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The US Patent and Trademark Office accuses China, which holds the top spot on the patenting chart, of manipulation – How should European companies react to the dispute?

08.02.2021
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More innovation is now taking place in China than anywhere ever before. Inexpensive registration fees, generous subsidies and state-set targets are leading to congestion in offices and promoting speculation. The staggering figures can also be viewed in the context of the China-US trade war, says Kolster’s CEO and Chairman of the Finland-China Business Association Timo Helosuo in his blog.

 

The activity and motivation of the Chinese for innovation and IPR protection are at historically high levels. In 2019, the Chinese authorities received 7.8 million trademark and 1.5 million utility model applications, representing almost half of the total number of applications worldwide.

 

The pace will not be slowing down, as one of the cornerstones of the country’s next five-year plan is innovations and IPR. As China joined the IPR world remarkably late, not until the 1980s, the country is catching up with others by protecting its innovations at an ever-increasing rate. This speedy pace in innovation as well as in the growth and development of society is giving rise to global complaints outside China’s borders.  

A recent report by the United States Patent and Trademark Office (USPTO) criticises China’s trademark and patent registration as being manipulated. The figures are affected by patenting requirements imposed on companies by the authorities, subsidies, fraudulent registrations, and trademark applications registered as a precaution. However, viewed from Finland, it is also worth considering what lies behind the criticisms of the US patent authorities. 

Subsidies, trolling and trademark hijackers 

China offers local companies more than 70 different subsidies for IPR protection, often exceeding the total cost of the application. The country is criticised for these subsidies, but they also exist elsewhere, including in Finland: ELY Centres, Business Finland and COVID-19 recovery packages provide money specifically to companies that develop and protect inventions.

In China, however, the combined effect of state-set targets, subsidies and low registration costs results in protection being sought beyond a genuine need. The basic idea of protection, i.e. doing business with a product with elements to be protected, easily gets left behind by speculation with public money and trolling when IP rights are bought and sold like shares. 

Trademark hijacking is already its own industry in China. Hijackers also hijack brands and trademarks of foreign companies and demand money for their return. 

The unpredictability of the operating environment leads to unnecessary trademark applications filed as a precaution, with the aim of preventing the loss of the trademark in the future. 

On the other hand, it should be remembered that as practices evolve to become closer to the Western model in China, fraudulent activities will also decrease. 

In light of trade war, USPTO is a purposeful actor 

Innovations are also a key element in the trade war between the United States and China. The wealth generated by innovation and new technologies is intensifying competition between the countries.

 

The Made in China 2025 plan at the latest showed that China is making a serious leap towards the top of the world, and in 2019, China surpassed the United States in the number of patent registrations. China’s relatively recent need for systematic patenting and reserving its own space in the world of innovation serves the US narrative in which China acts unfairly and thus complicates the usual way of doing things.

 

Activities that go against what is customary always provoke protests. As traditions mix, it can be difficult to accept that the world is changing in this area as well – and not just for the worse. The more attention the IPR industry receives, the more the knowledge of IP infringements and the need to address them will increase.

 

China has already reformed the operating models of its offices. It is also constantly improving its legal practices and seeks to ensure that its judicial systems have competent judges in the field. Legislative changes have been made, for example, to facilitate the return of hijacked trademarks to their rightful owners. The pressure that the United States has put on China during the trade war had a major impact on this. Without the contribution of the United States, us Europeans would still continue to be taken for a ride.

 

China’s volumes are here to stay

 

The USPTO is right in that the processing and control of massive application volumes leads to congestion in the operations of offices. However, large volumes are here to stay, and pioneering technology countries like Japan and South Korea may set out to follow the Chinese model. Instead of being horrified at these volumes, we should focus on adapting to them: do we try to manage these new kinds of volumes with old methods, develop new practices for managing applications, or try to reduce the number of applications that are not due to actual need?

 

Through innovations, we will make the world a better place. Smothering the system with political games and squabbling only slows down the spread of innovations. By tuning the system with fair competition, we can enable the faster spread of better, more efficient and cleaner innovations.

 

It is now more important than ever for Finland and Europe to succeed in competition and be able to promote innovations. China is going through all the technology areas that it could claim for itself with a fine-tooth comb. For example, the vast majority of drone patents around the world are already Chinese ones. Despite the pandemic, the world has not come to a halt. Instead of waiting around, we must use our energy selectively for what we want from the future and find ways to secure our own position.

 

Contact us

 

Timo Helosuo
CEO
timo.helosuo@kolster.com
+358 40 576 1659

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