Chinese patent owners becoming less willing to settle disputes, says new survey

China’s State IP Office (SIPO) has conducted a survey of domestic patent owners each year since 2008, polling its customers on their current practices and future plans when it comes to patent prosecution, enforcement and utilisation. This year, SIPO decided to release the results publicly for the first time. The results reveal that patent owning organisations in China are becoming more willing to enforce their patents through both administrative measures and the courts. In fact, the only dispute resolution mechanism that is becoming less popular over time is negotiated settlement.

About 9,000 respondents participated in the study, with upwards of 80% coming from the corporate world, and the remainder represented by universities, research organisations and inventors. The survey covered a lot of ground (you can read the full Chinese-language version here) but I would like to focus on the sections that covered enforcement, a few of which were helpfully translated into English by DEQI Intellectual Property Law Corporation.

When asked what measures they have taken in the past upon discovering infringement of their patents, 38% said that they have taken no measures at all up to this point. A further 26% have gone no further than dispatching a demand letter. That means about 65% of those surveyed have never taken action through either the relatively fast and low-cost administrative enforcement system, or the more involved litigation process. It’s a good reminder that while the volume of patent litigation in China is large and growing, only a fraction of companies with an infringement grievance have ever dipped their toes in the water.

When SIPO asks Chinese corporates what steps they hope or expect to take in the future, the message is clear - they prefer administrative enforcement:

Enforcement measures patent owners hope to take, 2011-2014

Administrative complaint to patent authority44%43%49%46%
Patent office acting on its own initiative61%60%54%60%
Negotiated settlement40%40%31%26%
Civil court lawsuit19%16%22%24%

Given the option to tick as many choices as they wanted when outlining their future plans, just 23% of corporates included patent litigation. 44%, however, hope to act through an administrative proceeding in the near future. This is a big difference between local and foreign companies; the latter often worry that expanded SIPO enforcement authority comes at the expense of the court system. With high-profile examples like Apple’s tussle at the Beijing IP Office in the headlines this year, this issue can be expected to garner even more attention. Interestingly, the greatest number of respondents (60%) expressed a wish for the patent office to carry out more enforcement on its own initiative. This may sound attractive to some,  but those Chinese companies whose businesses are truly built on IP assets are unlikely to rely on SIPO alone to protect them.

Perhaps the most striking trend we can see when we look at the last four years of surveys is that as the rate of patent enforcement advances overall, all the methods of dispute resolution are getting more popular – with the notable exception of negotiated settlement. When SIPO ran this survey in 2011, 40% of patent owners said they hoped to resolve future disputes through negotiations. But while demand for administrative and civil actions has stayed level or increased, steadily fewer patent owners have expressed a desire to resolve patent disputes through settlement – last year the figure was down to 26%, meaning it was only slightly more palatable than litigation at 24%.

Perhaps this is a gesture of confidence in the litigation system. Through their own experience or by observing the developments in their industry, many companies may have noticed that civil patent litigation in China can be quite friendly to patent owners – last year in the Beijing IP Court, for example, plaintiffs won at first instance about 72% of the time. It could also be that negotiating with infringers is getting harder. As a greater number of companies begin to approach IP in a mature way, patent owners can expect to come across tougher negotiating stances. Potential defendents may realise, for example, that even if infringement is proven, the plaintiff could have a hard time recouping the cost of litigation through damages. Perhaps it is a little of both, and there are surely numerous other factors at play. China is often touted as a huge potential growth market for patent licensing, but reaching a settlement deal with an infringer may be tougher than ever. 

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