be someone else’s foothold

Image credit: Dreamstime

When it comes to filing patents, China’s proactive approach to protecting intellectual property in world markets is something other countries would do well to emulate.

The last few years have seen China become one of the world’s leading innovators. According to WIPO, the World Intellectual Property Organisation, in 2016 China filed more patent applications than the US, Japan, the Republic of Korea and the EU combined. There are certainly lessons to learn from China’s proactive approach.

The marketing strategist Michael E Porter once said: “Companies have to be very schizophrenic. On one hand, they have to maintain continuity of strategy, but they also have to be good at continuously improving.” While Porter was referring to the need to keep customer interest and demand high, protecting intellectual property (IP) plays an important role in this.

China’s approach to securing IP shows the national importance of motivating domestic businesses to innovate and secure patents, not only domestically but in emerging markets too. If not, they may well face being squeezed out of their respective sectors in years to come.

As Porter rightly said, continuous improvement is fundamental to maintaining your market share. It’s no secret that everybody likes to buy improved products – if there are two products on the market and one has better functionality or is easier to use, then it has clear advantages. People and businesses will always want to buy the more advantageous product.

This type of product development helps you to keep your IP safe. As soon as a country or sector slows down its research and innovation, it’s only a question of time before domestic businesses lose ground to foreign competitors. Once an original patent lapses, a competing foreign company could easily get a patent granted on an improvement and then you’re locked out of that patent.

For example, as a country, the UK has a great background in innovation but it must increase its innovation or face losing its competitive advantage.

While UK businesses actually increased patent filings with the European Patent Office in 2017, the country’s overall share of patent applications remains very low, and in the same time Asian businesses have significantly increased their European applications.

To illustrate this, China’s patent filings increased from 6,486 in 2008 to 50,517 in 2017, a rise of close to 800 per cent. Over the same period, based on the country of the first named applicant, the UK only increased its filings from 7,172 to 7,530.

If the UK does not uphold its level of innovation, it may start to leave gaps in its IP. Countries like China are quickly filling these gaps with their own patents, and as time passes the UK might find it loses both its patent landscape and its competitive edge. The result: businesses will lose opportunities to cross-license IP and get squeezed out of the markets they helped to create.

So, what can we learn from China’s approach?

First, maintaining and growing market share requires support for innovation at a national level – something China has been championing for years.

Investment for IP is front-loaded, and with a first-to-file system it’s pretty simple – you may have a great idea but you face a considerable initial outlay to secure the IP. While the UK provides its businesses with a tax incentive based on profits from worldwide sales, a business needs that financial support right at the start of the process – not later when it is already making a profit.

China has tackled this issue by actively incentivising its businesses and start-ups to file in other nations. It offers a grant to help fund the patent application, which is followed by a second bonus grant if the application is successful. Perhaps other countries should follow this lead; if a business has genuine prospects of success, upfront funding to help gain IP across the world is surely beneficial to all involved.

By using IP competitively, nations can maintain their home advantage while also gaining a foothold in emerging markets. Countries such as India are still relatively cheap to file in, and securing patents in countries which are likely to see huge growth over the next 10-15 years could be very important for both production and sales. The lesson to learn from China is, speculate to maintain advantage, think carefully about where you are filing, and don’t miss out on opportunities to exploit emerging markets.

Robert Games is managing director of Albright IP

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