Boardroom optimism about the Chinese market is often not backed up by an intellectual property (IP) strategy. But filing IP in the country should be a default for multi-nationals.
When it comes to registering IP in China, the statistics are staggering.
In 2018, China-based inventors filed the second-highest number of Patent Cooperation Treaty (PCT) patent applications, a 9% increase on the year before. It is easily expected to surpass the US in two years.
Its domestic market has exploded. Growth in patent applications filed in China have rocketed since 2010, yet of the 432,000 that were granted last year, just 25% were foreign.
It's a similar picture of growth for trademarks, so why are some foreign companies still not taking its IP market seriously?
Where is the IP?
Our survey and report on the impact of disruptive technology on IP revealed that despite flagging China as a key market, a surprisingly low number of companies have an IP presence there.
The report's survey of 400 C-suite and legal professionals at large multinationals shows that over two thirds of all companies claim the Chinese market is either 'important' or 'very important' to their IP strategy.
Yet, only 34% have IP filings in the country.
"China has become a powerhouse for IP filing and one of the most important countries to cover for multinational companies. When they file patents internationally, many almost automatically register in China," says Jian Xu, Director, Intellectual Property Attorney at Gowling WLG UK.
Innovations like AI, blockchain and the Internet of Things are disrupting established markets and moving corporate value from tangible assets to the intangible.
And IP is set to play a central role in this new-look, future global economy.
With this in mind, one cannot ignore China's extraordinary transformation from manufacturer to innovator.
The country's flagship inventors specialise in fields highly relevant to disruptive technologies, like digital communications and AI. Huawei, the world's most active PCT filer, filed nearly double the number of PCTs than Mitsubishi in second place.
Understanding the China model
China's IP reputation, however, still needs work.
"There are a lot of media reports that say you cannot enforce IP in China but that is totally untrue," says Jian.
"You really can, although there are some differences in terms of procedure."
It can be easier to either initiate civil litigation or even prosecute criminal charges against counterfeiters now, Jian says, pointing to the country's highly-efficient customs procedures, which help brands by seizing fakes at the border.
While its IP courts, filing processes and enforcement have dramatically improved, the old problems have not gone away.
Foreign companies are still at risk from IP 'hijackers' - for example, Chinese suppliers that file their foreign client's IP without their permission.
"It's really very simple - if you don't file your IP, other people may file it and you could have trouble later," explains Jian.
"But at the end of the day, if you engage with the system and good local counsel, you can do very well in China. And at much lower cost compared to the US."
Making smarter choices in disruptive times
For more insight on the importance of filing IP in China, download our report Multiplicity: Smart choices in disruptive times.