Chinese patents: Ever more inventive; Mainland companies are building up their intellectual property

Chinese patents: Ever more inventive; Mainland companies are building up their intellectual property

May 24th 2014 | SHANGHAI | From the print edition

CHINA’S leaders see patents as rungs on the ladder to becoming an innovation powerhouse. So in five-year plans and through subsidies and official exhortations, they have encouraged locals to file patents. And locals have responded with gusto. Two years ago China’s patent office became the world’s busiest. Sceptics have scoffed that most of those filed are “utility model” patents—short-term ones granted for relatively trivial ideas, as opposed to proper “invention” patents—and that few Chinese inventors have won patents in countries where standards are higher.

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Many patents, it is also argued, are exercises in quota-filling by academics, with no hope of commercialisation. In short, these patents are a sham. Not quite, argues the UN’s World Intellectual Property Organisation (WIPO). A new study scrutinises Chinese patents and concludes that a small but rapidly growing proportion are up to world standards.

The WIPO included only patents filed by Chinese residents—that is, those with a Chinese address—who filed their patents first on the mainland. So, inventions by the Shanghai labs of GE or Philips are not included, since Western multinationals typically file first in America or Europe. Foxconn, a manufacturing goliath controlled by Hon Hai of Taiwan, is included in the study because, unlike other Taiwanese firms, it resides in China and files its patents first on the mainland.

The findings challenge conventional wisdom in several ways. Not only do they show that the number of Chinese patents filed abroad is rising sharply (see chart). They also show that, since 2003, most of these have been invention patents, not utility-model ones.

Finally, the firms topping the rankings of foreign patent applications are also revealing. Some, like Huawei and ZTE, are unsurprising: 29% of all foreign filings from 2005 to 2009 were in information and communications technology. Lenovo comes in at 16th. Others, like Sinopec in oil and gas, and BYD in batteries, suggest the energy industry is rising.

The surprise is that three of the top five spots are held by divisions of Foxconn. By 2012 it had filed more than 12,000 patents abroad, in areas from electrical machinery to computer technology to audio-video technology. A firm some scorn as a low-tech sweatshop turns out to be a model of invention.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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