China
Total
Invention
Utility Model
Design Patent
1985
19.57
5.00
6.67
55.26
1986
11.67
7.14
2.06
67.81
1987
6.02
26.30
1.58
33.49
1988
5.47
39.80
0.76
23.12
1989
9.63
52.97
1.00
22.31
1990
14.54
70.06
1.23
21.52
1991
13.97
68.20
0.73
15.79
1992
10.05
65.05
0.46
13.74
1993
8.44
59.82
0.51
12.17
1994
8.13
57.28
0.63
16.50
1995
8.47
54.91
0.91
14.97
1996
7.87
53.14
0.59
12.48
1997
9.03
56.15
0.57
12.34
1998
9.59
65.03
0.55
11.10
1999
8.04
59.45
0.49
8.97
2000
9.60
51.30
0.61
8.62
2001
13.11
66.89
0.63
8.56
2002
15.33
72.67
0.68
8.04
2003
17.91
69.31
0.89
8.24
2004
20.45
63.04
0.86
10.23
2005
19.81
61.16
1.53
10.54
2006
16.47
56.60
1.25
9.84
2007
14.26
52.99
1.10
9.34
2008
14.46
50.28
0.85
7.74
Source: World Patent Report: a Statistical Review 2008, WIPO Statistics Database.
As discussed earlier, the purpose of the patent system is to provide incentives for firms to invest in R&D by permitting monopoly rents in return for disclosure to the public of the underlying technology. However, this may not be the primary function of the patent system in China under current circumstances. Since high-value technologies patented in China have mostly been invented abroad where firms make R&D investment decisions based on projected profits from larger markets—typically the United States, European Union or Japan—reducing monopoly rents from sales in China might not cost China much in innovation, as lost sales there would likely be small compared to those made in the other countries. Similarly, the information disclosure function of the patent system would not be affected too much. Since technologies are usually patented abroad, firms and individuals in China can obtain the relevant information from the patent documents disclosed in those other countries.
However, this does not mean that foreign inventors will decline to seek patent protection in China. Since the information contained in foreign patent applications is available elsewhere and to others, if an inventor does not obtain a patent in China, someone else could do so and exclude the inventor from the market. If no one obtains a patent, rents that might have been available will be dissipated because the technology will be used on a royalty-free basis.
Some might suggest that restricting the market power of patents in developing or technology-importing countries could lead to static gains locally—consumers would get something for nothing, or for very little—while the dynamic loss from discouraging innovation or less information disclosure would likely be small. It might seem to follow then that China would benefit from a strategy that provided relatively little protection to IP and that adopted lenient rules that would require more compulsory licensing of powerful IP.