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Illustration: Henry Wong

China and US battle, quietly but fiercely, on yet another tech front: patent applications

  • According to 2023 UN data, Chinese inventors led in international patent applications for the second year running, posting some 14,000 more than the second-place US
  • As China raises its game, reducing substandard filings, some analysts say its swooning economy and ageing population could blunt its innovation trajectory

After inventing a system to counter ransomware, Paul Lewis started the data protection company Calamu in 2019 at his kitchen table in the US state of New Jersey. Over the past four years, through the pandemic and rounds of venture financing, he has received two international and several US patents to protect his intellectual property.

But he cannot help noticing how quickly and aggressively China is advancing in technology.

“China is a different animal,” he said. “It’s a fight against the US and this is an innovation grab on the world stage.”

According to 2023 UN data, Chinese inventors led in international patent applications for the second year running, posting some 14,000 more than the second-place US, as the two giants increasingly face off over technology, innovation and global bragging rights. And earlier this month Premier Li Qiang announced a 10 per cent increase in government science and technology research, even as the partisan US Congress battles over every budget line.

Paul Lewis, founder and chief executive of the data protection company Calamu. Photo: Handout

China – long criticised for focusing on patent quantity over quality and for heavily subsidising patent applicants – is also raising its game, weeding out plagiarised research papers and reducing substandard filings.

“There’s no question the Chinese patent filings do reflect underlying technological capabilities. We’d be foolish or ostrich-like if we denied that,” said Robert Atkinson, president of the Information Technology and Innovation Foundation (ITIF), who has served on government economic boards during President Joe Biden’s administration as well as the four previous ones.

“We still have a little time,” he added. “But by the end of the decade, if we haven’t responded in a very comprehensive and serious way, then it’s too late.”

Some analysts counter, however, that China’s swooning economy and rapidly ageing population could blunt its innovation trajectory and see momentum swing back to the US.

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According to figures released this month by the World International Patent Organisation (Wipo), China filed 69,610 applications under the UN Patent Cooperation Treaty in 2023, down marginally, compared with 55,678 by the US, a 5.3 per cent decline. The 1970 treaty allows inventors to file a single international patent in several countries simultaneously, avoiding the expense of filing in multiple jurisdictions.

One problem as the two superpowers race to benchmark their progress in the increasingly contentious battle for tech supremacy: rankings diverge widely and innovation is difficult to pinpoint, including the link between patent filings and new products, industries and economic activity.

“We have to be humble,” said Carsten Fink, Wipo’s chief economist who oversees the UN agency’s Global Innovation Index. “I don’t think we have the last word in innovation measurement – that invariably is more of an art than a science.”

Wipo’s 2023 index, a compilation of 80 factors, ranks Switzerland as the world’s most innovative country, followed by Sweden and the US. China is ranked 12th of 132 economies surveyed, but first among upper middle-income countries, followed by Malaysia and Bulgaria.

Qualcomm was the leading US filer for international patents last year. Photo: Reuters
Other gauges vary. The US Chamber of Commerce Intellectual Property Index ranks the US first and China 24 of 55 economies using 50 metrics, including patents, commercialisation and efficiency; Bloomberg’s innovation index ranks the US No 6 and China at 22 of 50 countries based on six metrics, including spending on research and development, manufacturing, research and patents.
And ITIF’s Hamilton Index says China leads in seven of 10 strategically important industries, including computers, electronics and chemicals, while the US leads in three: information technology, pharmaceuticals and transport.

“Time is running short to turn around US advanced industry fortunes,” said ITIF. “The race for global advantage in these industries is a zero-sum competition.”

In 2023, Qualcomm and Microsoft were the top US filers for international patents, while Huawei Technologies and the battery maker CATL led on the Chinese side.

Experts say that patents are a mixed blessing, nor is it clear how effective the US effort to slow Chinese advances in semiconductors by restricting exports will be. While patents encourage innovation by protecting inventors from intellectual property theft, they can also be weaponised, deterring collaborators from building on existing technologies. Most attempts to quantify innovation also struggle to capture relative intangibles like government regulation, business models, the quality and quantity of data and trade secrets.

There’s a lot of self-inflicted harm. We can’t blame it all on China
Mark Cohen, University of California, Berkeley

All countries promote patent filing but analysts say that China has taken it to another level. In its headlong quest for innovation, global rankings and benchmarks under its Made in China 2025 road map, Chinese applicants can earn subsidies that exceed the cost of filing, critics say – an incentive to file multiple patents for the same invention in order to garner income, glory and academic promotions.

Patent filers have also been rewarded with jail releases, coveted residency permits, or hukou, and lower income taxes, said Mark Cohen, head of the Asia Intellectual Property Project at the University of California, Berkeley law school.

“A lot of times, high subsidies lead to lower-quality patents,” he added. “The data is getting better for China, but China also regulates for data. It wants to generate those numbers.”

Experts say Western patent systems generally place more emphasis on showing that an invention is original globally, compared with China’s greater domestic focus and easier standards. One reason for this, they add, has been to defend against lawsuits by foreign patent holders over theft of intellectual property.

Huawei Technologies was the leading Chinese company filing for international patents in 2023. Photo: Reuters

“That’s not to say there isn’t strategic patenting by [US] companies,” said Atkinson. “In China, they engage in more strategic patenting in order to gain the right negotiating position … Western companies, it’s one company at a time. There, the entire ecosystem – the entire state – moves forward.”

But Beijing has also been working to stem excesses, clamping down on plagiarism in academic papers and sharply reducing two types of poorly vetted patents in 2023 while increasing the portion of closely examined patents, the State Council reported in January.

Even if Beijing’s numbers are inflated by 10 or 20 per cent, experts said, the trend is clear. Since its first patent was filed in 1985, China has often been underestimated overseas – that it lacks creativity, does not publish enough scientific papers, that those papers are not widely cited, that they are cited but not among the top 1 per cent – only to repeatedly surprise on the upside. “It shows they are creeping up the value chain,” Cohen said.

While China has the momentum, US innovation has been written off before – most notably in the 1980s, facing a rising Japan – only to mount a comeback as Silicon Valley exploded. China is also facing new headwinds.

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Even as the US has slipped – in 1960, its R&D spending was 69 per cent of global R&D, compared to 30 per cent by 2020, according to the Organisation for Economic Development and Cooperation – it remains the biggest total spender at US$806 billion annually, compared to US$668 billion for China.

And while China had been widely expected to surpass the US in overall R&D spending, that has not happened so far, amid huge demographic challenges, a property crisis, rising local debt and slowing economic growth.

The US economy, meanwhile, has been surprisingly resilient, with low unemployment and some US$200 billion newly invested in R&D through the Chips and Science Act of 2022.

“We’ve all been waiting to see when those two curves cross, and they haven’t crossed,” said Arati Prabhakar, director of the White House Office of Science and Technology Policy, citing the sharp increase in US business R&D.

US President Joe Biden signs into law the Chips and Science Act on the South Lawn of the White House in Washington on August 9, 2022. Photo: Abaca Press/TNS

Others, however, are more inclined to expect a continuation of the US slide. Washington’s deep political divisions and budget battles have hurt government R&D that fuels private sector innovation, including an 8.3 per cent hit to the National Science Foundation budget this year.

China’s governing system, they note, makes it easier to set and quickly carry out national campaigns. Many of its top leaders were trained as engineers, they add, while the US has lost its sense of national mission following the end of the Cold War.

“There’s a lot of self-inflicted harm,” said Cohen. “We can’t blame it all on China.”

James Pooley, an independent attorney formerly with Wipo, said that Washington’s “small yard, high walls” strategy – with its calls to decouple, restrictions on hi-tech exports and Chinese students in the US as well as growing limits on bilateral investment – is short-sighted.

Intellectual property theft by China is a serious problem, Pooley said, but it needs to be balanced against the benefits of cross-border collaboration.

“We should be engaging to find and work out ways to manage the risk as opposed to these performative things like forcing TikTok to sell,” he said. “Most people in Congress don’t understand intellectual property, they don’t understand innovation … the small yard is becoming pretty parochial.”

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An IP attorney who asked not to be identified given the sensitivity of US-China relations said that China’s growing patent prowess has failed to wake up the US tech community in part because of its inherent divisions.

Patents are important for large hardware companies, helping guard against reverse engineering of a tangible design, but less so for start-ups too busy surviving. And software companies often view them as a “necessary evil”, the lawyer said, largely ineffective in protecting their secrets, including business models, the quantity and quality of data and trade secrets.

“This is why, for example, even though China filed 2.5 times more patents than the US for AI technology by 2018, I don’t think this necessarily means the US is behind in AI innovation,” the attorney added.

China’s focus on innovation is not without its own shortcomings, experts said, including Beijing’s distorting subsidies, market micromanagement and inordinate focus on security.

“Their close links between civilians and military, that’s a mistake,” said Caroline Wagner, a professor at Ohio State University. “It scares off a lot of [international] collaborators.”

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Lewis of Calamu – named after his golden retriever – filed his first patent at 17. Most start-ups in his sector eschew patents but he has found them useful, since they force him to hone his strategy, assess competitors and serve as a marketing advantage that sets him apart from rivals. The US patent filing process seems unnecessarily lengthy, he added.

“I don’t know why it takes a year and a half or two when you have a patent that’s a finite number of pages and you’re doing all the searching electronically,” he said.

Lewis added that he avoids the China market, wary of having his intellectual property stolen and doubtful that a Chinese court would side with him against a local rival, no matter the merits.

His patent attorney, David Postolski, has other clients grappling with China, including some that have chosen to file for Chinese patents as Beijing’s filings rise. The figuring, he said, was “if you can’t beat them, join them”.

Nearly every country has a national science ministry, Postolski added – except the US. “Where’s ours?” he asked. “We really need to get back to innovation.”

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