In the past five years, China has established itself as the world’s leading innovator. That is, according to the World Intellectual Property Organisation (WIPO). In 2016 alone, China filed more patent applications than the USA, the European Union, Japan, and the Republic of Korea all combined.
China’s approach to securing intellectual property is revealing of the great national importance its leaders have in motivating its domestic businesses to innovate and secure patents, not just in the domestic Chinese market but emerging markets. This is a kind of insurance move to prevent its businesses from being squeezed out of sectors in the years to come.
The marketing strategist Michael Eugene Porter once said that businesses must be “very schizophrenic”; and that they “have to maintain continuity of strategy”, but “also have to be good at continuously improving”. He was referring to the need to keep customer interest high, and protecting intellectual property is a very important part of any business strategy, especially in the long-term. Continuous improvement is fundamental to maintaining customer demand and market shares.
China is capitalising on intellectual property complacency in the West
It is no secret that everybody likes to buy the best available product. If two products are for sale and one of them is markedly better; if it has clear advantages and better functionality, then that product will win out every time. To keep their intellectual property safe, businesses must work hard to make the best available products they can. But as soon as a country or sector slows down on its innovation and research, then it is only a matter of time before domestic businesses lose out to foreign competition.
For example, once an original patent expires, a competitor company from overseas could quickly move in and get a patent granted on an improvement, locking the original patent owner out in the process. China has been doing this for the better part of the last 10-years.
The United Kingdom has a great history of innovation but it needs to work harder than ever to keep a competitive edge both at home and overseas. Things have gotten slightly better over the last several years. For example, the UK actually increased the number of patent filings with the European Patent Office last year and in 2017, but the increases are still too low.
To compare, from 2008 to 2017, China’s patent filings skyrocketed from 6,486 to 50, 517, an increase of nearly 800%. Over the same time period, the UK’s patent filings nudged from 7,172 to 7,530.
Bringing the competitive edge back to the West
If the UK continues to lag behind in this regard, then it might find that it loses both the patent landscape and its competitive edge. The result could be that UK businesses will lose opportunities to cross-license intellectual property and will be starved of opportunities in the markets that they helped to establish in the first place.
But there is still time to stop this bleak scenario from happening. The most important thing we can do is work to establish a national culture that actively supports innovation, along with maintaining and growing market share. This national approach would be not unlike the one the Chinese have championed for the last 10-years.
Investment for intellectual property is pretty simple with its first-to-file system. The problem is that great ideas require initial fees to secure them as intellectual property. In order to get around this, the government will need to change its approach to UK businesses. Currently, it provides tax incentives based on profits only, but businesses need financial support from the beginning not later on when the money is already flowing. Things are currently the wrong way round if the UK’s aim is to increase its intellectual property.
China is actively encouraging businesses including even start-up businesses to file patents in overseas markets. The Chinese government gives out grants to fund the applications, and then rewards businesses with a second grant if the application is successful. The UK and the other Western powers would be foolish not to follow in China’s footsteps. After all, if a business looks like it is going to be a success, then upfront funding to gain intellectual property the world over is surely a benefit to everyone involved.
The UK and the wider Western World needs to play China at their own game. Only then can it use intellectual property competitively and to its advantage at home and abroad. There are still booming markets that are relatively cheap to invest in, for example India.
If there is one takeaway message the West needs to learn it is this: speculate to keep the advantage, and think carefully about where to file a patent. There are lots of emerging markets just waiting for intellectual property investing. Let’s not miss out on them.