Patent Subsidy in China: A Reformation from Quantity to Quality

Haoyu Zhou (Elliot)


It was known for many years that the Chinese government provided policies for subsidizing patent applications. The policy was originally designed to encourage innovators to become more familiarized and educated with the patent system, and to help startups and research institutes to overcome a difficult time when they have innovative ideas but a tight budget for patent applications. China is not alone for providing patent subsidies, as Japan and Korea also offered similar policies on patent subsidies historically. Undoubtedly, the patent subsidies were good in a sense that they helped the public of China from knowing nothing about the "patent game", to the largest patent filer globally. 

 

However, the patent subsidies have been led astray by Chinese corporate these years. A number of companies and individuals are taking advantage of the policy, treating it as a loophole for making profit. Some corporate applied for a large quantity of abnormal and valueless patents in a hope of obtaining more subsidies. They submit false technology and data to their patent agent, and ask the patent agent to draft and file false patent content to the China National Intellectual Property Administration (CNIPA) and eventually be disclosed to the public. Conceivably, even if these patents were granted (this is not surprising as utility model and design applications do not go through substantive examinations), they are practically meaningless to the industry, and are notoriously known as "junk patent". These patents are only in the appearance of patent for the purpose of obtaining subsidies, but are not useful at all for research and development of the technology in the industry. 

 

The office of CNIPA has realized the seriousness of this problem, and issued a notice for monitoring and investigation on subsidies relevant to patent recently. The notice mainly include the following points. 

(1) It is not allowed to subsidize Chinese domestic patent applications that are not granted.

(2) The amount of patent subsidy shall not exceed the total of official fees and the attorney's fees. 

(3) Repeated patent subsidization at multiple levels of government shall be avoided. 

(4) Any patent applicants or patent agents who file abnormal patent applications shall be seriously punished. 

 

Soon after issuance of the notice, Shanghai IP office published a New Method for Subsidizing Patent which stipulates that, from the start of 2019, the subsidy for utility model and design applications will be abrogated, and the subsidy for invention patent applications shall be no greater than 2,500 RMB (around 350 USD), provided that the invention patent application is granted - an amount that is almost half as it was used to be.

 

On the other hand, in order to encourage Chinese applicant to file overseas patent, the New Method stipulates that the granting of overseas invention patent through either PCT national phase or Paris Convention could be subsidized for a maximum of 50,000 RMB (around 7100 USD) and 40,000 RMB (around 5700 USD), respectively, and each invention patent application can be subsidized in a maximum of 5 overseas countries/territories. 

 

With advent of policies for cutting domestic patent subsidies while increasing overseas subsidies, we foresee there will be a huge leap in Chinese IP protection. Namely, the corporate that considers patent as "rigid demand" will continue to apply for high-quality patents, while the opportunistic will be rid of from the market. Moreover, those who invest heavily on R & D and who believe they have cutting-edge technology will be inspired to apply for overseas patent instead of being cocooned in China. As a result, we foresee the number of patent filings in China will stay stable or at least not increasing too rapidly as before, whereas the number of outgoing patent applications from China to other countries will go through a surge in 2019. The new patent subsidization policies in China will trigger a period of reformation for Chinese patent from quantity to quality.