On January 27 the World Intellectual Property Organization (WIPO) announced its 2008 statistics for patent filings. China moved up in the rankings, to number six globally, nearing tech leaders, such as Korea, and  surpassing the UK, Canada and other developed countries. At the same time, a Chinese company tops the ranking of corporate patent-filers for the first time, surpassing patent-mavens Panasonic, Philips and, well, everyone else because that is what it means to be number one.

That company, of course, is China’s bellwether Huawei Technologies - fuel to the fire for Huawei’s famed ‘wolf-culture‘ of hard work, passion, and ruthless competition.

I thought this news about Huawei was worth posting because it is a significant globally-recognized data point supporting the trend of China’s drive to be more innovative. In Supertrends of Future China, we noted China’s increased spending on R&D through its universities and research institutes (in various public and public-private partnerships), increased domestic patent filings, and relocation of multinational R&D centers to China (especially after new tax credits were introduced in 2007 / 2008’s revamping of corporate tax policy). All of these are indicators of a concerted effort to make China a more technology-intensive country, with two caveats.

First, it should be noted that WIPO patent filings are not an accurate reflection of domestic patent applications or patents granted overall. WIPO’s ranking refers to patents filed under the Patent Cooperation Treaty (PCT), in which a patent must be successfully filed in a signatory country or region before it is accepted under WIPO’s PCT for global protection. The PCT system enables the filing company to protect its intellectual property in 153 Contracting States with a single application, thereby significantly reducing costs and partially solving the problem of establishing and protecting IP in foreign territories.

Second, in terms of the individual company patent filings, Huawei coming in first for the first time does not necessarily indicate a broader trend of Chinese companies becoming more innovative. Filing under WIPO’s PCT could merely indicate how aggressively a company intends to defend patents abroad. WIPO’s PCT makes this much easier, as mentioned in the previous paragraph. Furthermore, a precipitous decline in patent filings in 2008 by Philips and Panasonic was more likely the true cause of Huawei’s placing first. With only one other Chinese company - ZTE - in the top 100, China’s strength in patenting versus that of global competitors is still negligible.

However, is there any additional evidence concerning patents that supports the contention that China is indeed becoming more innovative? For that, you could look to domestic applications and patents granted by the State Intellectual Property Office (SIPO). In this regard, China appears to be getting more innovative, with about 317,000 patents granted overall in 2008 (Jan - Nov 2008), up from about 301,000 patents granted in 2007 (Jan - Dec 2007). If you go back further, to 2006, less than 224,000 patents were granted. Globally, China ranks number three in patent-intensiveness, ahead of Germany and Korea (and behind world-leaders US and Japan).

All of the above figures, it should be stated, do not speak to the quality of the patents, and I have not provided a breakdown of patents by type (inventions vs. incremental improvements, for example), but an examination of the data on SIPO’s statistics page does show increases in invention and design patent categories that are slower than overall patent growth in China. Therefore one conclusion might be that China’s large number of patents filed owes more to brute force improvements rather than quality innovation.

Also, it will take China some time to reach the state of the art, but this is still a good indicator of progression on China’s long march up the global value-chain.

Chalk one more up for Huawei’s wolf-culture. At least for now, it is leader of the pack.

Categories: China Supertrends, Innovating