84 The (un)timely passing of Intellectual Property Rights?

Posted on March 28, 2012 by

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Intellectual property rights, such as patents, are “good good good” – or so we say out loud. Well, way may be soon chanting a different tune.

Patents were a conditional bounty at the outset: a time-limited monopoly was granted provided the invention was made public. Society benefited from the quick spreading of the facts about the advance: inventors could either build on it, or move to another field.

This understanding of the role of patents was not clear even then, when intellectual property legislation was introduced. Switzerland’s chemical and pharmaceutical industry emerged during a period when there was little patent protection in th country[1]. The inference that foreign firms settled there so as to establish copycat operations is utterly unwarranted. It would be far-fetched to argue that the rise in patent protection followed economic depression in the 1870s.

The function of patents has evolved, meanwhile. If it (ever) was reward for the invention, it has now become dust thrown in the eyes of the competitors. Let me explain. A patent sets out to define the “known”. Creative wording in the patent description can blur this boundary and open the way for destructive litigation as to the scope of the “claimed known”. When processes are patented, furthermore, their application to new uses automatically falls in the purview of the patent. Patent lawyers for street-wise firms will file patents so as optimally to hinder competition. One hears of “patent walls” allowing “defence-in-depth” of a core patent – the war imaginery is telling.

The effect has been perverse: instead of leading to the “high road to economic development” patents “will actually obstruct progress by disrupting the scientific process by promoting fragmentation, unnecessary duplication, and secrecy” [2].

As long as the West was in the lead – this was fine. But now China is spurting ahead.

CHIN Ch’u-shih (XII cen.) Ten kings of hell – the infernal machine

(Reuters)[3] – China became the world’s top patent filer in 2011, surpassing the United States and Japan as it steps up innovation to improve its intellectual property rights track record, a Thomson Reuters research report showed on Wednesday. The report said the world’s second-largest economy aimed to transform from a “made in China” to a “designed in China” market, with the government pushing for innovation in sectors such as automobiles, pharmaceuticals and technology.

However, legal experts said China would need to do more before it can lead the world in innovation as the quality of patents needed to improve. The government provided attractive incentives for companies in China to file patent applications, regardless of whether a patent was eventually granted, they said. (my emphasis)

The Thomson Reuters report said published patent applications from China were expected to total nearly 500,000 in 2015, following by the United States with close to 400,000 and Japan with almost 300,000. Published applications from China’s patent office have risen by an average of 16.7 percent annually from 171,000 in 2006 to nearly 314,000 in 2010, data from Thomson Reuters Derwent World Patents Index showed.

During the period, Japan had the highest volume, followed by the United States, China, Korea and Europe, the report said. It did not give figures for 2011.

I’m sure the discrepancy between filing and granting patens will soon be resolved, after all patent applications are filed with the China Patent Office. Whether the merits of a patent are verified in other countries before extension is given is hard to determine.

The scoffing argument “the quality of Chinese patents is low” misses the point. If the purpose of patents is to thwart competitors, “quality” is no longer the issue. On the contrary: the poorer that quality of the patent, the easier it is to litigate – particularly when the object of litigation is written in impenetrable Chinese.

With China already default industrial producer and master of the supply chain (such mastery can’t be patented) – and soon throwing fistfuls of paper patents to scare off competition – expect the discussion on intellectual property rights to take a different turn.

The turnaround of the argumentation might be aided by changes in technology. Big profits are made increasingly through fashion (e. g. Apple-products), convenience (natural monopolies like Microsoft), or third party payments (google, health care). Intellectual property may play a subordinate role in this context. Accommodation may be the outcome, leading to less patent litigation – which has now became a major transaction cost.


[1]           Dominique S. RITTER (2004): Switzerland’s Patent Law history. http://law2.fordham.edu/publications/articles/200flspub6401.pdf

[2]           See Michael PERELMAN (2002): steal this idea. Intellectual property rights and the corporate confiscation of creativity. Palgrave, New York. P. 3