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Title of Paper: A Tale of Two Countries: Intellectual Property Rights Laws and Indicators in China and
India
Author:
Sadequl Islam
Professor, Department of Economics
Laurentian University, Sudbury, Ontario, Canada P3E 2C6
Email: [email protected]
[email protected]
Tel: 705-675-1151, Ext. 4264 (Office)
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Abstract
In recent years both China and India have experienced rapid economic growth. Both countries have
managed to acquire comparative advantages not only in labour-intensive products but also in hightechnology products. As these countries increasingly shift toward production of knowledge-intensive
products, the relevance of intellectual property rights (IPR) will assume greater importance. This paper
explores intellectual property laws and regulations in China and India and carries out a comparative
analysis of IPR indicators of these countries. The paper presents some basic statistics on IPR and
presents some empirical results based on several statistical methods: the Revealed Comparative
Technological Advantage, the Patent Similarity Index, and the Herfindahl-Hirschman Concentration
Index. The empirical findings reveal that the volume and pace of patent activity are higher in China than
in India. Furthermore, the portfolio of China’s patent applications is more diversified and sophisticated.
I.
INTRODUCTION
Ideas and innovation form the foundation of a dynamic knowledge-based economy as emphasized in
the literature on endogenous growth models. As mentioned in Article 7 of the WTO agreement on
Trade-Related Intellectual Property Rights (TRIPS), the protection and enforcement of intellectual
property rights (IPR) promote technological innovation and dissemination of technology and ensure the
mutual advantage of producers and users of technological knowledge. During the last two decades, with
an outward-looking economic policies, China and India have experienced rapid economic growth.
Furthermore, with a huge absolute number of skilled human resources, China and India have become
significant exporters of high-technology products. As China and India become innovation- driven
economies, the protection of intellectual property rights in these countries will assume increased
significance. Since joining the WTO, India and China have amended intellectual property rights laws and
regulations to comply with TRIPS. In recent years, not surprisingly, patent activity has surged in these
two countries.
Indicators of intellectual property reveal that the pace of technological innovation is much higher in
China compared to India. Indeed, according to the Global Competitiveness Report, 2010-11 ( World
Economic Forum), in technological innovation, while China ranks 26th among 139 countries, India ranks
39th. China leads the world in utility models, trademarks, and industrial designs. In patent applications
and patents granted China is the third largest country behind the United States and Japan. In 2008,
based on patent applications by country of origin, while the figure of China was 203,481, the figure of
India was only 4,683. Furthermore, in 2009, the number of applications through the Patent Cooperation
Treaty (PCT) based on country of origin was 7,906 for China and 865 for India.
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China is now the largest exporter of high-technology products. Furthermore, in advanced technology
products, with the United States, China had a trade surplus of $94 billion in 2010, while India had a
trade deficit of $1.8 billion. Accordingly, it is instructive to compare intellectual property laws and
indicators of China and India which are the two largest economies among emerging economies. A
comparative analysis will be useful for other emerging developing countries which are at lower stages of
development. To my knowledge, no study has been undertaken to compare the intellectual property
regimes and indicators of these two countries.
The main objectives of this paper are: 1) to compare laws and regulations concerning intellectual
property rights in China and India and 2) to carry out a comparative analysis of various indicators of
intellectual property in the two countries.
Data and Methodology
Salient features of laws concerning intellectual property rights in China and India are obtained from the
relevant national government agencies: State Intellectual Property Office (SIPO)of China and the
Controller General of Patents, Designs, and Trade Marks, Ministry of Commerce and Industry of India.
Quantitative information on patents and other intellectual property rights are obtained from the World
Intellectual Property Organization and national government agencies, and the World Economic Forum.
The paper concentrates on the following types of intellectual property rights: patents, utility models,
industrial designs, and trademarks. The paper will explore the data on several indicators of intellectual
property including patent filings, patent grants, patents by fields of technology, and patent intensity in
relation to GDP and R & D expenditure.
The paper computes the “Revealed Comparative Technological Advantage” (RCTA)1 in technological
innovations for China and India as reflected in patent statistics by fields of technology. The paper also
computes the degree of concentration of patent applications across fields of technology and the Patent
Similarity Index (PSI)2 involving China, India, and a few comparator countries. Furthermore, the paper
examines patent intensity in relation to GDP and R & D expenditure in China and India since 1995 and
verify whether patent intensity has increased in recent years because of reforms of intellectual property
rights laws and increased demand for these rights.
Organization of the Paper
Section II presents a brief review of the literature concerning the importance of intellectual property
rights and controversy concerning optimal intellectual property rights and stage of economic
development with reference to China and India. Section III presents salient features of intellectual
property laws and regulations in China and India. Some basic statistics on intellectual property rights in
China and India are presented in Section IV. Section V presents a comparative empirical analysis of
several indicators of intellectual property for China and India. A final section makes some concluding
remarks.
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2
The RCTA is similar to the Revealed Comparative Advantage (RCA) in international trade formulated by Balassa.
The PSI is similar to the “Export Similarity Index “ ( Finger, 1979).
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II. Review of the Literature
There is a now a large theoretical and empirical literature on a) the relationship between technological
innovation and economic growth and b) the relationship between IPR and innovation. The relationship
between technological innovation and economic growth is highlighted in many endogenous growth
models and Schumpeterian growth models ( Aghion and Howitt, 1998; and Acemoglu,2009). In some
empirical studies, measurement of innovation is based on patent statistics ( Griliches, 1990; Hasan and
Tucci,2010). The global study by Hasan and Tucci ( 2010) finds that the level of patenting increases
economic growth.
The relationship between IPR and innovation has also been the subject of a large number of theoretical
and empirical studies ( among others, Lerner, 2009; Parker, 2008). The literature on IPR and innovation
has generated controversies about IPR policy for countries that are at different stages of development.
A major controversy is about IPR for pharmaceutical products. Historically, pharmaceutical industries in
developed countries are associated with high entry barriers and strong patent laws. In contrast patent
laws for pharmaceutical products in many developing countries including China and India have been
weak. Proponents of IPR for pharmaceuticals argue that strong IPR protection would benefit developing
countries in the long run by promoting the development of new drugs relevant to developing countries
and by providing incentives for innovation to local producers in developing countries. Opponents of
strong IPR for pharmaceuticals argue that for many poor developing countries, a harmonized IPR policy
on a global scale may prevent these countries to manufacture or import cheap generic essential
pharmaceutical products and consequently these countries would pay higher prices for essential drugs.
A study by Dutta (2011) finds that because of the TRIPS Agreement, in India , there would be a
consumer welfare loss of about $ 9 million per drug while for patent holders there would be a net gain
of about $1`.4 million3.
Some studies concentrate on the effects of strong IPR laws on innovation and argue that enhancing IPR
when IPR protection is already strong may discourage innovation by suppressing “ learning by doing.”
Indeed , a study by Furukawa ( 2010) finds an inverted –U relationship between IPR protection and
innovation.
In an empirical study Hu ( 2010) explores two hypotheses concerning the surge in patent applications by
foreign firms in China: market covering and competitive threat. Using patent statistics of China and the
USA this study finds strong evidence for the competitive threat hypothesis which implies that
competition among foreign firms largely accounts for the surge in foreign patent applications in China.
Patent activity in a globalized economy is likely to be related to international trade and foreign direct
investment. In a study Haruna, Jinji, and Zhang (2010) for some Asian countries including China and
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India had managed to build an indigenous generic pharmaceutical industry with its lax patent laws. Recently,
India in its free-trade negotiations with the European Union, refused to enhance the IPR laws beyond the TRIPS
Agreement.
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India, find a significant correlation between trade specialization and technology diffusion which is
represented by patent citations.
III. Intellectual Property laws and Regulations
Member countries of the World Trade Organization (WTO) are committed to meet minimum standards
for intellectual property rights (IPR) set out in the Trade-Related Intellectual Property Rights (TRIPS)
Agreement. Trips also specifies procedures for IPR enforcement and dispute resolution. Many WTO
members are also members of several international treaties, conventions, and agreements which make
it easier for owners of IPR to achieve recognition for their rights abroad.
Since 1992, China belongs to the Berne Convention concerning copyrights. In 1985, China became a
member of the Paris Convention concerning priority rights. Since 1994, China belongs to the Patent
Cooperation Treaty (PCT). Furthermore, in 1995, China became a signatory to the Madrid Protocol
relating to trademarks. China’s first patent law, enacted in 1984 came into effect in 1985. In 1992,
China extended protection of invention patents from 15 to 20 years and of utility models and industrial
designs from 5 to 10 years. Since China’s accession to the WTO, it has undertaken legal reforms
concerning IPR in line with the international standard.
China has a three-tier patent system which includes invention patents, utility models, and design
patents. Invention patents are conventional patents which allow protection for 20 years from the date
of filing or priority date. In patent applications, China follows, as in most other countries, except the USA,
the first to file system. In accordance with the Paris Convention, China allows for applicants for
invention and utility model patents filing in China to enjoy a right of priority if they have already applied
for a patent for the same item abroad within the previous year. China follows the standard three
criteria in assessing patent applications: novelty, inventiveness, and practical applicability. China grants
“ utility model” protection for ten years. Utility models , often called “petty or minor patents,” are
currently available in about 60 countries including Germany, France, Italy, Japan, South Korea but
excluding notably, U.K., USA, and Canada. The requirements for utility models are less stringent than for
standard invention patents. The time and cost of processing utility model applications are lower than
that for invention patents4. China makes a distinction between personal inventions ( or non-service
inventions) and “service inventions” by employees of an entity . For service inventions, the right to
apply for a patent belongs to the entity. For a non-service invention, the right to apply for a patent
belongs to the inventor. Since the year 2000, China’s IPR laws have been reformed to encourage
innovations by employees of an enterprise. China allows post-grant but not pre-grant invalidation of
patents.
Designs are covered by China’s patent laws. As in other countries, design rights deal with the shape,
pattern, colour, and other visible attributes of a product. China’s laws regarding design rights are
similar to those of utility models, with a protection for a maximum of ten years. The “right of priority”
4
For detailed discussions on utility models, see Suthersanen (2006).
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for previous filings of designs abroad requires filing in China within six months. The authority responsible
for all aspects of patents in China is the State Intellectual Property Office (SIPO).
According to Article 5 and Article 25 of the China Patent Law, the following items are unpatentable in
China:
(1) any invention-creation that is contrary to the laws of the state or social morality or that is
detrimental to public interest
(2) scientific discoveries;
(3) rules and methods for mental activities;
(4) methods for the diagnosis or for the treatment of diseases;
(5) animal and plant varieties;
(6) substances obtained by means of nuclear transformation.
China’s Trademark Law, dating from 1982 has been amended several times since then. It gives
protection for designs, symbols, colours used to identify a company’s products or services. For
trademarks, China follows the “ first to register” or “ right of priority” principle. Registration by foreign
firms under the Madrid Protocol takes about 18 months while a direct registration using the Chinese
domestic system may take two and a half to four years. A trade mark is valid for ten years, after which it
may be renewed indefinitely for further ten-year periods. The trademark authority in China is the
Trademark Office, operating under the State Administration for Industry and Commerce.
China’s copyright laws are based on the 1990 Copyright Law, amended in 2001, and the Copyright
Implementing Regulations of 2002. The law covers literary, dramatic, artistic and musical works, films
and sound recordings and also computer programs. The effective period for copyright protection is for
the life of the author plus 50 years. In China, the employee, not the employer, owns the copyright
related to a work created during the individual’s employment.
India
India’s IPR laws and regulations cover all significant aspects of intellectual property rights. India’s IPR
laws and regulations have been amended in recent years mainly in response to India’s accession to the
WTO in 1995.India has been a signatory to several international treaties and agreements: the Berne
Convention regarding copyrights since 1928; the Paris Convention concerning priority rights since 1998;
the Patent Cooperation Treaty (PCT) since 1998; and the Madrid Protocol regarding trademarks ( the
relevant bill passed by the Indian Parliament in 2010).
India’s Copyright Act was amended in 1995 to reflect the provisions of the Berne Convention. The
Copyright Act was further amended in 1999. India’s copyrights cover literary, dramatic, and artistic
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works such as books, films, music, photographs, illustrations, computer programs, satellite broadcasting,
and digital technology. Protection for most forms of copyright in India extends to 60 years from the
author’s death. Although not mandatory, it is useful to register copyrights in India.
India’s Patent Act of 1970 and Patent Rules of 2003 were amended in 2005 and 2006 to comply fully
with TRIPS. India follows the “first to file” or “rights of priority” principle in assessing patent applications.
Patents are valid for 20 years, subject to an annual renewal fee. India is a member of the Patent
Cooperation Treaty (PCT) which allows foreigner owners of patents to assess the possibility of obtaining
a patent before initiating the “national phase” of the application within India. The laws concerning
designs are the Designs Act of 2000 and the Designs Rules of 2001. Design rights in India are valid for a
maximum of ten years, renewable for a further five years. In India the processing time for patent
applications ranges from 4 to 5 years and for design applications 9 months. India permits pre-grant as
well as post-grant objections to patents. All the patent applications are kept secret up to 18 months
from the date of filing or priority date whichever is earlier and thereafter they are published in the
official journal of the Patent Office. The examination of a patent application is done only after receipt of
the request of examination either from the applicant or from a third party.
India’s trademark laws are governed by the Trademarks Act of 1999 and the Trademarks Rules of 2002.
A trademark in India is valid for ten years and can be renewed thereafter indefinitely for further ten-year
periods. The processing time for trademark applications ranges from two to three years.
The regulatory authority for patents, designs, and trademarks in India is the Department of the
Controller General of Patents, Designs, and Trade Marks, Ministry of Commerce and Industry of India.
While both India and China have strengthened intellectual property laws in recent years, enforcement of
laws and regulations remain a problem. According to the Global Competitiveness Report, 2010-11
( World Economic Forum), in intellectual protection, while China ranks 49th among 139 countries, India
ranks 66th. However, in software piracy rate ( unlicensed software units as a percentage of total units
installed), China’s performance appears to be worse than India. According to the Global Information
Technology Report, 2010-11 ( World Economic Forum), in 2009,while the software piracy rate for India
was 65, for China it was 79.
China was listed on the Priority Watch List in the US 2010 Special 301 report. Key concerns listed in the
report includes high levels of retail and wholesale counterfeiting, book, software, journal piracy, and
copyright piracy over the internet. The report also highlights weaknesses in China’s enforcement system
through criminal, civil, and administrative mechanisms: too low penalties and high value and volume
thresholds to initiate criminal prosecution of IP infringement. India was also listed on the Priority Watch
List in the US 2010 Special 301 Report which notes weak protection and enforcement of IPR in India.
According to the Report India doesn’t provide effective protection against unfair commercial use of
undisclosed test and other data generated to obtain marketing approval for pharmaceutical and
agrochemical products. Furthermore, India has not yet enacted legislation to implement the provisions
of the WIPO Internet Treaties.
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IV. Basic Statistics
This section of the paper presents some basic statistics on intellectual property rights in China and India
based on patent statistics. Table 1 reports the shares of China and India in world patent applications
during 1995-2008. Shares of both China and India show a rising trend. India’s share has increased
from .62% in 1995 to 1.93% in 2008. For China, increased trend is quite pronounced: the share rose from
1.78% in 1995 to 15.19% in 2008. High economic growth and reforms of intellectual property rights laws
in China and India are likely to be the main drivers of increased patent activities in these countries.
Table 2 presents some statistics on patent applications and patents granted in China in 2010. As
reported in Panel A of Table 2, in 2010, the highest number for patent applications was for design
( 421,273), followed by utility model applications ( 409,836). The number of patent applications for
invention was 391,177. It is evident from Panel A that for invention patents, the share of domestic
applications was 74.92% while the share of foreign applications was 25.08%. Panel B further reveals
that in utility model and design patents, applications in China are overwhelmingly filed by Chinese
residents: the domestic shares being 99.37% and 97.12%. Panel B presents data on patents granted in
2010. It is evident from Panel B that the share of domestic applications was 59.04% in invention
patents and more than 90% in utility model and design patents. The figures of Table 2 suggest that in
China the ratio of patents granted to patent applications is higher for foreign applicants than for
domestic applicants.
Table 3 reports the annual growth rates of patent applications in China. Three points are noteworthy.
First, it appears that growth rates of patent applications for three categories of patents have been
higher since 2000 compared to previous years. Second, in recent years (2009-2010) the growth rate of
utility model applications has been higher than for other categories of patents. Finally, the growth
rates of applications for invention and design patents declined in 2009- most likely because of the
Great Recession. However, it appears that in 2010, patent activity for these two categories recovered.
In order to ascertain the increased globalization of the Chinese economy and global technological
interdependence, it is instructive to identify leading countries which apply for patent rights in China
and also leading destination countries where China apply for patent rights. Panel A, of Table 4 shows
patent applications from ten leading countries in China in 2010 : Japan, USA, Germany, South Korea,
France, Netherlands, Switzerland, U.K, Sweden, and Italy. Japan and the USA dominate patent
applications in China with shares of 33.88 % and 25.37% , respectively. The number of patent
applications in China originating from India was quite small, amounting to only 189. Panel B reports
some data on flows of patent applications from China to leading countries. The USA is the largest
destination country for China’s patent applications with a share of about 61% followed by the
European Patent Office (EPO) with a share of about 14.5%. Japan is the third largest destination
country with a share of about 8%.
Table 5 displays some figures on patent applications and patents granted in India for selected years. It
is evident from Panel A that the number of patent applications, although considerably smaller
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compared to that for China, jumped from 4,824 in 1999-2000 to 36812 in 2008-09. It is also evident
from Panel A that in 2008-09,the share of resident applications in total patent applications was only
16.74%, down from the figure in 1999-2000. Panel B reveals that in 2008-09, close to 84% of patents
granted in India were accounted for by non-resident entities.
Table 6, Panel A presents data on annual growth rates of patent applications and patents granted in
India. It can be easily observed that growth rates have been quite volatile with negative figures for
some years. The growth rates have been higher since 2005, the year when India was required to
comply fully with the TRIPS of the WTO. However, the growth rate sharply fell during 2008-09 from
the previous year.
Panel B of Table 6 shows some data on patent applications from leading foreign countries in India:
USA, Germany, Japan, Switzerland, France, Netherlands, Sweden, South Korea. The shares of USA,
Germany, and Japan were about 36%, 11%, and 10%, respectively. The number of patent applications
from China was 381 accounting for only about 1.2% of total applications from foreign countries.
Table 7, Panel A presents some data on flows of patent applications from India to foreign countries in
2008-09. During this period, only 4700 patent applications were filed by Indian entities in foreign
countries. The United States was the major destination followed by the European Patent Office, and
Japan, accounting for about 61%, 9%, and 5% of the total applications filed abroad. The number of
patent applications from India to China was 184 amounting to about 4% of the total. Finally, Panel B
of Table 7 reports data on trademarks in China and India for 2008. Unlike patents, for trademarks, the
share of resident applications in total applications in India was quite high (92%) compared to China
with a figure of 88%.
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Table 1. Share of China and India in World Patent Applications (%)
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
India
0.62
0.79
0.88
0.75
0.38
0.62
0.73
0.79
0.85
1.12
1.45
1.62
1.89
1.93
China
1.78
2.10
2.15
3.95
3.95
3.78
4.36
5.56
7.08
8.33
10.24
11.77
13.18
15.19
Source: Computed from data of the World Intellectual Property Organization (WIPO) and the Annual
Report,2008-09 of the Office of Controller General of Patents, Designs, Trademarks, and Geographical
Indications, Government of India.
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Table 2.
Panel A.
Patent Applications in China: 2010
Type
Invention %
Domestic
Foreign
Total
293066
98111
391177
Panel B.
74.92
25.08
100
Utility
Model
407238
2598
409836
%
Design
%
Total
%
99.37
0.63
100
409124
12149
421273
97.12
2.88
100
1109428 90.77
112858 9.23
1222286 100
%
Design
%
Total
%
99.36
0.64
100
318601
16642
335243
95.04
4.96
100
740626
74199
814825
90.9
9.1
100
Patents Granted in China: 2010
Type
Invention %
Domestic
Foreign
Total
79767
55343
135110
59.04
40.96
100
Utility
Model
342258
2214
344472
Source: State Intellectual Property Office (SIPO), China.
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Table 3. Annual Growth Rates(%) of Patent Applications in China
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Invention
18.8
18.1
6.6
2
41
22.1
26.9
31.3
23.6
33.2
21.4
16.5
18.2
8.5
24.4
Source: SIPO
Utility
11.1
1.1
2.5
11.9
19.7
15.8
16.8
17.2
3.4
23.7
15.6
12.4
24.4
37.8
31.9
Design
21.5
23.6
13.9
15.7
25.1
21
30.7
18.7
17.9
47.4
23.2
33
16.9
12.3
19.9
Total
23.7
11.2
6.8
10
27.1
19.3
24.1
22.2
14.7
34.6
20.3
21.1
19.3
17.9
25.1
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Table 4. Panel A. Foreign Patent Applications in China in 2010:
Selected Countries
Country
Japan
USA
Germany
South Korea
France
Netherlands
Switzerland
U.K
Sweden
Italy
India
Other Countries
Total Foreign
Number
38241
28636
11297
8782
3994
3329
3067
2087
1996
1627
189
9611
112858
% of Foreign
33.88
25.37
10.01
7.78
3.54
2.95
2.72
1.85
1.77
1.44
0.17
8.52
100
Source: SIPO
Panel B. China’s Patent Applications Abroad
Selected Countries, 2009
Patent Office
USA
EPO
Japan
South Korea
Hong Kong
Other Countries
Total Foreign
Number % of
Foreign
6879
61.18
1632
14.51
891
7.92
426
3.79
411
3.66
1005
8.94
11244
100
Note: EPO = European Patent Office
Source: WIPO
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Table 5. Panel A. Patent Applications in India: Selected Years
Year
Resident (%)
NonResident
(%)
Total
(%)
19992000
20032004
20082009
2206
45.73
2618
54.27
4824
100
3218
25.1
9395
74.9
12613
100
6161
16.74
30651
83.26
36812
100
Panel B. Patents Granted India: Selected Years.
Year
Resident (%)
NonResident
(%)
Total
(%)
19992000
20032004
20082009
557
29.61
1324
70.39
1881
100
945
38.27
1524
61.73
2469
100
2541
15.82
13520
84.18
16061
100
Source: Annual Reports of the Office of Controller General of Patents, Designs, Trademarks,
and Geographical Indications, Government of India.
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Table 6. Panel A. Annual Growth Rates of Patent Applications (GPA)
and Patents Granted (GPG) in India
Year
199900
200001
200102
200203
200304
200405
200506
200607
200708
200809
GPA
(%)
-46.13
GPG
(%)
4.5
76.26
-29.93
24.57
20.71
8.25
-13.33
10
79.04
38.48
-22.6
40.3
126.06
18.1
74.51
21.69
102.43
4.53
5.24
Panel B. Foreign Patent Applications in India,2008-09: Selected Countries
Country
USA
Germany
Japan
Switzerland
France
Netherlands
Sweden
South Korea
Italy
China
Other
Countries
Total Foreign
Number % of
Foreign
10978
35.82
3323
10.84
2962
9.66
1685
5.50
1671
5.45
1544
5.04
1081
3.53
735
2.40
656
2.14
381
1.24
5635
18.38
30651
100
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Table 7. Panel A. India’s Patent Applications Abroad,2008: Selected Countries
Patent Office
USA
European Patent Office
Japan
China
South Korea
Other countries
Total Foreign
Number % of
Foreign
2879
61.26
439
9.34
214
4.55
184
3.91
108
2.30
876
18.64
4700
100
Panel B. Trademark Applications, 2008
Country Resident %
China
India
590805
119371
88.3
91.7
NonResident
78283
10801
%
Total
%
11.7
8.3
669088
130172
100
100
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V. Empirical Analysis of Patent Statistics
This section of the paper caries out an empirical analysis of patent statistics of China and India.
Specifically, the paper explores the following:
a) The “ Revealed Comparative Technological Advantage” (RCTA) of China and India in
different technological fields.
b) The degree of concentration of patent applications by fields of technology measured by
the Herfindahl-Hirschman Index (HHI)
c) The Patent Similarity Index (PSI) for China and India and selected comparator countries
d) Patent Intensity in India and China with reference to GDP and R &D expenditure.
The RCTA is defined as follows:
RCTA = ( PiC/PC)/ (PiW/PW)
Where PiC = Total number of patent applications originating in China for the ith field of
technology.
PC = Total patent applications originating in China for all fields of technology.
PiW = Total number of patent applications originating from all countries in the world for the ith
field of technology.
PW= Total patent applications originating from all countries for all fields of technology. The
RCTA can be defined for India and any other country in a similar way.
If the RCTA is greater than one in a particular field of technology, the relevant country is
considered to have a comparative technological advantage in that field. On the other hand, an
RCTA of less than one implies a comparative disadvantage.
The database of the World Intellectual Organization (WIPO) contains data on patent
applications for 35 fields of technology by country of origin for the combined period,2003-2007.
The computed RCTA figures of China and India are reported in Table 8. For China, the RCTA is
greater than one for 17 out of 35 fields of technology while for India, the RCTA is greater than
one for only 9 fields. For China, the fields that have high values of RCTA ( higher than 2) are
a)food chemistry, b) materials and metallurgy, c) pharmaceuticals, and d) digital communication.
For India relatively high values of RCTA are found for : a) organic fine chemistry, b)
biotechnology, and c) pharmaceuticals. In some fields such as optics and medical technology for
both China and India, the RCTA is significantly less than one, implying a lack of comparative
technological advantage. In some other fields, such as biotechnology and pharmaceuticals both
countries have RCTA greater than one. It is worth noting that in computer technology the RCTA
is greater than one for India but less than one for China.
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In comparing China and India a relevant question is how concentrated are patent activities in
these countries across fields of technology. The degree of concentration of patent applications is
measured by the Herfindahl-Hirschman index (HHI) which is defined as follows:
HHI = [(∑ Si2)1/2 – (1/n)1/2 ] /[ 1- (1/n)1/2 ]
Where Si = the share of ith field of technology in total patent applications for all fields of
technology in the relevant country.
n = the number of fields of technology, which is 35.
The HHI can range from 0 to 1, the latter implying the highest degree of concentration where by all
patent applications are concentrated in one field of technology.
Table 9, Panel A reports the values of HHI for China, India, and for the world as a whole. It is evident that
India’s patent activity has a high degree of concentration, compared to China and the world as a whole.
In other words, the world as a whole and China have a more diversified portfolio of patent applications.
Patent activity of a country can illuminate the stage of technological development of a country.
Furthermore, a comparative analysis of the composition of patent applications of two countries, can
identify whether the two countries are” technological competitors.” The Patent Similarity Index (PSI)
can be a useful indicator to quantify the degree of similarity of patent applications by fields of
technology. The PSI is defined as follows:
PSI = ∑Min {SiC, SiI}
Where SiC is the share of patent applications of ith field in China and SiI is the share of patent
applications of the ith field in India. The PSI can range from zero to unity, the latter implying a complete
similarity of patent activities in the two countries.
Table 9, Panel B, present PSI values for several comparator countries involving China and India: the USA,
Germany, Japan, U.K, South Korea, and Switzerland. It can observed that the PSI for India and China
is .531. The PSI figures of China and other comparator countries are higher than PSI figures of India and
the same countries. The PSI figures suggest that China has a higher degree of similarity of patent
activities with advanced countries than India.
Patent activities are likely to be determined by the level of GDP and also by R &D expenditure. To
highlight these relationships, Table 10 presents patent intensities in China and India. Panel A shows the
patent intensity with respect to GDP ( resident patent applications per $billion GDP) in China and India.
China’s patent intensity has increased more than 5 times from about 4.5 in 1995 to about 23 in 2007.
The increase of patent intensity for India has been relatively modest from 1.18 in 1995 to 1.98 in 2006.
Panel B of Table 10 presents figures for the second measure of patent intensity ( resident patent
applications per $Million R & D) for China and India. For China the figure has doubled from .91 in 1995 to
1.98 in 2007. For India again, the increase has been quite modest.
19
Table 8. Revealed Comparative Technological Advantage (RCTA): 2003-2007
Field
Electrical machinery, apparatus, energy
Audio-visual technology
Telecommunications
Digital communication
Basic communication processes
Computer technology
IT methods for management
Semiconductors
Optics
Measurement
Analysis of biological materials
Control
Medical technology
Organic fine chemistry
Biotechnology
Pharmaceuticals
Macromolecular chemistry, polymers
Food chemistry
Basic materials chemistry
Materials, metallurgy
Surface technology, coating
Micro-structural and nano-technology
Chemical engineering
Environmental technology
Handling
Machine tools
Engines, pumps, turbines
Textile and paper machines
Other special machines
Thermal processes and apparatus
Mechanical elements
Transport
Furniture, games
Other consumer goods
Civil engineering
China
0.87
0.69
1.30
2.04
0.60
0.80
0.47
0.54
0.54
1.08
0.93
0.91
0.52
1.00
1.25
2.28
1.07
2.45
1.84
2.21
0.94
1.20
1.15
1.42
0.51
1.03
0.65
0.79
1.02
1.53
0.61
0.43
0.60
0.99
1.07
Source: Computed from the database of the WIPO.
India
0.20
0.14
0.41
0.66
0.99
1.05
0.84
0.09
0.09
0.30
1.26
0.32
0.49
8.56
3.37
6.82
1.08
1.78
1.30
1.09
0.39
0.54
0.99
0.74
0.28
0.21
0.37
0.42
0.38
0.30
0.22
0.22
0.08
0.26
0.11
20
Table 9 Herfindahl-Hirschman Index (HHI) of Patent Concentration
Panel A.
Country
China
India
World
HHI
.0397
.2610
.0286
Panel B.
Patent Similarity Index (PSI): 2003-2007
Country Pair
China-India
China-Germany
China-Japan
China-Switzerland
China-South
Korea
China-U.K
China-USA
India-Germany
India-Japan
India-Switzerland
India-South Korea
India-U.K
India-USA
PSI
0.531
0.745
0.718
0.69
0.697
0.763
0.783
0.451
0.403
0.578
0.388
0.534
0.527
Source: Computed from the database of the WIPO
21
Table 10. Panel A. Patent Intensity: Resident Patent Applications
per Billion dollars GDP
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
China
4.49
4.75
4.73
4.77
5.04
7.54
8.25
10.03
12.99
13.68
17.61
20.63
22.84
India
1.18
1.18
1.31
1.44
1.31
1.25
1.29
1.41
1.65
1.79
1.85
1.98
-
Note: GDP data are based on the World Bank , purchasing power parity, 2005.
Panel B. Resident Patent applications per Million US$ R & D Expenditure
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
China
0.91
0.8
0.83
1.08
0.99
1.15
1.33
1.33
1.58
1.72
1.82
India
0.21
0.22
0.2
0.18
0.18
0.2
0.25
0.27
0.29
-
Source: WIPO database
22
VI. Concluding Remarks
High economic growth and reforms of IPR laws and regulations consistent with the TRIPS Agreement,
have led to proliferation of patent activities in China and India. Both China and India now satisfy the
minimum standards for intellectual property rights. However, there are significant differences between
China and India in patent laws and procedural regulations. While China grants utility model patents,
India doesn’t. As the experience of China demonstrates, utility models promotes incremental
innovations at the local level especially by small and medium enterprises. Other developing countries
which currently don’t offer utility model protection, may learn from the experience of China.
For developing countries such as China and India, enacting new IPR laws and regulations has been
much easier than enforcing these laws and regulations. As both countries move toward higher stages of
technological development, institutional mechanisms for enforcing IPR laws and regulations need to be
strengthened.
The basic statistics and statistical analyses of IPR indicators show that the volume of patent activity is
much higher in China than in India. A disaggregate analysis of patent statistics reveals that the depth and
width of technological development are much higher in China compared to India. China’s portfolio of
patent applications is more diversified compared to India. Furthermore, China has managed to acquire a
comparative advantage in a wide ranging fields of technology.
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