India must learn from China's patent chase and focus on quality over quantity | Mint

India must learn from China's patent chase and focus on quality over quantity

China’s push for innovation led to a flood of patents, but quantity overshadowed quality, leading to an abundance of ‘junk patents’ with scant innovation.
China’s push for innovation led to a flood of patents, but quantity overshadowed quality, leading to an abundance of ‘junk patents’ with scant innovation.

Summary

  • We must avoid the ‘patent paradox’ suffered by China—where policy has spawned a patent-filing frenzy of very little value. What we need is innovation and that’s a question of quality.

The eternal tussle between quantity and quality has been a subject of debate in various fields, including philosophy, art and innovation. This dichotomy is particularly relevant in the context of innovation, especially when considering the role of patents. Patents are commonly seen as a measure of a country’s innovative capacity. However, the sheer number of patents filed does not necessarily reflect true innovation. The number of filed patents and approvals by a country is not an end in itself, but rather a means to an end. The ultimate goal is for the nation to foster a culture of innovation.

China has led the world in the count of patent filings since 2011. According to the World Intellectual Property Indicators (WIPO) 2023 report, China’s global share of patents has almost doubled, from 24.4% in 2011 to 46.6% in 2021. Further, the highest numbers of patents in force have also been recorded in China. There are two reasons for such a spike in its number of patents.

First, MNCs and even small international businesses are now patenting in China as a bulwark against a tide of counterfeits, with China noted as the source of 80% of seized counterfeit goods globally, according to OECD data. The aim is to halt the production of fakes within China.

Second, China’s push for innovation led to a flood of patents, but quantity overshadowed quality, leading to an abundance of ‘junk patents’ with scant innovation. Despite hefty investments in research and development (R&D), meaningful innovation has lagged, with experts pointing out that large government subsidies have resulted in a glut of low-value patents.

According to the WIPO, 90.4% of total patents in China were filed by residents. In contrast, the total number of patents filed by residents in India is 50%, and in the case of the US, only 42.5% of patent applications were filed by its residents (as opposed to non-residents). Chinese ‘inventors’ predominantly seek domestic patents, as it is difficult for these ‘inventions’ to meet the stringent norms of a triadic filing across the major tech markets of Japan, the US and Europe, which is seen as the gold standard. In 2020, China registered 5,897 triadic patents, trailing the US’s 13,040 and Japan’s 17,469.

The Chinese government’s focus on favouring volume has ironically undermined its own goal of becoming an innovation leader. According to a 2019 report by China National Intellectual Property Administration, a quarter of China’s patents were held by universities, yet these had low rates of industrial use and licensing—3.7% and 2.9%, respectively. Patents by research institutions had an 18.3% industrialization rate and a 2% licensing rate. China’s National Audit Office in 2020 found that just 8.4% of academic patents were used commercially, contrasting with 40-50% in the US. This is because the state’s policies are focused on direct financial perks, such as subsidies and tax benefits, and social advantages, all tied to patent registration. This top-down strategy gave rise to a side industry of patent agencies more interested in chasing subsidies—which sometimes outpace the cost of patent filing—than in securing genuine innovations. This subsidy chase led to a spike in patent filings, many of which barely pushed the envelope or were simply rehashed old ideas. In recognition of these issues, China’s State Council has released a ‘Special Action Plan for Patent Commercialization and Application (2023-2025),’ aimed at enhancing the market orientation of patents as well as the commercialization of innovations.

The Chinese patent approach has lessons for India. We must ensure the quality of our patents does not get compromised. In recent years, India has implemented significant process reforms in its patenting system. Getting patents in India was difficult. It was not because quality was put to excessive scrutiny, but simply a capacity constraint. The patent office was understaffed and underfunded to deal with applications, a problem the government has now fixed. In 2016-17, India recorded 45,444 patent applications with only 9,847 grants. In 2022-23, numbers have impressively increased to 82,805 and 34,153, respectively.

However, as the country progresses in its ability to grant patents efficiently, a quality challenge might emerge. The focus should now shift towards ensuring that each patent granted represents a genuine and significant innovation. This shift from quantity to quality is essential in fostering a truly innovative ecosystem that can contribute significantly to global advancements. India should carry out a post-facto analysis of patent quality, possibly under the aegis of the Office of Principal Scientific Adviser. It could assess a patent’s value by the volume of subsequent citations it receives. This method is grounded in the rationale that a patent, like an influential academic paper, tends to accrue more citations if it pioneers a successful technological pathway. However, there are also studies which suggest “ex-post patent quality outcome metrics are generally not in agreement as to which are the ‘highest-quality’ patents." One can come up with better indicators.

Further, we should also focus on making our Intellectual Property Rights regime even more robust, which in turn will incentivize more firms and research institutions to file high-quality patents. We should also ensure that in our quest for patents, we do not put in place an incentive structure, especially for educational institutions, that attracts low-quality patents. We need the opposite.

The prevalence of low-quality patents perpetuates a cycle under which patentees are incentivized to continue filing low-quality patents. This trend, termed the “patent paradox" by Gideon Parchomovosky, suggests that firms engage in high- volume, low-quality patenting strategies to maximize potential benefits or minimize losses from the patent system despite the negative cash value of most patents. It’s critical for India to ensure that this does not happen in the country.

These are the author’s personal views.

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