Fostering positive competition rather than culpability

Economic powerhouses China and India have been hard at work transforming their economies, moving from manufacturing-centric to innovation-driven models.

With “Made in China 2025" and India’s Patent Facilitation Scheme, both nations are encouraging national businesses to innovate by granting financial incentives to apply for patent protection both locally and internationally.

As a consequence, many Chinese applicants and agents have filed patents solely to obtain government subsidies, particularly in foreign jurisdictions such as SA, targeted because of their non-examination approach to patent filing. This practice has attracted criticism from intellectual property (IP) professionals, the academic community and media. The criticism focuses on the large number of “junk” patents as a result of the incentive drive. While critics argue this may lead to some gaming of the system, should we not also perhaps view it as a vital lesson in fostering innovation and competition? 

In answer to this perceived abuse of the SA patent system the Companies & Intellectual Property Commission (CIPC) published Practice Note 21 of 2023. On the face of it, it appears to be a defence against the alleged abuse of our patent system. But is a practice note the correct “weapon”, and does it address the actual problem? 

Often, Chinese and Indian applicants are accused (rightly or wrongly) of manipulating the system. This myopic view fails to appreciate the underlying plot of these patent incentive schemes. These strategies are not designed as loopholes for abuse; they are fundamental to fostering domestic innovation and constructing a sturdy IP rights framework, playing a critical role in promoting a culture of innovation and understanding of IP rights.

Indeed, this was anticipated and addressed by respected SA IP law expert Madelein Kleyn in her doctoral thesis. “When China implemented the new National IP Strategy as early as 2010 the drive was already there,” she says. “This was a turning point in Chinese business culture — a move away from being copycats, to that of creative, innovative nationals.” 

South Africans should consider the economic benefit to our patent practitioners, the CIPC and the country as a whole, rather than reprimanding China and India for perceived misuse of the non-examination patent system. Embrace the benefits offered in boosting our economy by engaging our patent attorneys and contributing filing fees to our Patent Office. 

Last year foreign applicants, driven mainly by China and India, accounted for over a third of the nearly 14,000 patent applications received by the CIPC. This influx underscores the demand for a systemic overhaul of our patent application process, instead of being perceived as a burden. 

Practice Note 21 of 2023, though seemingly aimed at alleged system abuse, should serve as an impetus for improving our patent application processes rather than as a deterrent to foreign applicants (investors in our IP system). 

China has seen staggering success with its patent incentive scheme and Stephen Yang of IP March offers a fresh perspective that supports the view that the criticism levelled at China will soon be irrelevant. Yang informs us that the Chinese patent subsidy is set to end as part of the country’s 14th Five-Year Plan (2021-25). This plan strives to “optimise patent subsidy and reward policies and assessment and evaluation mechanisms and better protect and encourage high-value patents”. 

China, as it has done since 2010 when its first new national IP strategy was implemented, continues to transition into innovative phases of IP development, emphasising patent quality over quantity. This is evident through the actions taken by the Chinese government to implement systems for limited periods to incentivise Chinese national innovation. Continuously developing new strategies when a particular strategy has served its purpose, such as the five-year plan for patent subsidies, and a crackdown on abnormal patent applications, underscore this shift. 

SA should welcome innovative practices and learn from the experiences of our fellow Brics bloc countries, adapting these for our unique context. The focus should be on driving a positive result, such as refining our patent application and examination processes to enable the CIPC to deal with the influx of what appears to be “bad patents”.

Practice Note 21 of 2023 is a step in the right direction, advocating stricter requirements for requests for expedited acceptance. Yet we need more systemic changes like the anticipated substantive examination, and considering opposition proceedings, to strike the right balance between encouraging innovation and preventing system abuses. 

SA’s regulators and business owners have a remarkable opportunity to leverage the shifting global IP landscape to bolster our economy and innovation culture. We must foster positive energy and sound competition, discarding the “blame game”, which can only breed strategies aimed at unfair or unlawful competition.

The end goal should be a vibrant and robust innovation-driven economy, rather than a stagnant one built on suspicion and fear. 

• Breed is MD and competition law attorney, and Gerber patent attorney & senior associate, with law firm Barnard.