China passed its first patent law in 1984. This started a process of building a patent system closer to that of Japan and Europe. Three kinds of patents have been granted since then: invention, utility model and design patents.
The invention patent needs to pass a substantive examination and three criteria. That is, the characteristics of utility, novelty, and non-obviousness are expected to be satisfied before the patent is granted. By contrast, both the utility model and design patents are not subject to substantive examination.
In 1992, China amended its patent law to allow wider patent scope and longer patent duration. For example, products, food, beverages, flavours, and substances obtained by means of chemical processes became patentable. Meanwhile, the duration of invention patent protection was extended to 20 years. The duration of utility model and design patents was increased to 10 years (Hu et al., 2009).
In 2000, China amended its Patent Law again so as to be in line with TRIPS. The amendment provides for patent holders to obtain a preliminary injunction against an infringing agent before issue of a lawsuit. It also establishes standards to compute statutory damages and requires that there is no discrimination in obtaining patent rights between state and non-state enterprises.
More recently, China formulated its first National Intellectual Property Rights Strategy (National IPR Strategy). This makes policy objectives until 2020 and gives patents an eminent role in China’s drive for technological upgrade. The aim of these policies is engage innovation-based growth so as to escape the middle-income country trap (World Bank, 2011). Many countries have moved from low-income to middle-income level over the last fifty years, but few have successfully joined the high-income country grouping, as China seeks to do.
Patent protection and enforcement in China has also improved. One key feature of China’s patent enforcement system is that there are two kinds of protection: administrative protection and legal protection. Under administrative protection, the Patent Review and Adjudication Board (PRAB), under supervision of the State Intellectual Property Office (SIPO) are responsible for deciding patent validity.
SIPO also enforces patent infringement. Under SIPO rules, infringers are required to cease infringing a given patent, and financial compensation for infringement is mediated. Administrative protection’s advantages compared to those of legal protection lie firstly in the fact that it is much quicker and also less expensive. Secondly, the burden of proof appears to be lower. Thirdly, SIPO has the power to collect evidence that a patentee may not be able to collect (Clark ,2011). Besides SIPO, General Administration of Customs (GAC) also enforce patent rights, through the seizure of imports and exports of infringing products.
For legal protection China’s court system is limited to handling infringement actions. The court system consists of four instances: the Supreme People’s Court, the Higher People’s Court, the Intermediate People’s Court, and the Lower People’s Court. Patent infringement cases and appeals from administrative decisions must be filed with designated Intermediate People’s Courts. However, higher People’s Courts have been used in the first instance if claimed damages are sufficiently large. Compared to administrative protection, legal protection has the power to grant a range of remedies, including pre-trial and interim injunctions, and the freezing of assets of the defendant, etc.
Amid China’s push for more innovative-driven growth, there has been a surge in patent applications in China in recent years. The number of invention patent application with SIPO has increased from around 21,600(application received) in 1995 to more than 496,000(application) in 2011. Application of the three patent types (invention patents, utility models, and design patents) totaled 1539,256 in 2011, with domestic applicants accounting for more than 90% of filings (SIPO, 2012).
Several factors may explain the surge in patent filings: increased the R&D expenditure, growth of foreign direct investment, enterprise restructuring (Hu et al., 2009). Patent reform as well innovation policies such as patent subsidies may also play the role.