Intellectual Property Rights in China. Zhenqing Zhang

      CHAPTER 2

      The Implementation of Chinese Patent Policy

      In 2007, I met two young patent officials, Mr. Huang and Mr. Jiang, at a national intellectual property rights (IPR) conference in Beijing. Both of them were from central China’s H Province,¹ a province with a reputation for being a center of the production and distribution of counterfeit goods in northern China. A joke I heard from a street peddler from that province exemplifies this reputation. In that peddler’s words, counterfeit products in his province ranged from projects “as big as ceramic tiles covering the Great Wall and gauze masks for hippos in Africa, as small as shackles for fleas and condoms for cockroaches.”² Before I arrived at their hotel room, I called them on the phone to ask if they would like to schedule an interview with me about patent protection (zhuanli baohu) in H Province. They replied enthusiastically, telling me that they would love to discuss the issue of patent work (zhuanli gongzuo). Too excited to have access to two IPR officials, I almost ignored the subtle but important difference between “patent protection” and “patent work.” In the beginning of the interview, I raised the prepared questions, most of which emphasized patent protection. I asked under what conditions effective patent enforcement would mostly likely happen. The two young officials answered my questions in a polite way, but I could easily sense that they were not as interested in my questions as I had expected. When the interview was nearly completed, I raised a question not previously on the top of my list: “As an inland province, your economy is not as export oriented as provinces in East China. Can you describe the patent strategies of the province’s export-oriented enterprises, even though there are not as many?” That question suddenly sparked the interest of my interviewees. They enthusiastically described how many patent applications were filed each year under their sponsorship, how many of them were approved, and how the patent application and approval rate grew annually. Without being asked, they singled out a successful example of their patent work: how the intellectual property office (IPO) of Changxi,³ a city in the northern part of H Province, helped a local company defend itself in a patent lawsuit with a Japanese company, how that company boosted its export volume and grew from being a small business player into a vibrant competitor, how that company’s success benefited the local economy, how one of their colleagues won an annual prize for his excellent work to help that company, and even how that achievement helped the Changxi City IPO bargain for a better share of the city’s annual budget. The interview lasted another forty minutes. Instead of being frustrated that the interview did not proceed in the direction as planned, I was excited to learn an unexpected, albeit important, finding: there is an important difference between my interests (and probably that of many other observers of Chinese patent policy) and the interests of the Chinese patent policy practitioners on the ground. The former are more interested in “patent protection,” that is, how high-quality enforcement can be delivered to protect the interests of patent holders. For the latter, however, patent protection is only one part of “patent work.” More important for them is how patent protection can boost their foreign trade and promote local economic development. Indeed, the case of Changxi City that the two officials proudly cited cannot be called an example of “patent protection” in a strict sense. In almost all my interviews with the Chinese patent officials, I was told that patent protection had equal importance in the development of the patent industry. But the finding gained from the two patent officials spoke for itself: there is a hierarchy of importance in their policy agenda between “patent work” and “patent protection.” This hierarchy has a tangible impact on how effectively patent cases are enforced.

      The greater importance of patent work over patent protection was reinforced during a research trip to H Province in January 2013. I met Mr. Huang and Mr. Jiang again after many years. Having been friends for the past several years, they invited me to dinner. Both Mr. Huang and Mr. Jiang celebrated their promotion several months earlier, but they were assigned to different sections. Mr. Huang’s section was in charge of, in his words, the development of the patent industry while Mr. Jiang’s section was in charge of overseeing the enforcement of patent laws. I was invited to the guest seat of the dinner table. Mr. Jiang insisted that Mr. Huang should sit at the seat facing the door, known as the “upper seat.” Out of Chinese modesty, Mr. Huang declined. But Mr. Jiang replied, “Of course you should sit at the upper seat. You are our real boss!” Eventually, Mr. Huang took the upper seat. A fine dinner started. In Chinese culture, the dinner table is an important place for people to discuss business matters. The order of the seats at the dinner table is an important indication of the bureaucratic hierarchy.⁴ After drinking wine, Mr. Jiang told me half-jokingly, “Did you ask under what conditions effective patent enforcement would happen? How come you smart scholars just like to pose stupid questions? You scholars just view things differently from us. It all depends on our boss.” He pointed to Mr. Huang and said, “If our boss wants us to enforce the case in an effective way, that case will be an effective one.”⁵

      Mr. Jiang had a lot of wine during dinner, but his comment should not be interpreted as due to the wine. His comment indicated that the Chinese government does not protect intellectual property rights for their own sake. Rather, the Chinese government’s ultimate goal of IPR work is to build its own IPR industry. IPR protection is not an end in itself. An IPR scholar from the Chinese Academy of Social Sciences (CASS) explained the policy arrangement in a more explicit way. According to him,

      When people talk about IPR, the first thing that comes in mind is how many counterfeit products are seized and how many IPR infringers are brought to justice. But shouldn’t we also think about the nonobvious aspects of IPR work? In fact, our work consists of IPR creation, application, protection, and management. IPR protection is only part of that broader scheme, with the other aspects constituting the foundation of IPR activities. If the economic rationale behind IPR theft remains unchanged, we can only expect IPR infringement to happen constantly—no matter how serious we are about IPR protection.⁶

      This chapter explores the relationship between patent enforcement and other aspects of, in the patent officials’ words, “Chinese patent work,” with an emphasis on the mechanisms to bring about effective patent enforcement. I argue that patent enforcement should be understood as occurring at the interface between the Chinese state and societal actors. An overemphasis of one side and ignorance of the other will at best yield an incomplete understanding of the entire picture. As a developing country, China pursues dual goals in implementing its patent policy: (1) upgrading the country’s industrial competitiveness through the development of the patent industry and (2) protecting patent holders’ interests by punishing patent infringement. The second goal serves the first goal. The more patent protection is believed to serve the overall agenda of “patent work” and help to promote economic development, the more likely effective enforcement will occur. Otherwise, patent enforcement will yield at best a lukewarm result.

      This chapter is organized as follows: the first section discusses the implementation of China’s patent policy on the state side—namely, IPR special tribunals and IPOs at various levels. On the basis of analysis by other scholars, I argue that enforcing patent laws is only part of the responsibility of the Chinese patent bureaucracy. Equally, if not more, important is to establish a policy environment conducive to supporting the creation of high-quality patents and apply those patents to benefit the market. The second section discusses the uneven results of Chinese patent policy on various Chinese business actors, which in turn creates different attitudes toward patents. The business actors include foreign companies investing in China, Chinese elite domestic private enterprises, Chinese state-owned enterprises, and the majority of Chinese domestic private enterprises. In an important way, their different attitudes toward the patent norm not only influence the effectiveness of patent enforcement but also reflect an uneven level in the thoroughness of the Chinese political and economic transition.