Intellectual Property and Chinas National Strategies and Policies

Intellectual Property and China’s National Strategies and Policies for Innovation LIU Jian The State Intellectual Property Office of P. R. China July 2007 国家知识产权局 State Intellectual Property Office

Overview I. China’s National Strategies and Policies for Innovation l Reasons and potentials of adopting the strategies l Main goals of the national strategies l Priorities of the science & technology innovation under the national strategies l Policies and measures for guaranteeing implementation of the strategies II. Intellectual Property and Indigenous Innovation l Importance of IP for indigenous innovation l Major achievements in China’s IP undertaking l China is facing various challenges l Further enhance intellectual property work 2

I. 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)” l Promulgated in January 2006 in China l Initiated in July 2003 l Its formulation work was headed by Premier Wen Jiabao l Over 20 ministries and departments and more than 2000 experts involved in formulation of the Outline 3

I. National Strategies and Policies for Innovation Reasons behind adoption of the innovation strategy l Need to create an innovation-oriented country l Need to maintain long-term and rapid economic growth l Need to realize sustainable development l Need to upgrade industrial structure and transform the mode of growth, from resource and labor-driven to innovation-driven economy l Improvement of competitiveness 4

I. National Strategies and Policies for Innovation Potentials of building an innovation-oriented country l Rapid economic growth provides a solid material basis l Relatively complete scientific and technological research and development framework established l Adequate and advantageous human resources for science and technology research l Advanced in some specific technical fields, incl. biology, nanom, space technologies l Abundant in spirit of of innovation and creativity 5

I. National Strategies and Policies for Innovation Main Goals By 2020, China will be one of the innovation-oriented countries l R&D investment is 2. 5% of GDP l Contribution rate of science & technology progress to economic growth will exceed 60% (900 billion RMB) l Dependency ratio foreign technologies will decrease to below 30% l Annual number of granted domestic invention patents and SCI papers will rank among world top 5 6

I. National Strategies and Policies for Innovation Building indigenous innovative capacity includes three aspects l Capacity to make original innovation in the domain of basic research such as scientific discovery, and technological inventions l Capacity to integrate existing technology, emerging technology and inventions in order to create new products or business lines with market competitiveness l Capacity to absorb, digest and improve imported technologies, and to recreate IPR based on these technologies 7

I. National Strategies and Policies for Innovation Indigenous innovation is: l 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 l China’s innovation strategy is global-innovation or learning innovation 8

I. National Strategies and Policies for Innovation Priorities of science and technology innovation Main constraints and challenges l Limited supply and high consumption of critical natural resources which are bottlenecks for economic growth l Environmental pollution and ecosystem deterioration l Social problems such as epidemic diseases l Insufficient technological innovation capacity and lack of independent IPRs and core technologies 9

I. National Strategies and Policies for Innovation Priorities of science and technology innovation l R&D in fields of energy, water resources and environment protection l Improvement of people’s living and health standards is a major mission of science and technology innovation l Development and exploitation of the pre-competitive “common” technologies in order to upgrade industrial structure and provide technological support to SMEs l Reinforcing development and research of basic and pioneering technologies for sustainable development 10

I. National Strategies and Policies for Innovation Improvement of the national innovation system l Enterprises should be the core actors in technological innovation, not only large-scale enterprises but also SMEs l Innovation should be market-oriented and enterprise-universityacademia collaboration further enhanced l To facilitate commercialization of R&D results from research institutes and universities l To intensify intermediary services such as information service, IPR agencies, assets appraisal, investment service and incubators 11

I. National Strategies and Policies for Innovation Implementation of incentive policies for innovation l To adopt favorable public financial policies and to increase R&D input l To improve the legal framework for encouraging and protecting innovation l To establish and improve risk capital and investment capital market l Public procurement l To cultivate a favorable innovation culture l Human resource development l. Optimal use of global innovation resource 12

II. Intellectual Property and Indigenous Innovation Importance of Intellectual Property 1. l 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 l IP in the market economy has the same characteristics as wealth and goods , and it has high added-value. l IP is a necessary tool for the market competition, and is also the foundation of and the thresholds for establishing an innovationoriented country. 13

II. Intellectual Property and Indigenous Innovation 3. IP in the Knowledge-based Economy l knowledge treated as a property has become the most important element for productivity and resources for wealth l IP is a powerful tool for international competition in the era of knowledge-based economy. 4、The Important Role of IP in Indigenous Innovation l A guarantee for a comprehensive development of the economy and society l The main goals and resources for indigenous innovation l An important threshold for the national comprehensive strength of competitiveness 14

II. Intellectual Property and Indigenous Innovation 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” l 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. 15

II. Intellectual Property and Indigenous Innovation l 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. l Third, efforts are to be made to further improve policies for encouraging innovations, and to enhance protection of intellectual property rights l Formulation of a national IP strategy supportive of innovation l …………. 16

II. Intellectual Property and Indigenous Innovation Major achievements in China’s IP undertaking l An IP Legal Framework that suits China’s national conditions and conforms to international practice has been established and operated well. l A Working Mechanism has been set up, including examination and approval of IP rights, publicity and training, intermediary services, academic researches etc. . 17

II. Intellectual Property and Indigenous Innovation Major achievements in China’s IP undertaking l A law enforcement system has been established under which administrative and judicial enforcement are adopted, functioning parallel. l 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. 18

II. Intellectual Property and Indigenous Innovation Comprehensive IP legislation implemented l 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. l conforms to international standards and practice, esp. Trips Agreement. l further amendments are under way, like the patent law, or foreseen in the near future and, more laws and regulations relevant under way 19

Main IP Laws and Regulations Adopted and Amended Title Approval 1 Trademark Law 1982. 8. 23 1983. 3. 1 2001. 10. 27 2 3 Patent Law Copyright Law 1984. 3. 12 1990. 9. 7 1985. 4. 1 1991. 6. 1 2000. 8. 25 2001. 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 6 Regulations on Audio and Video Products Administration Regulations on Customs Protection of Intellectual Property Rights Regulations on the Protection of New Plant Varieties 7 8 Promulgation Implementation 1993. 12. 1 1994. 8. 25 1994. 10. 1 1995. 7. 6 1995. 10. 1 1997. 4. 21 1997. 10. 1 2001. 4. 2 2001. 10. 1 9 Regulations on the Protection of Layout-Designs of Integrated Circuits 10 Regulations on Copyright Collective Administration 2004. 12. 22 2005. 3. 1 11 Measures for the Administrative Protection of Copyright on Internet 2005. 4. 30 2005. 5. 30 2001. 3. 28 Revision 20

II. Intellectual Property and Indigenous Innovation Main International IP Treaties Accessed l l l l WIPO Convention Paris Convention Madrid Agreement (Marks) Berne Convention Universal Copyright Convention Rome Convention PCT 8. Budapest Treaty 9. UPOV 1980. 6. 3 1985. 3. 19 1989. 10. 4 1992. 10. 15 1992. 10. 30 1993. 4. 3 1994. 1. 1 1995. 7. 1 1999. 4. 23 21

II. Intellectual Property and Indigenous Innovation Efficient IP authorities established l l 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: l local IP Offices, incl. provincial, municipal, district, etc local AICs, incl. provincial, municipal, county levels etc. Local copyright administrations, same as above 22

II. Intellectual Property and Indigenous Innovation The State Intellectual Property Office (SIPO) l 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 foreignrelated intellectual property issues are involved. 23

II. Intellectual Property and Indigenous Innovation Progressively intensifying force of law enforcement Dual-track protection mechanism for IP rights l Judicial enforcement -Civil and criminal remedies offered -Special IP tribunal and judges available l l Administrative enforcement -quicker, cost-efficiency, professional, enforceable Supreme Court Judicial Interpretation on Criminal Penalty 24

II. Intellectual Property and Indigenous Innovation Judicial Protection l 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 25

II. Intellectual Property and Indigenous Innovation Administrative Protection Local IP authorities established within local governments, responsible for administrative enforcement of IP and for other IP related matters: l l l 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 26

II. Intellectual Property and Indigenous Innovation 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, -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 3 rd million 27

II. Intellectual Property and Indigenous Innovation Patent applications received (1985 -2006) 28

II. Intellectual Property and Indigenous Innovation Patents granted (1985 -2006) 29

II. Intellectual Property and Indigenous Innovation China is still facing various challenges l IP has become the focal point of international competition. l The era of more frequent IP disputes has come in advance. l Enterprises’ capacity of innovation is still weak and they are unable to have enough indigenous IPRs l IP awareness needs to be further promoted and culture of innovation waits for taking shape. 30

II. Intellectual Property and Indigenous Innovation Domestic vs. Foreign Applications for Three Types of Patents 31

II. Intellectual Property and Indigenous Innovation Foreign Enterprises Intensify Competition in China Market via IP Top Ten Foreign Countries Filing Applications with SIPO Country Applications （2005） Applications (2006) Japan 36221 37848 USA 20395 23494 Korea 9300 10596 Germany 7502 8676 Holland 3988 3721 France 3190 3614 Switzerland 2106 2370 United Kingdom 1613(No. 9) 1813 Italy 1632(No. 8) 1699 Sweden 1101 1492 32

II. Intellectual Property and Indigenous Innovation Top Ten Foreign Companies in China in 2006 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. South Korea Japan Holland Japan South Korea USA Japan Germany Japan Samsung Electronics Co. , LTD 4355 Matsushita Electric Industrial Co. 3067 Royal Philips Electronics N. V. 2503 Sony Corporation 1648 LG Electronics Co. , LTD 1506 IBM 1435 Toshiba Corporation 1211 Seiko Epson Corporation 1144 Siemens AG 887 Hitachi, LTD 836 33

II. Intellectual Property and Indigenous Innovation Foreign Invention Patent Applications Focused on Hi-Tech Proportion of Foreign Applications Wireless Transmission Mobile Telecommunication Television System Transmission Equipment Semi-Conductor Accessories Genetic Engineering Pharmaceutical 93% 91% 90% 89% 85% 75% 69% TV 34

II. Intellectual Property and Indigenous Innovation l The Proportion of Chinese Enterprises that Hold Their Own Indigenous IP Rights Is Too Small l 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. 35

II. Intellectual Property and Indigenous Innovation Core technologies are either imported or controlled by foreign companies l China is the 3 rd largest global trade power, but its high-tech products independently innovated only account for 2% of its total foreign trade. l Civil airplanes are all imported into China from abroad. l High-Tech medical equipment, manufacturing equipment for semi-conductor, integrated circuits and laser fiber are mainly imported. l 80% petrochemical equipment, and 70% numerical-controlled machine tool and advanced textile manufacturing equipment are imported. l Over 50% core technologies of color TV and cell phone are owned by foreign multinational companies 36

II. Intellectual Property and Indigenous Innovation Only a Small Number of Patent Applications are Filed Overseas by Chinese companies l Up to 1999 less than 300 applications filed abroad a year l In 2000 1026 such applications l In 2004 2423 such applications l An average of 1. 86 applications filed broad from 1 million Chinese, while in developed countries the average is over 50 applications. 37

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work 1. l l 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 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 38

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work Main Targets of the National IP Strategy l Improving the legal system and policies for IP l Enhancing IP capacity building esp. capacity of creation, management, utilization and protection of IP, and for promoting indigenous innovation. l Perfecting a supportive system for IP, in particular the information service and training of competent IP professionals 39

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work 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. 40

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work 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. l 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. 41

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work 4. We will effectively protect intellectual property rights by further perfecting the framework for IP protection and by intensifying the force of law enforcement. l 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. 42

II. Intellectual Property and Indigenous Innovation Further Enhance Intellectual Property Work 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. l The culture of innovation, a social environment conducive to respect of others’ IP rights and protection of our own, must be established. 43

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