Intellectual Property and China’s National Strategies and Policies for Innovation LIU Jian The State Intellectual Property Office of P.R.China July 2007

Intellectual Property and China’s Intellectual Property and China’s National Strategies and Policies National Strategies and Policies

for Innovationfor Innovation

LIU Jian

The State Intellectual Property Office of P.R.China

July 2007

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OverviewOverview

I. China’s National Strategies and Policies for Innovation Reasons and potentials of adopting the strategies Main goals of the national strategies Priorities of the science & technology innovation under the

national strategies Policies and measures for guaranteeing implementation of the strategies

II. Intellectual Property and Indigenous Innovation Importance of IP for indigenous innovation Major achievements in China’s IP undertaking China is facing various challenges Further enhance intellectual property work

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I. National Strategies and Policies for InnovationI. National Strategies and Policies for Innovation

Indigenous Innovation: New National Strategy

The “Outline of National Medium- and Long-term Science and

Technology Development Plan(2006-2020)”

Promulgated in January 2006 in China Initiated in July 2003 Its formulation work was headed by Premier Wen Jiabao Over 20 ministries and departments and more than 2000 experts involved in formulation of the Outline

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Reasons behind adoption of the innovation strategy

Need to create an innovation-oriented country Need to maintain long-term and rapid economic growth Need to realize sustainable development Need to upgrade industrial structure and transform the mode of growth, from resource and labor-driven to innovation-

driven economy Improvement of competitiveness

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Potentials of building an innovation-oriented country

Rapid economic growth provides a solid material basis Relatively complete scientific and technological research and

development framework established Adequate and advantageous human resources for science and

technology research Advanced in some specific technical fields, incl. biology,nanom, space technologies Abundant in spirit of of innovation and creativity

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Main Goals By 2020, China will be one of the innovation-oriented countries

R&D investment is 2.5% of GDP

Contribution rate of science & technology progress to economic growth will exceed 60% (900 billion RMB)

Dependency ratio for foreign technologies will decrease to below 30%

Annual number of granted domestic invention patents and SCI papers will rank among world top 5

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Building indigenous innovative capacity includes three aspects

Capacity to make original innovation in the domain of basic research such as scientific discovery, and technological inventions

Capacity to integrate existing technology, emerging technology and inventions in order to create new products or business lines with market competitiveness

Capacity to absorb, digest and improve imported technologies, and to re-create IPR based on these technologies

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Indigenous innovation is:

By no means designed to close the door but rather to expand greater and deeper level of exchange and cooperation in the

field of science and technology with other countries

China’s innovation strategy is global-innovation or learning innovation

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Priorities of science and technology innovation

Main constraints and challenges

Limited supply and high consumption of critical natural resources which are bottlenecks for economic growth

Environmental pollution and ecosystem deterioration

Social problems such as epidemic diseases

Insufficient technological innovation capacity and lack of independent IPRs and core technologies

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Priorities of science and technology innovation

R&D in fields of energy, water resources and environment protection

Improvement of people’s living and health standards is a major mission of science and technology innovation

Development and exploitation of the pre-competitive “common” technologies in order to upgrade industrial structure and provide technological support to SMEs

Reinforcing development and research of basic and pioneering technologies for sustainable development


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Improvement of the national innovation system Enterprises should be the core actors in technological innovation, not only large-scale enterprises but also SMEs

Innovation should be market-oriented and enterprise-university- academia collaboration further enhanced

To facilitate commercialization of R&D results from research institutes and universities

To intensify intermediary services such as information service, IPR agencies, assets appraisal, investment service and incubators

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Implementation of incentive policies for innovation

To adopt favorable public financial policies and to increase R&D input

To improve the legal framework for encouraging and protecting innovation

To establish and improve risk capital and investment capital market

Public procurement

To cultivate a favorable innovation culture

Human resource development

Optimal use of global innovation resource

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II. Intellectual Property and Indigenous InnovationII. Intellectual Property and Indigenous Innovation

Importance of Intellectual Property 1. Intellectual Property is A kind of non-physical property—intangible assets, with value

for use and exchange and created by the human in process of their

intellectual activities in fields such as science, technology and culture.

2. Intellectual Property in the Market Economy IP in the market economy has the same characteristics as wealth and

goods , and it has high added-value. IP is a necessary tool for the market competition, and is also the

foundation of and the thresholds for establishing an innovation-oriented country.

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3. IP in the Knowledge-based Economy knowledge treated as a property has become the most

important element for productivity and resources for wealth IP is a powerful tool for international competition in the era of

knowledge-based economy.

4、 The Important Role of IP in Indigenous Innovation A guarantee for a comprehensive development of the economy

and society The main goals and resources for indigenous innovation An important threshold for the national comprehensive strength

of competitiveness

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IP policies for promoting innovation

“The core technologies can not be bought. Only by strong capacity of science & technology innovation and by obtaining our own IPRs,

can we promote the international competitiveness of the country

and can we win respect and dignity in the international society”

First, we support enterprises to develop energetically core technologies with indigenous IP rights, and to create their own well-know brands and to enhance their R&D capacities.

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Second, we will stick to the principle of combination of digestion and innovations while introducing advanced technologies. Capacity of indigenous innovations should be improved in order to develop core technologies with indigenous IP rights.

Third, efforts are to be made to further improve policies for encouraging innovations, and to enhance protection of intellectual property rights

Formulation of a national IP strategy supportive of innovation

………….

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Major achievements in China’s IP undertaking

An IP Legal Framework that suits China’s national conditions and conforms to international practice has

been established and operated well.

A Working Mechanism has been set up, including examination and approval of IP rights, publicity and training, intermediary services, academic researches etc..

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Major achievements in China’s IP undertaking

A law enforcement system has been established under which administrative and judicial enforcement are adopted, functioning parallel.

The number of applications filed in China for trademark, utility model and design keeps No.1 in the world in recent

consecutive years. The annual number of invention patent applications is already among the world top 5.

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Comprehensive IP legislation implemented covers almost all major fields of IP rights including patent,

trademark, copyright and related rights, computer software, plant varieties, topography, unfair competition, law enforcement and etc.

conforms to international standards and practice, esp. Trips Agreement.

further amendments are under way, like the patent law, or foreseen in the near future and, more laws and regulations relevant under way

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Main IP Laws and Regulations Adopted and Amended

Title Approval Promulgation Implementation Revision

1 Trademark Law1982.8.23

1983.3.12001.10.27

2 Patent Law1984.3.12

1985.4.12000.8.25

3 Copyright Law 1990.9.7 1990.9.7 1991.6.12001.10.27

4 Regulation for Computer Software Protection

1991.5.24

1991.6.4 1991.10.1

5 Law Against Unfair Competition 1993.9.2 1993.12.16 Regulations on Audio and Video

Products Administration 1994.8.25 1994.10.1

7Regulations on Customs Protection of Intellectual Property Rights

1995.7.6 1995.10.1

8 Regulations on the Protection of New Plant Varieties 1997.4.21 1997.10.1

9Regulations on the Protection of Layout-Designs of Integrated Circuits

2001.3.28

2001.4.2 2001.10.1

10 Regulations on Copyright Collective Administration

2004.12.22

2005.3.1

11Measures for the Administrative Protection of Copyright on Internet

2005.4.30 2005.5.30

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Main International IP Treaties Accessed

WIPO Convention 1980.6.3 Paris Convention 1985.3.19 Madrid Agreement (Marks) 1989.10.4 Berne Convention 1992.10.15 Universal Copyright Convention 1992.10.30 Rome Convention 1993.4.3 PCT 1994.1.18. Budapest Treaty 1995.7.19. UPOV 1999.4.23

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Efficient IP authorities established Major IP authorities at central level: SIPO, State Intellectual Property Office TMO of SAIC, Trademark Office under the State Administration for

commerce and Industry NCAC, National Copyright Administration under the National Press

and Publication Administration Other related governmental agencies and departments Local IP authorities at different levels:

local IP Offices, incl.provincial, municipal, district, etc local AICs, incl. provincial, municipal, county levels etc. Local copyright administrations, same as above

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The State Intellectual Property Office (SIPO)

a government agency under the State Council(the cabinet), acts as the competent authority in patent affairs, layout designs of integrated circuit and as the coordinating agency when foreign-related intellectual property issues are involved.

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Progressively intensifying force of law enforcement Dual-track protection mechanism for IP rights Judicial enforcement -Civil and criminal remedies offered -Special IP tribunal and judges available

Administrative enforcement -quicker, cost-efficiency, professional, enforceable

Supreme Court Judicial Interpretation on Criminal Penalty

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Judicial Protection

IP courts/tribunals

-No.3 Civil courts established in the Supreme Court, 31 High Courts, specialized in handling IP cases

-Such tribunals also set up in Intermediate Courts located in capital cities of 31 provinces

-Over 60 intermediate courts assigned as first instance courts for patent disputes

-Over 400 intermediate courts across nation assigned as first instance courts for copyright, TM and other IP-related cases

-A few district courts in major cities can handle IP cases as first instance courts

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Administrative Protection

Local IP authorities established within local governments, responsible for administrative enforcement of IP and for

other IP related matters:

enforcing the patent, TM, copyright laws making local regulations or policies on IPR protection promoting and raising public awareness disseminating IP information and knowledge promoting exploitation of IPR for local development other missions assigned by local governments

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Patent filings have kept rapid increase

In 2006, a total of 573,178 applications were filed with SIPO, including invention patents, utility models and industrial designs.

On March,17,2004, a number of patent applications received

accumulatively in China since 1985 surpassed 2,000,000, -14 years and 9 months to score the first million - 4 years and 2 months to reach the second million -2 years and 3 months to have the 3rd million

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14372 18509 26077 34011 32905 41469 5004067135 77276 77735 83045

102735114028121989134239

170682203573

252632

308487

353807

476264

573178

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Patent applications received (1985-2006)

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138 3024 6811 11947 17129 225882461631475

62127

43297 45064 4378150997

67890

100156105345114251

132401

182226190238

214003

268002

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Patents granted (1985-2006)

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China is still facing various challengesChina is still facing various challenges

IP has become the focal point of international competition.

The era of more frequent IP disputes has come in advance.

Enterprises’ capacity of innovation is still weak and they are unable to have enough indigenous IPRs

IP awareness needs to be further promoted and culture of innovation waits for taking shape.

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18.6%

52.4%

29.0%

86.8%

1.6%

11.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

domesti c forei gn

i nventi on

uti l i tymodel

desi gn

Domestic vs. Foreign Applications for Three Types of PatentsDomestic vs. Foreign Applications for Three Types of Patents

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14921101Sweden

16991632(No.8)Italy

18131613(No.9)United Kingdom

23702106Switzerland

36143190France

37213988Holland

86767502Germany

105969300Korea

2349420395USA

3784836221Japan

Applications (2006) Applications （ 2005） Country

Foreign Enterprises Intensify Competition in China Market via IPForeign Enterprises Intensify Competition in China Market via IP Top Ten Foreign Countries Filing Applications with SIPO

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Top Ten Foreign Companies in China in 2006

1. South Korea Samsung Electronics Co., LTD 43552. Japan Matsushita Electric Industrial Co. 30673. Holland Royal Philips Electronics N.V. 25034. Japan Sony Corporation 16485. South Korea LG Electronics Co., LTD 15066. USA IBM 14357. Japan Toshiba Corporation 12118. Japan Seiko Epson Corporation 11449. Germany Siemens AG 88710. Japan Hitachi, LTD 836

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Wireless Transmission 93% Mobile Telecommunication 91% Television System 90% Transmission Equipment 89% Semi-Conductor

85% TV Accessories 85% Genetic Engineering 75% Pharmaceutical 69%

Foreign Invention Patent Applications Focused on Hi-TechForeign Invention Patent Applications Focused on Hi-Tech

Proportion of Foreign Applications

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The Proportion of Chinese Enterprises that Hold Their Own

Indigenous IP Rights Is Too Small

Too few enterprises in China have the far-sight, strategy and capacity

to create and develop their own indigenous IP rights. According to

statistics, only thousands of Chinese enterprises have such IP rights,

accounting for only 3/10000. More than 90% enterprises have never

filed patent applications. 60% of enterprises have not their own

trademarks. Many Chinese enterprises can only “make” but can not”

create”. They have “property” but no “knowledge”. Some of them

even rely on copying others’ technology for survival.


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Core technologies are either imported or controlled

by foreign companies

China is the 3rd largest global trade power, but its high-tech products

independently innovated only account for 2% of its total foreign trade.

Civil airplanes are all imported into China from abroad.

High-Tech medical equipment, manufacturing equipment for semi-conductor,

integrated circuits and laser fiber are mainly imported.

80% petrochemical equipment, and 70% numerical-controlled machine tool and

advanced textile manufacturing equipment are imported.

Over 50% core technologies of color TV and cell phone are owned by foreign multi-

national companies


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Only a Small Number of Patent Applications are Filed Overseas

by Chinese companies

Up to 1999 less than 300 applications filed abroad a year

In 2000 1026 such applications

In 2004 2423 such applications

An average of 1.86 applications filed broad from 1 million Chinese, while in developed countries the average is over 50 applications.

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Further Enhance Intellectual Property Work

1. Fully aware of the importance of IP work under the new circumstances, we will take the IP strategy as one of the important strategies for development of the whole nation and will make use of it to serve the goal of building an innovation-based country.

A national IP strategy is under way A leading working group for formulation of the national IP

strategy was set up in 2005, with Vice Premier Madame Wu YI

as the head, and composed of 28 ministries and departments

Expected to fulfill the formulation within the year 2007

2. We will further enhance the role of the government in guiding the IP work, intensify organizational and structural construction, actively facilitate the creation of a favorable policy environment and incentive mechanism, and protect and encourage inventors and scientific researchers to engage themselves in inventions and creations.

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Main Targets of the National IP Strategy

Improving the legal system and policies for IP

Enhancing IP capacity building esp. capacity of creation, management, utilization and protection of IP, and for promoting indigenous innovation.

Perfecting a supportive system for IP, in particular the information service and training of competent IP professionals

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2. We will further enhance the role of the government in guiding the IP

work, intensify organizational and structural construction, actively

facilitate the creation of a favorable policy environment and incentive

mechanism, and protect and encourage inventors and scientific researchers to engage themselves in inventions and creations.

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3. We will continue to help and encourage enterprises to develop and exploit the innovated technologies with indigenous IP rights. The main players of the market economy are enterprises, thus they should also be the main force for indigenous innovation and creation of indigenous IP.

Enterprises are the key to carry out IP work. In abroad, over 90% patent applications are filed by enterprises. In China,many applications are filed by individuals. However, technical creations are knowledge-intensive and intangible, requiring vast investment in the process of innovation and development of products, thereby difficult for individuals to achieve. As a result, enterprises should be the main force for innovation and the creators of indigenous IP rights.

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Further Enhance Intellectual Property Work4. We will effectively protect intellectual property rights by further

perfecting the framework for IP protection and by intensifying the force of law enforcement.

Without IP protection, there could hardly be indigenous innovation. IP protection is actually the most vital part of the whole chain of the IP system.

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5. We will enhance cultivation of IP talents and promotion of public awareness of IP. Protection of IP relies on the improvement of the public IP awareness, and the promotion of the awareness of independent innovation.

The culture of innovation, a social environment conducive to respect of others’ IP rights and protection of our own, must be established.


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For more information, please get access to

www.sipo.gov.cn

Thank You

Documents

Intellectual Property and China’s National Strategies and Policies for Innovation LIU Jian The State Intellectual Property Office of P.R.China July 2007