Jacob Schindler

It is IP week in China, and that means we’ll be getting a lot of statistical insight into China’s relatively closed court system in the coming days as the Supreme People’s Court releases white papers summing up how many IP case were filed and by whom in 2016.

The specialised IP court in Shanghai has already released some figures on its workload from the past year, showing that civil patent litigation cases increased by 20% compared to last year. The involvement of foreign entities appears to be holding fairly level at 15% (it was reportedly around 16% last year). The report names BASF, HP Inc and Mitsubishi Electric as foreign parties involved in lawsuits, and says industrial companies including Sweden’s Sandvik and Japan’s SMC Corporation have been among the most active on the plaintiff side.

It’s the same story in Beijing, with consultancy IP House reporting that cases involving foreign parties accounted for about 22% of the total (up slightly from 20% last year). Hong Kong, Macau and Taiwan parties were involved in another 5% of Beijing IP Court cases. So while IAM certainly reported on more high-profile cases featuring foreigners in the last year, the overall level of foreign-involved litigation hasn’t necessarily exploded.

But China’s IP system is advancing rapidly, and there’s increasing evidence that this presents an opportunity for IP-based outfits – see, for example, the increasing activity by NPEs in the market. But in terms of the broader business environment, the feeling is the exact opposite. While the American Chamber of Commerce’s latest annual report on China once again praised improvements to IP protection, overall it said Western companies face the worst barriers in decades there. The group said more of its members are dialing back investment in the country.

It’s hard to believe this isn’t affecting the IP market as well. I’m reminded of a recent conversation I had with a contact in Beijing. He’s been in the country for about six years now and operates an IP strategy consultancy with a Chinese partner. Though he works with both local and foreign clients, he says the overall business climate has him questioning his viability more and more. He told me: “My decision to relocate here and then to start an IP strategy business was based on two trends: that China would become more and more open to the outside world, and that Chinese companies would become radically more innovative.” He now says it’s clear the first is no longer true, while the jury is still out on the second.

General practice US law firms are feeling the squeeze in China, according to recent reporting, as outside investment in the country slows. Of course, a large proportion of IP work is insulated from this type of pressure. You can bet that however much multinational companies draw back their exposure to China, one thing they will not cut back on is protecting their IP assets there, including through enforcement. But it does strike me that in recent months I have seen a lot of high-profile patent partner moves among international law firms in China, suggesting there is some amount of competition or consolidation happening. A longtime legal market observer told IAM he thinks foreign law firms, especially those that aren’t IP specialists, are slowly but surely pulling back investment in China.

It is probably not positive for anyone when the IP environment and the business environment are heading in opposite directions. A better trade situation would likely do a lot for foreign confidence in the Chinese IP system, something that officials here have worked hard to earn through continual reforms. And a more open market would almost certainly be more conducive to China developming more homegrown innovation.

The IAM Asia team will soon be back in Beijing for IPBC China next Tuesday at the Grand Hyatt Hotel. The first topic on the agenda is ‘Outsiders looking in and insiders looking out’, which is sure to further explore how foreign and Chinese companies can both make the most of China’s IP market.