Quality patents becomes the new mantra in China

After several years of intensive growth in patent filings and grants, the Chinese government and businesses in the country are turning their attention to improving the strategic value of intellectual property. A group of industry insiders discuss the issues this raises

In 2010 the Chinese government published its National Patent Development Strategy. Among other things, the plan set a number of ambitious targets for the country’s IP system. By 2015, it would be receiving at least 2 million patent applications per year; it would rank among the top two nations in terms of the number of patent applications filed by domestic applicants; average pendency time would be reduced to 22 months; and it would have handled IP transactions of a value of Rmb100 billion ($15.8 billion).

Five years down the line, at least the first two of those objectives have not only been met, but exceeded. Information on the third has apparently not been released by the Chinese State IP Office (SIPO); while the fourth objective seems unlikely to be achieved, but is probably close to impossible to measure without knowing the government’s own criteria for what constitutes such a deal.

What those first three goals set forth in the National Patent Development Strategy – and the Communist Party’s myriad other proclamations on patent issues – demonstrate is that government policy over the past few years has been largely successful in achieving its primary aim of growing the country’s patent holdings. While this means that the population of Chinese patent assets is now greater than that of any other jurisdiction and has cemented SIPO as the examining agency which handles the most applications and grants the most rights in the world, it has also led to a proliferation of patents that have little commercial value. Achievement of the fourth goal – to be handling billions of dollars’ worth of IP deals – relies more on the patents in question being sufficiently attractive to buyers that they will part with money to acquire or license them. And that has very little to do with the number of patents available; much more important is the quality of those assets.

Chinese patent quality is regularly called into question, for a number of reasons. First, and perhaps most obvious, is that the country’s judicial and administrative systems are still regarded as poor in comparison to those of the other major patent jurisdictions, such as the United States, Japan and some EU countries. Moreover, a reputation gained as the source of most of the world’s counterfeit products does little to improve this image of a nation that lacks a fundamental understanding of, or respect for, IP rights.

Figure 1. Patent application growth, selected countries 2007-2013


NB: China figures relate to invention patents only and do not include utility model and design patent applications

Source: China’s Innovation Quotient: Trends In Patenting And The Globalization Of Chinese Innovation, Thomson Reuters


Number crunching

The results of the government push to drive up patent numbers are clear for all to see. The growth of the country’s IP holdings in recent years has been, in a word, immense. According to SIPO, it received a record 2.361 million patent applications last year, putting it far ahead of any of the world’s other examining agencies.

Of course, patents do not equate to innovation; and churning out a large number of patents certainly does not imply that innovation has increased commensurately. This alone does not mean that state-led actions aimed at increasing patent filings are misplaced; after all, a business cannot enjoy the potential myriad strategic and economic benefits of patents if they do not own them in the first place.

Principle of utility

Dig down a little deeper, however, and it becomes apparent that the impressive numbers are not quite what they may seem at first glance. China offers three distinct forms of patent protection: the invention patent, the utility model patent and the design patent. While the latter two are not subject to substantive examination, they have nonetheless been included in many of the government’s headline-grabbing patent filing figures.

The utility model patent, in particular, has been seen as a major factor in holding back patent quality in China, since such applications are relatively cheap and are quickly processed and issued, supposedly without much scrutiny. The vast majority of utility model patents are applied for, and granted to, domestic Chinese applicants.

Therefore, that 2.361 million figure for 2014 requires further analysis. It includes almost 928,000 invention patent filings – which still puts SIPO top among the world’s examining offices, for the fourth year in a row. SIPO also handled about 868,000 utility model applications and 565,000 industrial design filings last year. According to SIPO, the fact that invention patent applications represented 39.3% of the total patent applications it received shows that “China’s innovation was improving and invention patents took [a] more and more important place in China’s development”. But while invention patent applications may be the most numerous, utility models are not far behind. A comparison with other major jurisdictions offering utility model protection reveals that Chinese applicants are much more reliant on this particular form of IP right than those in other countries (see Figure 2). That utility models and design rights are classed as types of patent in China has handily enabled the authorities in the country to make rather grandiose statements about the volume of IP assets that are being applied for and granted each year, with many observers left none the wiser.

Figure 2. Composition of patent types in China and Japan, 1985-2012

China                                                                                       Japan


A comparison between two jurisdictions offering patent, utility model and industrial design protection

Source: China’s Patent Explosion and Its Quality Implications, Cheryl Long and Jun Wang, Xiamen University (2014)

Remunerative incentives

It is not just the availability of ‘cheap and easy’ patents that has contributed to China’s IP rights boom. A range of incentives has also encouraged domestic companies to file for patent protection, even in situations where such a move would make little business sense beyond the immediate financial benefit.

In 2008 the government announced that it would begin offering tax breaks to Chinese companies that could demonstrate they were developing technologies of high economic importance. Such businesses could benefit from a reduced corporate income tax rate of 15%, as well as being able to apply for further value-added tax deductions. In addition, local and provincial authorities have been offering their own cash-based enticements to would-be patent applicants in order to boost filing numbers and meet quotas handed down by the central government.

But it is not just subsidies and tax benefits that have arguably caused an artificial mushrooming of patent filings. Reportedly, some Chinese universities consider the number of patent applications filed by a professor as a key criterion for offering tenure. Similarly, it has been suggested that in a country where internal migration of citizens is carefully controlled, workers and researchers in high-tech industries who are keen to settle in a desirable city may increase their chances of receiving a residency permit from the local authorities if they have filed for patents.

It has even been documented in the Chinese press that patent filings are being used as ‘get-out-of-jail-free’ cards – quite literally. In some provinces, local IP administrations have teamed up with prison services in order to create schemes where inmates can get their jail time commuted if they file patents. What seems like abuse of these arrangements has also been reported, with wealthier convicts – sometimes detained for white-collar crimes including, ironically, fraud and corruption – paying attorneys to add their names to existing patent applications in order to benefit from the scheme, often before they have even begun their custodial sentences.

Ask the experts

With so much in the mix in terms of statistics, incentives, government policies and different forms of patent protection, the insights of those working at the coalface of patent strategy in China are invaluable.

We spoke to a number of senior executives from Chinese and foreign companies, as well as patent attorneys drafting and filing applications in China, to get their views on defining patent quality, the role of government, the pros and cons of utility models and filing incentives and a whole lot more.

Those participating in the roundtable discussion are:

  • Jianguang Du, group IP director at Shenzhen-based medical devices company Mindray;
  • Heather Lin, a patent attorney and senior partner at NTD Intellectual Property Attorneys in Beijing;
  • Micky Minhas, chief patent counsel and associate general counsel patent strategy at Microsoft in California;
  • Laure van Oudheusden, head of Philips’ IP & Standards unit in China, based in Shanghai;
  • Tao Zhang, director of IP strategy at Huawei, based in California;
  • Wei Zhao, a patent attorney and director of the electronics group at China Science Patent & Trademark Agent in Beijing; and
  • Kelly Zhuang, an IP manager at automaker BYD in Shenzhen.

Each of these participants shared their personal views on these topics and their contributions to the discussion do not necessarily reflect the views of their company or firm.

The concept of quality, when referring to patents, is somewhat subjective and difficult to pinpoint. How would you define a ‘high-quality’ patent?

Kelly Zhuang (KZ): As you implied in your question, it is not easy to define exactly what a high-quality patent is. However, from a corporate perspective, there are some features which would be considered as such. A high-quality patent should have high claim stability – in other words, the claims remain valid after they have been challenged (eg, after litigation or an invalidation action). It should also be well written and have a proper claim scope. Finally, a high-quality patent is valuable to a company – for example, it has the ability to be successfully enforced in litigation or licensed.

Wei Zhao (WZ): Considering that a patent has a long lifetime, my opinion is that its quality can be defined by two phases. One phase is in prosecution; the other is in litigation. In the first phase, quality is focused on the scope of protection and whether it is accurate, sufficiently broad and stable. In the second phase, validity is the key issue; no matter how many defects in one patent, the patent can be considered of high quality in a dispute context if it is valid. Of course, beyond the validity of the patent, the effectiveness of the patent in terms of its coverage of products, technical standards and so on is also very important to its owner.

Table 1. Key differences between Chinese invention patent and utility model patent


Invention patent

Utility model patent

Subject matter

Apparatus, method, process, composition of matter

Apparatus, shapes and structures only

Examination system

Formality examination and substantive examination

Formality examination and preliminary examination, including novelty assessment

Field of prior art references

Proximate, relevant or other technical fields that provide information about a technical solution

Examiner will normally focus only on technical field to which the application belongs

Prior art citations required

One, two or more

One or two, depending on circumstances

Request for earlier publication possible?




Absolute novelty principle

Absolute novelty principle

Inventiveness standard

Higher – must have “prominent substantive features” and represent “notable progress”

Lower – must have “substantive features” and represent “progress”

Time to grant

Typically, three to five years

Typically, three to 10 months

Term of protection

20 years from filing date

10 years from filing date

Presumption of validity while in litigation

Assumed valid unless invalidated by Patent Re-examination Board (PRB) of the State IP Office. Court may deny requests to suspend legal proceedings if validity is challenged before the PRB

If validity is challenged before the PRB, court will suspend legal proceedings until the PRB issues its decision on validity

Sources: Inovia; State IP Office of the People’s Republic of China

Laure van Oudheusden (LvO): As Kelly and Wei have pointed out, two important aspects are validity and business value. A high-quality patent should clearly define the breadth and scope of the invention and provide certainty as to its validity. A high-quality patent will also include a specification which provides a clear, direct and detailed description of the invention so as to enable one of ordinary skill in the art to be able to make the invention without undue experimentation. Such patents often encourage investment in further R&D, as well as commercialisation of the invention. The second important parameter is the business value generated by the patent or the IP portfolio to which it belongs. Business value can be determined by the level of inventiveness and the scope of the invention in relation to the relevant products and markets, for example.

Tao Zhang (TZ): Following on from Laure’s last point, a high-quality patent has, firstly, high-quality evidence of use through mapping, ease of detection, prior art and file history; and secondly, high cost in avoidance of infringement. If a patent does not read onto another party’s product, it is not particularly useful and therefore has low intrinsic value, no matter how high the quality of the drafting.

Heather Lin (HL): In one word, a high-quality patent should be an enforceable patent. A high-quality patent should have an adequate protection scope which allows it to survive challenges and design-arounds. And in all jurisdictions, a high-quality patent possesses that same feature: enforceability.

Micky Minhas (MM): My definition of a ‘high-quality’ patent is one in which you have a reasonable belief that the invention will be used, the inventive idea is detectable and the application is written in a way that has lasting value.

Does your definition of what constitutes a high-quality patent change according to jurisdiction? Is a high-quality Chinese patent fundamentally different from a high-quality US patent?

MM: No, I don’t think it does. But the environment and incentives to file patents may differ from jurisdiction to jurisdiction. For example, the dynamics of patent filing are a little different in China. The government provides a subsidy to domestic companies and inventors for each patent they file. That financial payment more than covers the costs associated with the actual application process. So there is a different cost-benefit analysis in whether to file a patent. The return on investment assessment is not being made primarily on whether it is worth filing for patent protection on a given innovation, but is rather heavily influenced by the financial incentive to file. Of course, that addresses whether to file patent applications – it does not necessarily affect the overall quality of the patent applications that are granted.

Jianguang Du (JD): I believe that the definition of patent quality does vary between different jurisdictions. For example, some patents can be licensed in the United States but not in China, or the other way around. Furthermore, some patents for which it proves difficult to show infringement have a low chance of winning litigation in Chinese courts. However, the counterpart patent’s chance of winning litigation in the United States may be higher due to the extensive discovery procedure there.

Figure 3. Application and examination process for Chinese invention, utility model and design patents


Source: Drug Patents International (http://drugpatentsint.blogspot.hk)

TZ: Since different jurisdictions have different standards in treating prior art, estoppels and so on, patent quality may vary between jurisdictions somewhat. Patent offices around the world have their own processes, so claim scopes may end differently and claim construction may be different for the same specification. Therefore, a high-quality US patent asset may have a low-quality Chinese counterpart, or vice versa.

LvO: Differences in national patent laws have resulted in differences as to what constitutes a high-quality patent. Countries differ in what constitutes patentable subject matter and the standards by which an invention is measured as being useful, new and unobvious – in other words, having an inventive step. Efforts to minimise these differences and eventually harmonise the patent laws on a global basis are ongoing and will hopefully result in a high-quality patent defined in the same way throughout the world.

What practices can one follow to ensure that China applications are likely to result in high-quality patents?

TZ: I recommend tracking case law, following interim guidance from all the patent offices and establishing corresponding internal processes. It is also a good idea to clearly outline criteria so that both inventors and drafters know exactly what you are looking for. For starters, file only when it is likely that someone else will use the technology within the next 20 years. Next, based on all the facts, honestly evaluate whether the patent office is likely to grant the patent based on the scope you are seeking. Getting a really narrow patent granted that is unlikely to read onto any product is worse than not filing the patent to begin with. A bad patent wastes money, diverts valuable resources and fools people into thinking that they are safe. As a result, they are more likely to miss other, real opportunities.

HL: When our attorneys are drafting Chinese patent applications, we keep the following in mind:

  • The description should be sufficiently disclosed;
  • The claims should cover a range of scopes of protection, from the broad to the narrow, and the technical features should be defined by standard, unambiguous terms; and
  • The claims shall be supported by the description.

More than one embodiment or example should be included if a broader protection scope is desired.

WZ: For drafting, the focus is on protection scope. At our firm, we always consider the following questions:

  • Can all terms in the claims be well explained by the specification?
  • Are all the features in the claims essential?
  • Can the technical solutions in the claims and the specification be understood by yourself and another attorney?
  • Have all possible alternatives been considered and claimed?

In considering these requirements, we will designate two attorneys for each drafting case. The responsible attorney will engage in thorough discussions with the inventors to fulfil these requirements. The senior attorney will review the drafted claims and specification to see whether they themselves can understand the language in the application and that the four considerations I mentioned previously are covered.

LvO: We employ a global patent filing policy and use international filing routes whenever possible. A rigorous selection process is undertaken prior to filing any application. Our IP counsel reject inventions that do not satisfy our quality criteria to avoid low-quality patents. We conduct systematic global prior art searches, including patent literature and other sources of prior art, before filing an application in any jurisdiction. We also abandon applications during prosecution when the business value of the patent can no longer be justified, such as when the scope of protection becomes too limited in view of the prior art. We use filing routes via the Patent Cooperation Treaty, thus obtaining an early search report and preliminary examination of the application before we select the countries for national entry.

How do you find high-quality Chinese patents to buy? Do such assets have different characteristics when purchased from those which are generated internally?

KZ: I think the most important thing, as always, is to do a deep investigation of the objective patent that you want to buy. We buy patents only when we need to and I don’t think there are any clearly different characteristics in that regard compared with generating patents internally.

LvO: Acquired intellectual property needs to pass the same quality standards for validity and business value as internally generated intellectual property. Worldwide, the quality of patents available for acquisition varies significantly. We identify intellectual property for acquisition through proactive scouting, reviewing IP landscapes, reaching out to patent owners and explaining to third parties what kind of intellectual property we are looking for.

TZ: Using industry connections is the best way to buy patents, because most of the high-quality patents that you need will not be on the market. Therefore, you need to develop long-lasting win-win relationships. I think that buying does have different characteristics. You should understand the seller’s IP culture so you can get a better sense of what you are acquiring.

Figure 4. Allowance rate of examined invention patent applications at the State IP Office, 1998-2008


Source: Patent statistics: A good indicator for innovation in China? Patent subsidy program impacts on patent quality, Jianwei Dang and Kazuyuki Motohashi, Department of Technology Management forInnovation, School of Engineering, University of Tokyo (2013)


Do you believe there is a significant problem with patent quality in China?

TZ: I think that most Chinese companies need to start shifting their emphasis to patent quality and away from patent quantity. The numbers game is an old theme that no longer works today.

KZ: With the volume of patent applications in China booming in recent years, there is obviously a big challenge in terms of examination. So the existence of some low-quality patents is unsurprising, considering that there are definitely some high-quality patents too.

MM: Wherever in the world you find a patent system, you will also find rampant criticism that the patents being issued in that system are low quality. In that context, I would say that China is really no different from any other country. It happens in the United States – patent quality concerns were one of the rationales behind the last round of patent reform legislation, as evidenced by the new post-grant review challenges at the Patent Trial and Appeal Board – and it has happened in the European Union, Japan, Korea, India and so on. The existence of criticism is not evidence of a problem.

LvO: The quality of a Chinese patent has continued to improve in recent years, especially when talking about those of the invention type. We attribute these improvements to a number of different factors, including the amendments to China’s patent laws, the increase in the patent examining corps and ongoing harmonisation efforts with other major patent offices. However, the utility model patent has seen a steep increase in filings in recent years. A utility model patent is granted without examination, which creates uncertainty as to its validity. Moreover, the standard by which a utility model patent is examined for obviousness precludes combining more than two prior art documents in establishing invalidity, which also may adversely affect patent quality.

WZ: I would suggest that one of the most significant problems pertinent to Chinese patent quality arises from the inconsistency between prosecution and litigation – in particular, between the findings of SIPO’s Patent Re-examination Board (PRB) and court decisions. For the same legislative provision, they might have different interpretations and explanations. As such, it seems that a lot of patents will face different validity challenges from the PRB and the court. This means that no one can tell whether a patent is high quality before it is tested in court.

If there is a substantial problem, what can be done to solve it and improve the quality of Chinese patent assets?

WZ: Can we really cure this ‘problem’? Even if the latest standards set by the courts are followed when drafting an application, will that application be allowed by the patent office, found valid by the PRB and also be found valid by the court? The same challenges exist in other countries, as we have seen from the recent US Supreme Court decision in Alice v CLS Bank. What we do here in China is probably not that different from what happens in the United States and other jurisdictions; we track the changes and follow the decisions of both the PRB and the courts.

JD: The problem can be solved by reducing state funding and subsidies for filing patents, and by stipulating that such funding is limited to invention patents that are granted. Meanwhile, there needs to be a rise in the damages available for patent infringement and recoverable litigation costs. I think that these measures would help corporates to focus on patent quality rather than quantity.

KZ: Three stakeholders have a hand in improving patent quality. First, the Chinese government should make an effort to demonstrate how high quality, as opposed to high quantity, of patents is what encourages innovation. Second, corporate IP owners should implement their own internal measures to ensure that they generate high-quality patents. Third, patent attorneys can improve their skills and service levels.

MM: There is an increasingly rigorous examination process to evaluate patent applications and clear guidelines for patent eligibility in China, similar to the processes in place in the United States to ensure that high-quality patents are granted. While the Chinese patent system is maturing, it is also clear that SIPO is committed to a well-functioning patent system that includes further modification and amendments to improve patent quality. It is not unlike the new patent quality initiatives underway at the US Patent and Trademark Office, or what other countries have done.

What is your opinion of the Chinese government’s efforts to enhance patent quality? Do you think the government has a positive role to play, or should this be left up to companies?

HL: The government can certainly play a positive role here, but I believe that resolving this issue should rely more on the input and actions of companies and patent attorneys.

WZ: Generally, I think the Chinese government equates rights with duties. The patentee has the patent right and thus has a duty to ensure that the patent is of good quality. However, I think the government also realises that, left alone, it would take a very long time for Chinese applicants to ‘grow up’; so it is trying to provide guidance and training to them.

TZ: The Chinese government can be the most effective force to raise patent quality. If it were left up to companies, it would take years to see results; while the government can make things happen, quite literally, overnight. Therefore, I strongly support government efforts to raise patent quality.

LvO: I have attended several conferences and seminars recently and have been quite impressed by the central and local governments’ focus on patent quality. Enhancing the quality of Chinese patents is part of the core strategy for innovation and growth in China. The government has played a major role in raising the level of patent quality and should continue to work with companies in this effort. Cooperation between patent offices on a worldwide basis not only improves patent quality, but also promotes efficiency and reduces costs for users.

Why do you think it is that the discernible majority of utility model patents in China are filed by, and granted to, Chinese applicants?

JD: On the one hand, international companies entering China often apply for invention patents only and do not seem sufficiently familiar with the Chinese utility model system. On the other hand, many Chinese companies are still relatively unsophisticated in terms of R&D, and they are typically intending to make small structural improvements as they develop their products and services. Therefore, the utility model patent seems to be a good fit for many Chinese companies. Also, utility model patents are not subject to substantive examination and thus are easier to obtain. In the years to come, I think that the number of utility model patent applications will grow at a slower rate, or may even fall, as Chinese companies become more sophisticated in terms of R&D and state subsidies are reduced. However, the fact remains that utility model patents can be granted very quickly – in less than one year – so these will still be valuable with regard to consumer products that are regularly updated. The value of utility model patents will be better reflected in the future as China’s enforcement environment continues to mature.

KZ: The utility model has its merits, and we take advantage of those merits according to the demands of our IP and business strategies. For example, utility model patents can be granted very quickly, cost less in terms of official fees and are typically easier to obtain than invention patents. Given these features, it is unsurprising that it is Chinese companies which are applying for the vast majority of this type of patent.

HL: Utility model patents protect less-inventive inventions, which means that they match up well with the current R&D levels of most Chinese companies. However, I believe that more and more invention patents will be filed as Chinese companies develop increasingly innovative technologies. In fact, in 2014 more invention patent applications were filed than utility model patents.

TZ: Utility model patents are faster to grant and cheaper to file and maintain, and their 10-year term suits fast-changing technologies well. Also, since the litigation process is similar to that for invention patents, the potential outcomes can be anticipated, giving their owners some certainty. For technologies with a short lifecycle, both multinationals and Chinese companies should consider the utility model patent as part of their strategy.

MM: Utility model patents are used in other jurisdictions – for example, they exist in Germany. They are less expensive to file and have shorter term limits, which may be useful for certain business models. However, some significant drawbacks to utility model patents limit their effectiveness. Because they are not subject to substantive examination, validity remains an issue and they are more difficult to enforce. And since a patent is a right to exclude, if you cannot enforce that right, its utility is limited.

But if, as we have previously discussed, the quality of utility model patents really is one of the main factors in any overall problem with patent quality in China, then what should be done about it? Should utility model patents be scrapped altogether? Or perhaps a more substantive examination process should be introduced?

HL: I don’t think utility models are a root cause of the patent quality problem, since the same problem also exists with invention patents. As we have said, when industry realises that patents can be a powerful tool, things will change. Of course, stricter examination of utility models will be good for patent quality and SIPO has been updating its practices in this regard.

JD: That’s right – SIPO has increased its checks on the quality of utility model patent applications in the past two years. It has started to scrutinise more closely for innovativeness and uniqueness, so the feeling is that the quality of utility model patents has gradually increased recently. I can’t see that the utility model system will be scrapped in the short term; rather, examination procedures will become much stricter.

TZ: I haven’t seen a lot of assertion or litigation based on Chinese utility model patents. Companies will strive to file higher-quality patents – whether utility model or invention – if they truly understand that they will not be able to use low-quality patents for any useful objective while still paying money for them.

Work in progress

Based on what our roundtable participants have said, it is clear that China’s issues with patent quality are much more complex – and by no means as negative – as many might believe. For one thing, China is not the only country struggling with the problem of how to grant high-quality patent assets in the face of a rapid rise in filings and a continually evolving background of jurisprudential developments, legislative changes and wider economic events.

It would be wrong to suggest that prospective rights holders do not face big challenges as they consider filing for patent protection in China. But the fact of the matter is that China is still an IP ecosystem in development. Let us remember that the country’s first modern patent law was instituted just three decades ago, and it should therefore not seem too extraordinary that many aspects of the Chinese IP system’s infrastructure remain uncertain, undesirable or unfathomable to both foreigners and residents alike. With a combination of carefully thought-through government intervention, an increase in the expertise and experience of IP practitioners and a more widespread realisation among senior executives of the value creation potential of Chinese IP assets, patent quality can only get better.

Action plan

The Chinese IP system is often characterised as being awash with low-quality patent assets, to a disproportionate extent compared with other major jurisdictions. However, China’s patent quality problems are more nuanced than many observers may at first assume and there are positive signs of substantial improvement:

  • Chinese businesses are increasingly recognising that a high-quality patent portfolio, rather than simply a large portfolio, is key to value creation.
  • Expansion into foreign markets is requiring Chinese companies to file abroad. As a result, many are reviewing their own patenting habits and are implementing stringent internal quality control processes at home.
  • The State IP Office (SIPO) is increasing its scrutiny in its limited examinations of utility model patents, which have been seen as a major cause of low quality in the Chinese patent system.
  • SIPO receives more applications for invention patents (almost 928,000 in 2014) than it does for utility model patents (868,000).
  • Some relaxation of the regulations governing the operations of foreign law firms in China – as well as the ability of domestic firms to work abroad – may be helping to enhance expertise in the patent attorney sector.
 Jack Ellis is the Asia-Pacific editor of IAM, based in Hong Kong

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