Innovation strategy can be spot-on

While China's growing innovation capacity has found mention in recent foreign political debates, those debates focused more on vilifying the country for intellectual property rights (IPR) "theft". This portrayal unfortunately provides a skewed outlook on the IPR and innovation system in China.

China's achievements in IPR protection deserve better recognition, and it is important to understand that the main reason for this progress is linked to growing innovation in the country. China has come a long way in the last decade in terms of dramatically improving its IPR environment, particularly its regulatory environment. While more remains to be done, IPR enforcement in China has improved in several ways over the years. These advancements have in part been a product of, and a contributor to, China's growing innovation capacity.

But some well-intentioned efforts to boost IPR in China and therein stimulate innovation are unfortunately misguided, with some even being counterproductive. As discussed in detail in a 229-page study published recently by the European Union Chamber of Commerce in China, there are a variety of patent-related policies and practices that are in some ways hampering, rather than facilitating, healthy innovation in China.

One key area is what appears to be an overemphasis on quantitative patent targets. The chamber study uncovered 10 national-level and over 150 provincial/municipal quantitative patent targets, most of which are intended to be met by 2015. Certain performance evaluations are even linked to the targets.

While commendable in terms of ambitiousness, the emphasis on these patent targets arguably misses the mark in innovation building. Patent filings by themselves are poor single indicators of innovation in China because they do not measure whether the patented invention is actually transformed into something useful, that is, becomes an innovation.

One needs to employ patent "quality" related indicators to better gauge how patents are actually feeding into innovation. According to the chamber study, while China led the world in domestic patent filings in 2011, it has a long way to go in producing a higher proportion of quality patents.

The argument put forward by several scholars and government officials I have had the pleasure of talking with in support of the target strategy is that China should encourage quantity of patents first to build awareness - and then focus on quality. In some respects, this strategy indeed makes sense. And certain ministries, like the State Intellectual Property Office, have issued some commendable policies meant to improve patent quality.

However, it is not necessarily going to be easy to create better patent quality and innovation in China, and a range of policies and practices still need to be reformed, and sooner than later, to facilitate this transition. A different approach than that used in the past for export-led and inward-investment-reliant development is required, namely a more holistic focus on quality, and therefore creating nurturing circumstances rather than over-reliance on quantity and a few quantitative goals.

To start with, a better policy framework to measure the effectiveness of efforts to stimulate quality patents and innovation could be established. This could, for example, take the form of a healthy composite of indicators to be used at multiple levels of government, including solid patent quality indicators (for example, life spans of patents) and measures of educational capacity, availability of financial credit, returns on research and development investment, certain products-to-market, and so on.

Beyond the patent targets issue, a wide range of other policies intended to promote patents and innovation would benefit from reform. The recent revisions to the draft Service Invention Regulations (for inventor remuneration) require serious rethinking. Other measures include a number of tax and other financial incentives that do not optimally consider what types of innovations, if any, will result from the policies.

There are certain policies that are arguably misguided by nationalism, which may not ideally stimulate quality patents and innovation. These include certain "indigenous IPR" programs and standardization policies, among others.

A host of rules and procedures surrounding patent enforcement deserve reform, as do certain restrictions on the review of patent applications and patentability of inventions.

Various other types of patent-related measures also deserve re-thinking.

When reforms of these policies and practices are combined with continued efforts to improve IPR awareness and other facets of the IPR environment in China, and with fundamental improvements in the educational and financial credit systems, China will surely become a more competitive innovation economy. Rather than IPR violations, a more central issue in foreign elections may then be "how can we better compete with Chinese innovation?"

The author is manager of the IPR Working Group at the European Union Chamber of Commerce in China and author of Dulling the Cutting Edge: How Patent-Related Policies and Practices Hamper Innovation in China.

(China Daily 12/18/2012 page9)