Chinese Junk Patents Flood Into Australia, Allowing Chinese Companies To Strategically Block Innovation      

from the perverse-incentives dept

Techdirt has been writing for a while about China's policy of providing incentives to file patents -- regardless of whether those patents have any worth. That's led to a naïve celebration of the large numbers now being granted, as if more patents corresponded to more innovation.
Until now, this problem of junk patents has been confined to China, and the companies that operate there. But last year China went even further with its subsidy system, offering to pay the fees for filing overseas, presumably to encourage Chinese companies to build up patent portfolios in foreign markets that can be used for defensive or even offensive purposes. We're now beginning to see the effects of this further distortion to the patent system, as Australian businesses struggle with the flood of new patents there. The Patentology blog explains:

A Chinese government scheme providing financial incentives for small and medium sized enterprises, public institutions or scientific research institutions appears to be resulting in abuse of the Australian patent system, and the 'dumping' of numerous low-quality innovation patents on the Australian Register.

These 'junk' patents are not being examined or certified. They therefore represent no more than potential enforceable rights. Even so, they generate costs to companies operating legitimately in Australia, which may need to obtain advice on the likely scope and validity of these patents in order to avoid possible infringement. In extreme cases, the existence of junk patents could result in an Australian business choosing not to take the risk of bringing a new product to market, even though the Chinese owner of a patent is not itself offering any products or services in this country.

This is a perfect example of how granting more patents actively harms innovation. Thanks to China's incentive scheme, which encourages patent quantity rather than quality, Australian businesses must now spend more time searching through them all to see if they are likely to affect their own products, deciding if they are a threat, and what to do about it. All that costs money that could have been spent on real innovation, developing new products. Thanks to the patent system, and China's new incentives, that money will now go to the lawyers.