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CHAPTER 2

The Implementation of Chinese Patent Policy

In 2007, I met two young patent officials, Mr. Huang and Mr. Jiang, at a national intellectual property rights (IPR) conference in Beijing. Both of them were from central China’s H Province,¹ a province with a reputation for being a center of the production and distribution of counterfeit goods in northern China. A joke I heard from a street peddler from that province exemplifies this reputation. In that peddler’s words, counterfeit products in his province ranged from projects “as big as ceramic tiles covering the Great Wall and gauze masks for hippos in Africa, as small as shackles for fleas and condoms for cockroaches.”² Before I arrived at their hotel room, I called them on the phone to ask if they would like to schedule an interview with me about patent protection (zhuanli baohu) in H Province. They replied enthusiastically, telling me that they would love to discuss the issue of patent work (zhuanli gongzuo). Too excited to have access to two IPR officials, I almost ignored the subtle but important difference between “patent protection” and “patent work.” In the beginning of the interview, I raised the prepared questions, most of which emphasized patent protection. I asked under what conditions effective patent enforcement would mostly likely happen. The two young officials answered my questions in a polite way, but I could easily sense that they were not as interested in my questions as I had expected. When the interview was nearly completed, I raised a question not previously on the top of my list: “As an inland province, your economy is not as export oriented as provinces in East China. Can you describe the patent strategies of the province’s export-oriented enterprises, even though there are not as many?” That question suddenly sparked the interest of my interviewees. They enthusiastically described how many patent applications were filed each year under their sponsorship, how many of them were approved, and how the patent application and approval rate grew annually. Without being asked, they singled out a successful example of their patent work: how the intellectual property office (IPO) of Changxi,³ a city in the northern part of H Province, helped a local company defend itself in a patent lawsuit with a Japanese company, how that company boosted its export volume and grew from being a small business player into a vibrant competitor, how that company’s success benefited the local economy, how one of their colleagues won an annual prize for his excellent work to help that company, and even how that achievement helped the Changxi City IPO bargain for a better share of the city’s annual budget. The interview lasted another forty minutes. Instead of being frustrated that the interview did not proceed in the direction as planned, I was excited to learn an unexpected, albeit important, finding: there is an important difference between my interests (and probably that of many other observers of Chinese patent policy) and the interests of the Chinese patent policy practitioners on the ground. The former are more interested in “patent protection,” that is, how high-quality enforcement can be delivered to protect the interests of patent holders. For the latter, however, patent protection is only one part of “patent work.” More important for them is how patent protection can boost their foreign trade and promote local economic development. Indeed, the case of Changxi City that the two officials proudly cited cannot be called an example of “patent protection” in a strict sense. In almost all my interviews with the Chinese patent officials, I was told that patent protection had equal importance in the development of the patent industry. But the finding gained from the two patent officials spoke for itself: there is a hierarchy of importance in their policy agenda between “patent work” and “patent protection.” This hierarchy has a tangible impact on how effectively patent cases are enforced.

The greater importance of patent work over patent protection was reinforced during a research trip to H Province in January 2013. I met Mr. Huang and Mr. Jiang again after many years. Having been friends for the past several years, they invited me to dinner. Both Mr. Huang and Mr. Jiang celebrated their promotion several months earlier, but they were assigned to different sections. Mr. Huang’s section was in charge of, in his words, the development of the patent industry while Mr. Jiang’s section was in charge of overseeing the enforcement of patent laws. I was invited to the guest seat of the dinner table. Mr. Jiang insisted that Mr. Huang should sit at the seat facing the door, known as the “upper seat.” Out of Chinese modesty, Mr. Huang declined. But Mr. Jiang replied, “Of course you should sit at the upper seat. You are our real boss!” Eventually, Mr. Huang took the upper seat. A fine dinner started. In Chinese culture, the dinner table is an important place for people to discuss business matters. The order of the seats at the dinner table is an important indication of the bureaucratic hierarchy.⁴ After drinking wine, Mr. Jiang told me half-jokingly, “Did you ask under what conditions effective patent enforcement would happen? How come you smart scholars just like to pose stupid questions? You scholars just view things differently from us. It all depends on our boss.” He pointed to Mr. Huang and said, “If our boss wants us to enforce the case in an effective way, that case will be an effective one.”⁵

Mr. Jiang had a lot of wine during dinner, but his comment should not be interpreted as due to the wine. His comment indicated that the Chinese government does not protect intellectual property rights for their own sake. Rather, the Chinese government’s ultimate goal of IPR work is to build its own IPR industry. IPR protection is not an end in itself. An IPR scholar from the Chinese Academy of Social Sciences (CASS) explained the policy arrangement in a more explicit way. According to him,

When people talk about IPR, the first thing that comes in mind is how many counterfeit products are seized and how many IPR infringers are brought to justice. But shouldn’t we also think about the nonobvious aspects of IPR work? In fact, our work consists of IPR creation, application, protection, and management. IPR protection is only part of that broader scheme, with the other aspects constituting the foundation of IPR activities. If the economic rationale behind IPR theft remains unchanged, we can only expect IPR infringement to happen constantly—no matter how serious we are about IPR protection.⁶

This chapter explores the relationship between patent enforcement and other aspects of, in the patent officials’ words, “Chinese patent work,” with an emphasis on the mechanisms to bring about effective patent enforcement. I argue that patent enforcement should be understood as occurring at the interface between the Chinese state and societal actors. An overemphasis of one side and ignorance of the other will at best yield an incomplete understanding of the entire picture. As a developing country, China pursues dual goals in implementing its patent policy: (1) upgrading the country’s industrial competitiveness through the development of the patent industry and (2) protecting patent holders’ interests by punishing patent infringement. The second goal serves the first goal. The more patent protection is believed to serve the overall agenda of “patent work” and help to promote economic development, the more likely effective enforcement will occur. Otherwise, patent enforcement will yield at best a lukewarm result.

This chapter is organized as follows: the first section discusses the implementation of China’s patent policy on the state side—namely, IPR special tribunals and IPOs at various levels. On the basis of analysis by other scholars, I argue that enforcing patent laws is only part of the responsibility of the Chinese patent bureaucracy. Equally, if not more, important is to establish a policy environment conducive to supporting the creation of high-quality patents and apply those patents to benefit the market. The second section discusses the uneven results of Chinese patent policy on various Chinese business actors, which in turn creates different attitudes toward patents. The business actors include foreign companies investing in China, Chinese elite domestic private enterprises, Chinese state-owned enterprises, and the majority of Chinese domestic private enterprises. In an important way, their different attitudes toward the patent norm not only influence the effectiveness of patent enforcement but also reflect an uneven level in the thoroughness of the Chinese political and economic transition. I conclude this chapter by connecting the implementation of Chinese patent policy with the country’s ongoing institutional reforms.

Chinese Patent System: Enforcement Function and Beyond

This section provides an analysis of the legal and administrative enforcers of Chinese patent policy—namely, the Chinese IPR special tribunals and patent bureau/IPOs. Previous scholars have already offered a thorough analysis of the organizational evolution of the Chinese State Patent Bureau (SPB); its successor, the Chinese State Intellectual Property Office (SIPO); and SPB/SIPO’s regional branches. They have also conducted an in-depth discussion of the relationship between the Chinese patent administrative apparatus and IPR courts.⁷ Nevertheless, some key issues that influence their enforcement functions remain underexplored: Do Chinese IPR courts and IPOs have any goals other than patent protection? If patents receive due protection, how do the enforcement decisions influence (and are influenced by) the broader political and economic environment in China? This section situates the operation of Chinese IPR courts and patent bureau/IPOs against the greater political and economic backdrop of the country’s market reform since the early 1980s. I argue that the Chinese IPR tribunals and patent bureau/IPOs not only enforce patent laws but also design patent policy to serve the general scheme of the country’s economic modernization campaign. Hence, the effectiveness of Chinese patent policy is measured by the quantity and quality of enforcement cases and also by its contribution to the country’s technological and economic advancement.

Chinese IPR Tribunals: Between Trial and Mediation

As some scholars have rightly pointed out, Chinese IPR courts are the primary venue for delivering patent protection. Over the years, Chinese IPR courts have handled high-quality patent enforcement cases through trials. Building on these scholars’ analyses, I demonstrate that, in addition to delivering legal enforcement through a trial, the Chinese IPR tribunals have also increasingly introduced pretrial mediation as an alternative means to resolving patent disputes in recent years. Both trial and pretrial mediation serve China’s need to render technological innovation into practical market benefits.

Chinese patent legislation identifies three types of patent violations: patent infringement (qinquan), patent counterfeit (jiamao), and patent passing off (maochong).⁸ The 2008 Chinese patent law defines patent infringement (qinquan) as “the exploitation of a patent without the authorization of the patentee” for the purpose of making profits.⁹ Patent counterfeit (jiamao) is defined as counterfeiting the patent certificate or other patent documents belonging to the legitimate holder of the patent. Patent passing off (maochong) is defined as selling or producing a nonpatented product as a patented product.¹⁰ When a patent owner identifies a patent violation, the owner can resort to legal protection or administrative protection. Under the current Chinese patent regime, IPR courts are the primary providers of legal enforcement while IPOs at different levels are the primary providers of administrative enforcement. Due to their technical complexity, most patent infringement (qinquan) cases are handled through legal channels. Regional patent bureaus or IPOs are mainly in charge of handling the relatively less complex cases of patent counterfeits and patent passing off. According to some scholars of Chinese IPR policy, high-quality enforcement, featuring consistency, transparency, and procedural fairness, has emerged in the Chinese IPR special tribunals. They attribute this to the high qualifications of Chinese IPR judges, the relatively independent status of IPR special tribunals, and the courts’ stronger authority to resist local protectionism.¹¹ These factors have equipped the Chinese IPR special tribunals with the capacity to handle complex patent infringement cases. Chinese IPR judges themselves are also confident of the quality of their legal decisions and are required by the People’s Supreme Court to post these decisions online for the general public to review.¹²

Figure 1. Administrative versus legal enforcement of patent cases in China, 2001–2010. Chinese Intellectual Property Yearbook (2002–2011).

Statistical data indicate that, between 2001 and 2010, IPR courts at different levels handled 69.6 percent of the patent disputes while regional IPOs handled 30.4 percent.¹³ Further examination of the data reveals that IPR courts in China have witnessed a rapidly growing number of hearings on patent disputes over the past decade (see Figure 1).

Statistical data about Chinese IPR tribunals are telling, and one is tempted to conclude that Chinese IPR special tribunals accomplish all their tasks by offering legal protection to patent holders. But a careful study of the history of Chinese patent dispute settlement indicates that the number of court trials is only a partial reflection of their work. Before China established its first IPR special tribunal in Beijing in 1993, patent disputes were mainly resolved by patent bureaus at different levels. Between 1985 and 1992, the patent bureaus settled a total of 1,858 patent disputes, with 1,400 of the settlements resulting in mediation because the disputes were not high-value cases.¹⁴ According to the recollection of Cheng Yongshun, one of the founding judges of the IPR Tribunal of the Beijing Intermediate People’s Court, conducting trials of IPR cases was the main way to resolve IPR disputes during the early years of the IPR tribunals in the 1990s.¹⁵ As the first of its kind in China, the IPR tribunal in Beijing shared its experience with its counterparts in other provinces. As of 2012, China had established 420 IPR tribunals at the basic court (jiceng fayuan) level, reaching into some remote provinces such as Xinjiang and Yunnan. The IPR tribunals were staffed by 2,759 IPR judges.¹⁶

With the rapid growth of IPR special tribunals over the past decade, the complexity and difficulty of patent cases on trial have also increased. Even IPR judges do not deny the challenges that IPR tribunals face. Specifically, these challenges include burdensome evidence collection, expensive lawsuits, lengthy trial processes, and difficulty with calculating economic compensation. These factors make IPR civil enforcement a luxury, particularly for IPR holders with weaker economic status, such as individuals or small and medium-sized companies. Even if companies win the case and the court orders a stop to the patent infringement, the companies may have lost time and business opportunities. As such, they go to court only when absolutely necessary. In light of this, the Chinese IPR special tribunals introduced another important part of their work in the late 1990s and early twenty-first century—the mediation between the different parties involved in the patent cases.

No systematic data exist about when the IPR special tribunals started to adopt pretrial mediation as the major means in the resolution of IPR disputes. Speeches by Chinese judges in the early twenty-first century, however, indicated that the courts increasingly realized the importance of pretrial mediation in solving civil disputes, including IPR cases. For example, in a speech delivered at the annual conference of the presidents of the Provincial High People’s Court in 2004, the Chinese People’s Supreme Court judge, Xiao Yang, stated that the people’s court should “mobilize positive factors in various aspects, explore alternative means other than trials to solve legal disputes, and further improve settlement mechanism of social contradictions.”¹⁷ In 2008, Xiao Yang’s successor, Wang Shengjun, elaborated that principle as “mediation first and then combine mediation with adjudication” (tiaojie youxian, tiaopan jiehe) in handling civil cases.¹⁸ Applying this principle to IPR cases, the newly appointed director of the IPR Tribunal of the Chinese People’s Supreme Court, Kong Xiangjun, proposed that disputes between different parties in IPR cases should be mainly categorized as “internal contradictions among the people” (renmin neibu maodun). The judge’s role should not only be limited to delivering a high-quality trial for individual cases but also should provide a legal basis for resolving plaintiff-defendant contradictions and enhancing the application of technological innovation to promote social and economic development.¹⁹ Under this rationale, mediation mechanisms aim to (1) find common interests between the parties involved, (2) negotiate a technology transfer agreement, and (3) make the parties cooperate. An example cited by an IPR judge in Nanjing illustrates the effect of the mediation mechanism. In 2005, a retired engineer, Mr. Lu (plaintiff), developed a technological innovation that was not put into application until after his retirement. When Mr. Lu discovered this, he was upset to find that his former employer (defendant) had produced goods according to the technological innovation he had designed. As he was about to sue his former employer, the Nanjing IPR court mediated between Mr. Lu and his former employer. Eventually, the two sides reached an “outside court reconciliation” and negotiated a technology transfer agreement, in which Mr. Lu received 110,000 RMB (about $15,000) in economic compensation. After the mediation, Mr. Lu decided to withdraw the lawsuit.²⁰

In the early twenty-first century, mediation became an increasingly important way to solve IPR disputes, particularly for those cases of lower financial value. In 2003, 49.4 percent of IPR cases were resolved through pretrial mediation.²¹ As of 2010, that number had increased to 57.13 percent.²² An IPR judge’s comment summarized his understanding of Chinese IPR tribunals’ work:

We should not only care about the result of a patent lawsuit. More attention should be paid to the social and economic issues extending out of the lawsuit. A successful judge should not only deliver high-quality trials that can stand the test by the social public but also play his or her own role in directing the healthy development of certain industries involved. Our task is to protect inventions, but where do all the inventions come from? If there is not sufficient number of inventions, what should we protect?²³

While Chinese IPR tribunals handle many more patent disputes than IPOs at different levels and are praised for delivering high-quality enforcement cases, it is unfair to conclude that the Chinese patent bureaus at various levels are weaker on the ground because they handle a lower number of cases. In fact, the IPR special tribunals and regional IPOs shoulder different tasks in the division of labor in Chinese patent work. It is true that IPR special tribunals are focused on dealing with the more complex patent cases, but that should not trivialize the role of patent bureau/IPOs in the implementation of Chinese patent policy. The next section discusses the functions of patent bureau/IPOs at different levels in China. I demonstrate that administrative enforcement is only part of the task of Chinese IPOs at different levels. More important for them is the creation of a social environment conducive to technological invention in the country. In that sense, the IPR tribunals and the patent bureau/IPOs share similar goals in China’s “patent work.”

Chinese IPOs: More Than Administrative Enforcement?

The primary administrative organ in charge of Chinese patent affairs is the State Intellectual Property Office (SIPO) and its regional offices. Some scholars have examined the organizational evolution of SIPO in a detailed way. That is, SIPO and its predecessor, the State Patent Bureau (SPB), went through several superior or “host” organizations since its establishment in 1980. These organizations include the State Science and Technology Commission (SSTC) from 1980 to 1982, the State Economic Commission (SEC) from 1982 to 1988, and the SSTC again from 1988 to 1993. In 1998, SPB was named the SIPO and acquired the status of a vice-ministerial level organization directly subordinate to the State Council.²⁴ Scholars such as Mertha attempted to gauge the strengths and effectiveness of Chinese patent bureaucracy through the organizational history of the SPB/SIPO. Using their analysis as a foundation, I examined how the transfer from one superior or “host” organization to another informs the institutional culture of the SPB/SIPO and, possibly more important, how that institutional culture impacts the SPB/SIPO’s perception of its role in the implementation of Chinese patent policy. I found that since the early 1980s, the Chinese patent system has performed dual functions: (1) managing Chinese patent affairs in general and (2) providing guidelines for patent protection. The institutional history of Chinese the SPB/SIPO suggests that market reform in the country’s science and technology policy introduced in the early 1980s has significantly influenced its operation.

The Chinese SPB was established in 1980, with Wu Heng as its first general director. Wu Heng also held the position of SSTC vice director. As discussed in Chapter 1, the macroenvironment for SPB’s establishment was the introduction of reform and opening policy in China. At the ministerial level, the SSTC played a major role in the establishment of the SPB. In 1979, one year before the SPB was formally established, an IPR training seminar was organized to prepare the SPB with the first group of “backbone staff” (gugan chengyuan). The seminar participants were young officials and professionals in their late twenties and early thirties, but they became the elites of the Chinese IPR circle thirty years later. Among them were Tian Lipu (SIPO general director from 2005 to 2014), Li Jiahao (former vice director of the Asia Pacific Development and Cooperation Bureau, World Intellectual Property Organization), Lu Xueshi (former director of the Shanghai Branch Office of the Chinese SPB), and many other emerging young professionals who assumed influential positions in Chinese patent affairs in later decades.²⁵

Historical archives of the 1979 Training Seminar revealed interesting details that foretold the operation of Chinese patent activities in the decades to come. As the primary organizer of the seminar, the SSTC appointed An Yutao, head of Scientific and Technological Achievement Division, to lead the day-to-day operations. Within the SSTC, some called for patent affairs to fall exclusively under the commission. But those callings met opposition from Wu Heng, the principal designer of the SPB. Wu criticized that opinion as selfish factionalism (benwei zhuyi) and insisted that young professionals with expertise in other related fields and from other related ministries should also be included. According to him,

Comrades of patent work should first have a solid background in science and technology. But that is not enough since patent work is a key component of our country’s growing economic modernization scheme. It also has important influence on our country’s growing foreign trade. Therefore, we should be well versed in international trade and international commerce. Ideally, our comrades should have a good command of at least one foreign language to meet the need for international exchange. In short, our patent cadres should be interdisciplinary talents.²⁶

Under that rationale, the first generation of employees of the SPB was recruited from various sources. Cadres from the SSTC constituted the majority of SPB staff, joined by their colleagues from the China Council for the Promotion of International Trade, Ministry of Foreign Trade, Ministry of Education, Chinese Academy of Sciences, and various other ministries of industry. In an official document issued on January 14, 1980, the Chinese State Council clearly delineated the goals to establish the SPB as “promoting and protecting our country’s invention and innovation, enhancing international technological exchange, creating conditions for attracting foreign investment and technological knowhow, and quickening the pace of China’s economic and technological development.”²⁷

Work toward these goals was furthered during the first decade of the SPB’s operation. By the late 1980s, China had trained over 4,000 patent agents and attorneys, 2,000 corporate patent professionals, and 2,000 patent trade professionals nationwide. As the first-generation practitioners of Chinese patent policy, the young people should be credited for institutionalizing the organizational culture of the Chinese patent system nationwide. That is, while the Chinese science and technology sector has had an indelible influence on the country’s patent activities, the country’s patent practitioners were also educated to serve the needs of the country’s economic development and foreign trade. The back-and-forth transfer from the SSTC to the SEC as the host organization for the SPB in the 1980s and early 1990s helped establish and even reinforce that institutional culture.

The operations of the Chinese patent administration could hardly be detached from the broader scenario of the country’s market-oriented reforms introduced in the science and technology sector. While the adoption of Chinese patent law was being hotly debated in the early 1980s, the country was also engaged in a thorough reform of the science and technology system established during the planned economy era. The key components of the Chinese science and technology reforms during that period were twofold: (1) diminish government intervention in the country’s science and technology sector to push the sector into the market and (2) create a technology market for transactions between research institutes and industrial enterprises.²⁸ The establishment of a patent system served that purpose. In an article published in 1986, SSTC Director Song Jian explained the role played by Chinese patent policy in that reform scheme. According to him,

[As an important part of Chinese science and technology reform], Chinese patent policy serves to establish a technology market in the country and strengthen our enterprises’ ability to absorb new achievements in our country’s scientific research. In the implementation of Chinese patent policy, we should change the past practice of using the achievements of scientific research for free and guide the science and technology sector from research labs to factories, rural areas, and various corners of our motherland. We should open the gate for our science and technology professionals to the main battlefield of economic modernization.²⁹

When Song Jian made that comment, the host organization of the SPB had already shifted from the SSTC to the SEC. Although it was odd for Song Jian, then SSTC director, to comment on the work of the Chinese SPB, an organization that was no longer under his jurisdiction, his comment did not seem to have offended the leadership of Chinese patent policy. Huang Kunxi, then SPB general director, echoed Song Jian’s comments in an article published later in 1986. According to Huang,

The implementation of Chinese patent law is bound to provide strong motivation for our country’s science and technological development since it effectively combines the need for economic development with legal practice. The purpose of our work is to coordinate the relationship between the owners of the inventions and their users…. There are millions of industrial enterprises, thousands of research institutes, and hundreds of research universities in our country. They are going to produce inventions and utilize inventions as well. At the same time, millions of farmers also need to utilize scientific invention and technological innovation. It is therefore important to create conducive conditions for the technological innovations to be applied and turned into concrete productive forces as early as possible. Our patent work should serve that purpose.³⁰

The opinions of Song Jian and Huang Kunyi demonstrate how Chinese patent work was influenced by the general context of Chinese economic reforms. From 1980 to 1998, the SPB shifted from one host organization to another and went through four general directors, but the general goal of Chinese patent work remained unchanged. Shortly after the Chinese SPB was renamed SIPO in 1998, the newly appointed SIPO general director, Jiang Ying, reiterated this goal in an article published in People’s Daily, the mouthpiece of the Chinese Communist Party. According to her,

The twenty-first century is an age of knowledge economy. Our main task is to effectively utilize our IPR system and promote the production and dissemination of knowledge…. The development of new technology is increasingly gaining pace in the new era. Our work on IPR protection should be adjusted to that new development. We should study the relationship between IPR and knowledge economy in an in-depth manner. That is the requirement of our country’s economic development.³¹

Jiang Ying’s successors, Wang Jingchuan and Tian Lipu, inherited the rationale elaborated in her article. As China became more deeply involved in the global IPR regime in the late 1990s, the Chinese State Council entrusted SIPO with a more complete set of functions as a vice-ministerial-level organization. Those functions included (1) designing laws and regulations related to patent work and preparing patent legislation; (2) coordinating IPR affairs related to foreign countries, including negotiating with foreign countries and other relevant government ministries and studying the trends of the development of international IPR affairs; (3) organizing and designing development plans for a patent information exchange nationwide; (4) designing the standard for patent validation and infringement and providing professional guidance to local patent bureaus to solve patent disputes and punish patent violations; and (5) educating and training IPR professionals and advocating for patent laws and other regulations.³²

SIPO was established at a time when China was becoming profoundly integrated into the global economy with its entry in the World Trade Organization (WTO). In the early twenty-first century, Chinese top leadership repeatedly emphasized the importance of technological innovation in the process of upgrading the country’s industrial sector and urged the Chinese patent system to play an important role in that grand enterprise. In 2004, former Chinese president Hu Jintao put forward for the first time the notion of “building an innovative country” in an official speech.³³ In 2008, China elevated intellectual property rights to the level of national strategy and adopted the Outline of the National Intellectual Property Rights Strategy, known as the 2008 Outline. The 2008 Outline reaffirmed the goal of building China into an “innovative country” by 2020. To that end, China aimed to “significantly improve the level of independent innovation, further enhance the ability of IPR application to produce knowledge-intensive products, markedly reduce the cost of IPR protection and crack down IPR infringement.”³⁴ It is noteworthy that the 2008 Outline, like other official IPR policy documents, did not downgrade the importance of IPR protection but rather prioritized it lower than IPR creation and application in Chinese IPR work. Leadership speeches and official documents cited above represent the thinking of Chinese patent policy designers. That is, while some scholars focused on patent enforcement, the designers of Chinese patent policy were more interested in how patent enforcement could serve the purpose of transforming science and technology into being the primary engine for the country’s economic development. This tendency is also represented in the operation of IPOs at the regional level.

Regional patent bureau/IPOs were being established in the 1980s. As of 2010, all thirty-one provinces/municipalities in China had established a provincial/municipal IPO. Among the provincial/municipal IPOs, nine are at the bureau level (tingji) (Beijing, Tianjin, Shanghai, Guangdong, Guizhou, Shanxi, Hunan, Sichuan, and Inner Mongolia), nineteen are at the vice bureau level (futingji) (Liaoning, Yunnan, Hebei, Heilongjiang, Jiangsu, Hubei, Ningxia, Xinjiang, Fujian, Jiangxi, Anhui, Shandong, Henan, Chongqing, Jilin, Gansu, Zhejiang, Guangxi, and Hainan), and three are at the section level (chuji) (Shaanxi, Qinghai, and Tibet). The IPOs covered the city/prefecture level in twenty-three provinces and reached the county level in thirteen provinces.³⁵ It is generally agreed that the subnational IPOs have a dependent relationship with the Science and Technology Bureau in their respective provinces. There are also varied budgetary and personnel allocations (bianzhi) of the subnational IPOs from one locality to another. Some of them are quite strong and others weak. This coincides with the personnel and budgetary allocations in different provinces/municipalities. The Henan Provincial IPO, for example, only had twenty-five full-time staff when it was established in 2000.³⁶ In China’s capital, Beijing, however, the Beijing municipal IPO had forty-two full-time staff when it was established in 2002.³⁷ Scholars also noted that a significant proportion of the staff of the local IPOs come from the Science and Technology Bureau. When the needs for patent enforcement arise, IPOs have to resort to the local Administration for Industry and Commerce (AIC) and Quality and Technology Supervision Bureau (QTSB) for additional help.³⁸

A natural question thus arises: under what conditions will the regional IPOs persuade the AIC and QTSB to provide them with necessary help for patent enforcement? The short answer to this question is when the IPOs can convince the AIC and QTSB that patent protection helps to promote local economic development. As indicated by a closer examination of IPO functions, enforcing patent laws is only part of their duties. After the establishment of a complete set of IPR tribunal systems around China in the 1990s, the enforcement function was gradually outsourced to the IPR courts, with the emphasis of the patent bureau/IPOs shifting to the management of patent affairs. Like their counterparts at the central level, the regional IPOs serve to design the regional patent regulations, coordinate the implementation of the intellectual property rights strategy and foreign-related IPR affairs, disseminate patents to enhance the economic development of the area under its jurisdiction, and deliver patent protection through administrative means.³⁹ Also, like their counterparts at the central level, the regional IPOs never downgraded the importance of patent protection. In practice, however, the development of scientific capacity takes precedence over the enforcement of patent laws. During my research trip to Changxi, an IPR official cited a piece of informal evidence corroborating this. He noted that there are several vice bureau chiefs in the city’s IPO, and when the bureau chief and vice bureau chiefs take group photos on formal occasions, the vice bureau chief in charge of the patent industry always appears on the right side of the vice bureau chief in charge of patent protection, with the bureau chief in the middle. Due to the lack of institutionalization in Chinese politics, the order that the officials appear in group photos is an important indicator of bureaucratic hierarchy.⁴⁰ It is, therefore, no wonder that Mr. Jiang, the official in charge of patent protection, called Mr. Huang, the official in charge of patent industry, “our real boss,” even though both of them held the same bureaucratic rank.

With the priority established, the variation in the budgetary and personnel allocations of the regional IPOs only serves as a partial measurement of their capacity and effectiveness. In the affluent provinces/municipalities such as Beijing, Shanghai, and Guangdong, the IPOs can obtain a better share of budgetary and personnel allocations because the tasks of managing patent activities in those regions are more numerous. IPOs in the relatively backward inland provinces may have less of a budget and fewer personnel. As suggested by the example cited at the beginning of the chapter, however, effective patent enforcement is still possible, even in a province that is traditionally regarded as having low respect for IPR. The condition for determining patent enforcement, of course, is whether it is believed to enhance their region’s economic development and improve their competitiveness in foreign trade. Some subnational IPOs may be “weak” in the sense that they are not as well financed and well staffed as their counterparts in coastal provinces, but their enforcement efforts can be effective if they can prove that patent protection will benefit the overall economic advancement of the area. This logic holds across inland and coastal provinces alike. The following fieldwork experience further illustrates this point. Before I ended my research trip to Changxi City, Mr. Huang told me,

Of course we should be better financed and better staffed than before. That is because the likelihood of IPR theft is going to increase with our rapid economic development. Should we be jealous of our comrades in the coastal provinces, who are even better financed and better staffed than us? Maybe, but do not forget that their duty is probably heavier than [ours]. It is not fair to measure the effectiveness of our work according to how many people enforce how many cases. Patent enforcement is part of our work. Our patent work is effective if the patent policy that we designed can serve our economic development and serve it well.⁴¹

The above analysis indicates that the Chinese patent bureaucracy has never existed in a vacuum. A fuller understanding of patent protection in China should adopt a holistic approach and consider the social, economic, and political environment in which these bureaucracies operate. An integrative approach can yield a more nuanced understanding of the functions of the Chinese patent bureaucracy. In discussing the relationship between patent protection and other aspects of patent work in China, I did not touch on the role of Chinese IPR holders. Although the least parsimonious variable in the equation, patent holders are by no means the least important. In fact, the patent protection apparatus would not exist if patent holders did not feel that their interests were being harmed. The next section discusses the various patent holders.

Chinese Patent Policy and the Societal Actors

The previous section established the principal rationale for designing Chinese patent policy on the state side, and this section studies the effect of Chinese patent policy on the country’s various business actors. After all, it is the Chinese business community whose interests are directly affected by the implementation of Chinese patent policy. The following questions guide my discussion: Who creates patents and who holds them? Who infringes upon them? What does the notion of patent mean for patent holders and patent infringers? How important (or unimportant) is the issue of patents for them? Why is the patent issue important for some business actors but not others? During the defense and infringement activities, who are the winners and losers?