1. A Great Wall of Patents: What is behind China’s recent patent explosion? Albert Guangzhou HU National University of Singapore and Gary H. Jefferson Brandeis University Prepared for Nanjing Workshop on Globalization of R&D May 27 – 29, 2005, Nanjing, China,

2. A quote from a Chinese IP lawyer “Once upon a time, the counterfeiters in China ran away when you came after them. Today, they don't run away. Indeed, they stay put and they sue us. More and more Chinese companies are taking a so-called legal approach, taking advantage of serious weakness in the Chinese legal system." --- New York Times, March 5, 2005

3. Figure 1. Domestic and foreign patent applications

4. Figure 3. Patents-R&D and R&D-GDP ratios

5. The patent explosion Growth of patent applications Similar patterns for patent grants U.S. patent explosion  Patent grants and applications: 5-6% from 1983/4 (Kortum and Lerner, 1999; Hall and Ziedonis, 2001; Jaffe and Lerner, 2004; Hall, 2005) All patents Domestic invention Foreign invention 1985 – 199915%12% 2000 – 200418%29%22%

6. What’s behind the patent explosion? The pro-patent amendments to the Patent Law in 1992 and 2000 The intensification of R&D Surge of foreign direct investment Strategic patenting Economic reform and private property in China’s enterprise sector

7. Table 3. Patents production function: ZIP estimates

8. Figure 8. Ownership and propensity to patent

9. Figure 9. Propensity to patent over time

10. Concluding remarks and caveats Weak patents – R&D link: 0.02 vs. 0.6~0.99 FDI prompts more patenting by domestic firms: 15%. Legislation strengthening patent rights leads to greater propensity to patent. Clarification of enterprise property rights results in more aggressive assertion of patent rights. Inter-industry differences: discrete vs. complex Caveats:  Invention vs. utility model and design patents  Small firms