Have you seen companies boasting about the sheer number of their patents before? As if patent filing numbers were a key performance indicator (KPI)? I have.

Have you seen that being applied to entire countries? I have.

Does this make sense? Partly yes, because patent applications are a side-product of innovation, and therefore the “filing numbers per year” value is a mathematical derivative of the innovative initiatives of that applicant, at the time of filing these patent applications.

But that is just as far as I would be willing to go. I have personally seen companies going bankrupt that had large patent portfolios. Among them one of the largest computer memory manufacturers of the world.

So patents are not insurance against economic failure.

You are now ready for what is to come.

Animated PCT Filing Numbers Over Time, Sorted by Country

That is what triggered my attention today: I saw this video clip about animated PCT filing numbers over time, sorted by country, I have taken that video from the WIPO website (click here). Please watch it:

 

You have just seen the rise of PCT applications that were filed by Chinese applicants rising from as little as 2,503 in the year of 2005 to as many 58,990 in the year of 2019, a 23.5 times increased number of PCT filings in only 15 years. China has now overtaken the United States of America in filing PCT applications.

The number of new PCT filings by Chinese applicants doubled almost every 4 years. That is equivalent to an annual increase of almost 20%, and that over a long period of 15 years.

Being an engineer by training, I find such growth exceptional. Almost nothing else shows such growth in natural ways.

When I talk with my Chinese peers they explain to me that China went through a long period of growth and – seen on a larger time frame – that the same growth may not be sustainable in the future.

But what does that mean?

Pareto 80/20 Principle At Work: China and the World GDP

The PCT filing form covers currently 155 (or so) countries. Following the Pareto principle, 20% of these countries (i.e. 31 countries) represent 80% of the world`s economic power.  And because the Pareto principle is intrinsically fractal, 20% of 20% of these countries (i.e. 6 countries) represent 80% of 80% (= 64%) of the world`s economic power.

Let`s find out who are these 6 countries.

The following table has been taken from Wikipedia:

Actually, when discussing World economical matters, one should know the at least the biggest five (5) players by heart: US, CN, JP, DE, and the UK.

China is without question a very powerful economic force in the current world.

Wikipedia says (click here) that the GDP of China in the year of 2005 was (only) 2,286.69 billion US$.

So over a period of 15 years, China`s GDP increased by a factor of 6.3. That is an increase of 530%. Repeat after me: “five”. “hundred”. “thirty”. “percent”. Now that is a lot. And it is real.

Anyone who has not heard that loud shot is not realistic.

China is today an economic super-power. That is what I call success.

The number of PCT patent applications filed by Chinese entities increased by a factor of 23.5 during the same period of time. That is a bigger increase than the corresponding growth in GDP. But that is not a much bigger increase, it is less than one magnitude bigger.

China`s Achievements in Augmenting Her IP System

China has not only grown tremendously over the past 15 years, and even more so if seen over a period of 30 years. And China has augmented her Intellectual Property system tremendously, too. While China in 2005 was still a place where you could buy counterfeit products literally at many street corners, this has stopped in the meantime. China has installed a system of specialized IP courts with technically trained IP judges that are also legally qualified.

Decisions of these China IP courts that I have studied so far all have proper reasonings. One may not like the individual reasonings, but that lies in the very nature of court decisions. In contrast to that, I have seen court decisions from European countries that came without any comprehensive reasoning at all. Only at a later time, a law professor came out with an article that explained what those judges may have had in mind when they rendered that decision.

I have also seen a survey of the Beijing Patents Court decisions between genuinely local Chinese parties and foreign parties, and that survey showed that neither being a local Chinese party nor being a foreign party would give you any significant advantage in court.

The Chinese IP system seems to be fair to me, and if I had the choice of a court venue being in Beijing or Shanghai over any other place in the known IP world, I would not hesitate to rank  China within the top 6 positions. That is what I call success.

But I am digressing. Let´s talk about innovative power.

Innovation Is Not Measured By The Number Of New Patent Applications Filed

Very often I hear people talking about innovation, without being able to define it.

Here is a simple and also natural definition of innovation:

Innovation is an idea that is turned into a product or a service that generates profit, in a short time.

That`s it. Whatever you create, if it generates profit then you are a successful innovator.

The word “patent” is not needed for that. Nobody requires you to protect your new product or service in order to sell it. In fact, 99% of all innovation in this world happens without any patent in place. And there is certainly no Non-Disclosure Agreement (NDA) in 99.99% of all innovations.

Patents and other Intellectual Property rights are helpful when you are testing the market response with a new product idea. Having IP in place will make sure that competitors cannot easily copy a solution. Despite that, it is a very common situation that a large corporation with a large patent portfolio cannot appropriately address a competitor that copies one of their products.

In short, having IP in place will neither make sure that your product will generate profit. People often confuse the cause and the effect when it comes to IP.

Then there are other motives to file patent applications. One of them is building up a patent portfolio around a specific technology that may help to collect license fees from competitors in the same technical field. For startup companies that are seeking investors, patent applications render a sense of substance and security over those other startup companies that have no patent applications at all. But that are more remote motives for filing patent applications, as compared with the genuine goal of addressing competitors that are making copies of innovative products.

Does it hurt to have many patent applications? No, having patent applications does not hurt if you can afford them. You can see that we are again back to the question of substance.

 

Substance vs. Style

Now, this leads me to one of the underlying principles of my website: substance vs. style.

In life, it is all about success indicators vs. success, wannabe vs. genuine, wishful vs. real, and success vs. significance.

For my entire life, I have been striving to find the ultimate root cause of many things.

And in Intellectual Property, it is the following: successful innovation causes sound profits and growth. And IP rights such as patents are only a side-effect of successful innovation. That applies to inventors, to companies, and to entire countries.

Never to be confused: successful innovation vs. a large number of patents.

In short: don´t look at China´s new PCT application filing numbers so much. Look at her GDP.

 

Call to Action

Change your mindset.

Follow substance and not style.

In every aspect of your life.

 

Martin “Real Thing” Schweiger