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Trademarks and Patents in China: the Impact of Non-Market Factors on Filing Trends and IP Systems

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Trademarks and Patents in China: the Impact of Non-Market Factors on Filing Trends and IP Systems Trademarks and patents in China: The impact of non-market factors on filing trends and IP systems January 2021 Trademarks and patents in China: The impact of non-market factors on filing trends and IP systems January 2021 USPTO Project Team: Michael Mangelson Elaine T.L. Wu Michael Diehl Lubing (Larry) Lian Qian (Kelly) Sheng Duncan Willson Contact For questions or inquiries, please send an email to [email protected]. Acknowledgments: We thank colleagues in the USPTO’s Office of Policy and International Affairs for helpful drafting suggestions, research, and analysis. Mary Critharis and Andrew A. Toole provided especially insightful comments. Introduction A growing number of suspect trademark applica- mandates, bad-faith trademark applications, and tions filed in the United States from China prompted defensive countermeasures. This paper examines the the U.S. Patent and Trademark Office (USPTO) to reasons for China’s increased filings, including the study the reasons for this development. The volume contribution of these non-market factors, and high- of trademark and patent applications in China is the lights how filing numbers overstate innovation and highest in history. In 2019, relevant authorities in brand creation. Additionally, this paper explores how China received 7.8 million trademark applications and patent and trademark filings motivated by non-mar- 1.5 million utility patent applications, accounting for ket factors have affected the USPTO, stretched the nearly half of global totals. These numerical trends capacity of China’s patent and trademark examination have attracted considerable attention.1 In addition systems, and cluttered China’s registries, which com- to the market factors that normally drive application plicates clearance searches and can narrow the scope volume in any country, China’s filings are influenced of available protection. by non-market factors such as subsidies, government Trademark and patent application trends in China In 2019, the China Trademark Office received 7.8 authorities around the world in 2019, China received million trademark applications, while the China more than half (51.4 percent), when measured National Intellectual Property Administration (CNIPA) by class count5 (which harmonizes comparisons received approximately 4.3 million patent appli- across jurisdictions).6 Figure 1 shows that filings cations of all types.2 Internationally, China’s filings in China in 2018 surpassed those of the other under the Protocol Relating to the Madrid Agreement members of the so-called TM5 (the five largest Concerning the International Registration of Marks trademark offices in the world: China, the United (Madrid Protocol) are rising, as are its filings under the States, South Korea, Japan, and Europe). Madrid Patent Cooperation Treaty (PCT),3 which surpassed Protocol filings by Chinese applicants are growing those of the United States for the first time in 2019.4 but are still low compared to China’s large domes- tic filing numbers. According to World Intellectual The magnitude of China’s filings is striking when Property Organization (WIPO) country filing data considered in relation to global totals. In terms for 2018, the United States leads in Madrid Protocol of trademark applications submitted to domestic filings, followed by Germany, then China.7 1 Xinhuanet, “Int’l Community Highly Praises China’s Efforts in IP Protection,” March 1, 2020, www.xinhuanet.com/english/2020- 03/01/c_138832955.htm. See also Hong Xiao, “UN: China Now First in Patent Applications,” ChinaDaily.com.cn, April 8, 2020, https:// global.chinadaily.com.cn/a/202004/08/WS5e8d2f75a310aeaeeed50b02_1.html, which notes, “China last year became the top source of international patent application filings, surpassing the United States.” 2 CNIPA Department of Strategic Planning, Intellectual Property Statistics Briefing 2019, Issue 28, January 3, 2019, 1, www.cnipa.gov.cn/20200203123754249256.pdf (last accessed on Dec. 14, 2020). 3 The Patent Cooperation Treaty does not provide for an international patent but rather for a streamlined application process: appli- cants can seek patent protection for an invention simultaneously in a number of countries by filing a single international application. Applicants must then enter into the national phase in each country to proceed toward grant of the patent in that country. 4 Stephanie Nebehay, “In a First, China Knocks U.S. from Top Spot in Global Patent Race,” Reuters, April 7, 2020, www.reuters.com/article/us-usa-china-patents/in-a-first-china-knocks-u-s-from-top-spot-in-global-patent-race-idUSKBN21P1P9. 5 Some national trademark systems permit an applicant seeking to register a mark in multiple classes of goods to file a single application, whereas other systems require separate applications for each class. To promote comparisons of trademark application activity across dif- ferent systems, the World International Property Organization (WIPO) provides figures by “class count.” See WIPO, World Intellectual Property Indicators 2019 (Geneva: WIPO, 2019), 74, www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2019.pdf. 6 WIPO, Intellectual Property Indicators 2019, 7. 7 WIPO, Intellectual Property Indicators 2019, 112, Figure B49. United States Patent and Trademark Office 1 Trademarks and Patents in China Figure 1: Trademark filings in TM5 countries and regions, 2018 JPO 166,681 / 17,802 Direct Filings KIPO 185,698 / 14,373 International Registrations EUIPO 127,322 / 25,171 USPTO 442,791 / 24,416 7,301,991 / 68,718 CNIPA Source: Reproduced from figure on page 1 of “TM5 Common Statistical Indictors 2018”(the latest available as of this writing),http://tmfive. org/wp-content/uploads/2020/06/CSIGraphstm5_2018.pdf. Note: CNIPA = China National Intellectual Property Administration; EUIPO = European Union Intellectual Property Office; JPO = Japan Patent Office; KIPO = Korean Intellectual Property Office; USPTO = United States Patent and Trademark Office. In terms of patent applications, filings for utility model filed globally in 2018, according to WIPO data.10 Figure patents8 and design patents accounted for approxi- 2 shows that from 2013 to 2017, China’s utility patent mately 64 percent of total patent applications and 82 filing numbers far exceeded those of the other largest percent of patent grants in China in 2018.9 Although patent offices in the world, including the rest of the applications for utility patents (termed “invention IP5 (the United States, Japan, South Korea, Europe) patents” in China) made up only about one-third of and patent offices in other countries. As noted earlier, all patent applications filed in China in 2018, they still China recently accounted for more PCT applications numbered more than 1.5 million and accounted for than any other country. nearly half (46.4 percent) of utility patent applications 8 China’s utility model patents generally undergo limited examination and have a duration of 10 years. See CNIPA, Patent Examination Guidelines, Part I, Chapter 2, Section 11. See also Article 42 of the Patent Law of the People’s Republic of China, 2020. In China, an appli- cant may apply for a utility model patent and an invention patent on the same invention but may ultimately hold only one patent on the invention. See Article 9 of the Patent Law. 9 CNIPA, 2018 Patent Statistics Annual Report: Total Applications/Grants/In Force for Three Kinds of Patents Received from Home and Abroad (Beijing: CNIPA, 2019), www.cnipa.gov.cn/tjxx/jianbao/year2018/a/a1.html (patent application figures); CNIPA, 2018 Patent Statistics Annual Report: Distribution of Domestic and Foreign Patent Applications Authorized Annual Status (Beijing: CNIPA, 2019), www.cnipa.gov.cn/tjxx/jianbao/year2018/b/b1.html. 10 WIPO, Intellectual Property Indicators 2019, 7. WIPO also reported that in 2018 the number of China’s utility patent applications was “similar in magnitude to the combined total of the offices ranked two through 11.” WIPO, “World Intellectual Property Indicators: Filings for Patents, Trademarks, Industrial Designs Reach Record Heights in 2018,” press release 838, October 16, 2019, www.wipo.int/press- room/en/articles/2019/article_0012.html. United States Patent and Trademark Office 2 Trademarks and Patents in China Figure 2: Utility patent applications filed by IP5 and other countries, 2013–2017 2.5 M 2,087,361 2,119,610 2 M 1,845,409 1,680,339 1,594,408 EPC states 1.5 M Japan R. Korea P.R. China 1 M U.S. Others .5 M 0 2013 2014 2015 2016 2017 Source: Reproduced from Figure 3.4, IP5 Statistics Report 2018, www.fiveipoffices.org/statistics/statisticsreports/2018edition. Note: EPC = European Patent Convention. Non-market factors that help drive trademark application numbers Trademarks confer commercial value to brand government mandates, filers acting in bad faith, owners by distinguishing their goods and ser- and filers employing good-faith countermeasures. vices in the marketplace. A trademark may also, The first of these non-market factors is subsidies. by clearly establishing rights in and relating to the China has reportedly adopted more than 70 sub- mark, facilitate attempts by the brand owner to national trademark subsidy measures, including engage in commercial relationships with others measures for domestic and foreign applications and and to access capital. Although these observations registrations.11 Because the amount of these subsidies hold true in every country, additional non-mar- often exceeds the cost of registering a trademark, a ket considerations drive trademark applications rational economic actor in China may choose to pur- in China. Such considerations include subsidies, sue a trademark application without any intention to use the mark in commerce. 11 As of July 2019, the USPTO cataloged 77 subnational trademark subsidy measures in China. While some of China's domestic trademark subsidies have since expired or have been replaced with other programs, China is expanding incentives to register trademarks, particu- larly abroad. See, e.g., Jiangsu Province Opinions on Further Implementing Trademark Strategy (Su Zheng Fa [2010] No. 115); Zhejiang Province Opinions on Further Implementing Trademark Strategy (Zhe Zheng Ban Fa [2014] No.
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