The long-standing battle of supremacy between the US and China has extended its tentacles into countless arenas, and patenting trends are no exception. Statistical reports surrounding patent applications in both countries present useful insights into the two markets.
The US has always been the global leader in terms of international patent filings. In the year 2016, applicants in the country filed 215,918 applications abroad. China took the fifth position with a total of 51,522 international applications, reaching approximately a quarter of the US figure.
Notably, however, the year 2017 saw China threatening to upend the status quo, by moving up three steps to fall behind the US. While applicants in the US filed a total of 56,624 international patents, China took the second spot with 48,882 filings.
Another interesting trend can be found when the number of patent applications and patents in force in the two countries are analyzed. Since 2010, China has been the global leader in filing domestic patents. In 2015, the country set a new record, becoming the first to receive over a million applications in a single year.
The total number of applications filed in 2015 was 1.102 million, translating to a growth of 18.7% over the previous year. Similar performance prevailed in subsequent years with 1.338 million applications in 2016, 1.338 million in 2017 and 1.8 million in 2018.
In contrast, though the US was in the second spot behind China during the highlighted periods, its figure amounted to only about half of China’s total. For instance, in 2016, US-based applicants filed 605,571 applications and 606,956 in 2017. While the growth rate for China in that period was 21.5%, the US only had a 2.7% increment.
However, comparing the total number of applications to the number of patents in force can be questionable. According to Statista data, the US had 2,984,825 patents in force in 2017 while China was in second place with 2,085,367.
Why the massive disparity? Let us take a look at a number of possible reasons by examining the key differences distinguishing the patenting trends in the two countries.
In a bid to encourage innovation in China, policymakers implemented a number of key changes that favor applicants. Applicant companies now enjoy subsidies and tax cuts among other privileges. Though this has motivated innovators and inventors, it has also given rise to fraudulent practices. For instance, some companies file low quality patents simply to take advantage of employee tax benefits or to seek residency. This brings us to the next key difference.
A Bloomberg report revealed that a high number of patents are being discarded in China as applicants fail to pay maintenance fees. Taking the year 2013 as an example, the disposal rate reached an unprecedented high of 91%.
In contrast, the same report reveals that in the US, during the same year, applicants paid maintenance fees for 85.6% of patents.
Despite the fact that China has a higher number of filings than the US, having a majority of them being discarded raises concerns with regard to quality. Though the government offers new applicants incentives to file, holders face the stark reality of paying the ever-increasing fees to keep them in force.
For less inventive concepts and fraudulent submissions, the cost of maintenance overshadows potential benefits and disposal seems to be the best way out.
In contrast, US applicants do not enjoy any incentives for filing patents. The initial cost of filing a non-provisional application is considerably high and they too have to pay maintenance fees if the patent issues. Though the growth rate in annual patent applications is not as impressive as that of China, it has shown some level of consistency.
To make sure an investment in a non-provisional patent application makes sense, US inventors and innovators take advantage of the opportunity to file provisional patents first, before filing the actual patent. This is a lower-cost alternative, and with the simple process Seventh.ai outlines, it is also easier to implement. With such applications, innovators can take a full year to carry out further research and iterate on the initial results. By filing consistently and often, innovators can very easily begin to get a decent sense for their IP strategy. Once they commit to filing non-provisional patents, they have a better chance of maintaining it as they have had time to assess the project thoroughly beforehand.
Overall, both China and the US are worthwhile contenders in the race to innovation and patenting supremacy. However, prevalent trends give the US an edge over China in terms of sustainability and long-term growth. For China to compete at par, it would need to address the high disposal rate and work out a more effective strategy.
To stay on par with China in promoting innovation, the US should be offering additional incentives to US and foreign startups to use the US as the springboard for global filing. And startups should take notice, because the advantage of starting the patenting process in the US is it provides the priority benefit of the US filing dates in most any jurisdiction around the world.
Finally, starting with an early provisional filing in the US provides a significant advantage. A provisional patent application for a micro entity costs only $75. Bar 3-5% of all startups, most anyone else falls into the micro entity category. It’s the best $75 any startup founder can spend, because the return on investment could mean an actual investment in the enterprise at a higher valuation. Moreover, at $19 Trillion annual GDP, patenting in the US opens up to the most attractive, robust markets anywhere in the world. No other country offers such an amazing ROI.