Opportunities and Challenges of China's Intellectual Property Service Industry

The essence of intellectual property rights is an economic and commercial right. Therefore, whether it is standing in line with the international trend or thinking about promoting industrial transformation, how to strengthen the protection of intellectual property rights, and further obtain benefits from it, is what countries all over the world must face in their national development policies. Many countries are implementing or starting to formulate development strategies related to intellectual property rights, to strengthen the innovation, protection, and utilization of intellectual property rights and ensure the country's competitive advantage in international economic and trade activities.

What are intellectual property rights?

The scope of intellectual property rights, defined by the WIPO Convention of the World Intellectual Property Organization, can include the following rights:

• Discoveries in literature, art, and science
• Performing, recording, and broadcasting by entertainers
• Human inventions in various fields
• Scientific discoveries
• Industrial Design
• Trademarks, logos, business names, and business marks used by the service industry
• Prevention of unfair competition
• Other rights arising from human wisdom in the fields of industry, science, literature, and art.

Overview of China's intellectual property service industry:

The "Intellectual Property Strategy" formulated by China refers to the characteristics of intellectual property rights based on the concept of technical, legal, and economic integration. Using it can increase the market share of enterprises, stimulate technological innovation, and become a driving force to support the development of enterprises. It includes the use of the legal protection system of intellectual property rights to fully safeguard one's legitimate rights and interests, obtain and maintain a competitive advantage, and prevent competitors from seizing the market through improper means. Improving and perfecting the knowledge management system encourages the creation, protection, transformation, and application of intellectual property rights, thereby improving knowledge innovation capabilities and international competitiveness, and promoting sustainable economic and social development.

Although the State Intellectual Property Office of China has been actively cracking down on improper applications in the past two years and rectifying the order of the agency market, the scale of China's intellectual property service industry in 2020 will maintain the high growth it has seen in the past. However, vicious competition in the market and the scarcity of high-end talents are also major concerns for the healthy development of the intellectual property service industry.

China's huge volume of patents and trademarks has spawned a huge intellectual property industry including agency, information analysis, and legal services. Although China's government no longer encourages blind patent applications, over the past two years it has rectified the agency industry. The overall development of China's intellectual property service industry is still quite prosperous in terms of institutional establishment, employees, turnover, and other indicators.

With the increase in the overall number of patent and trademark cases in China, the number of patent and trademark agencies continued to grow in 2020. Taking patent agencies as an example, there were more than 3,000 patent agencies in 2020, and more than 55,000 trademark agencies, with a continued growth rate of over 20%.

The number of patent and trademark agencies in China continues to grow:

China's intellectual property service institutions are mainly concentrated in coastal provinces, especially Guangdong, where the largest technology industries are located. Perhaps because the scale of domestic business is too large, the internationalization of China's intellectual property service industry is not high. Only 11.6% of the operators said that their service targets involved overseas customers, and among nearly 90% of the other operators, nearly 40% of the service scope was limited to the province where they were located.

In the legal service sector of the intellectual property service industry, the proportion of overseas clients is as high as 28.3%, more than double that of other intellectual property service sectors. In addition to core infringement litigation disputes, the business content of legal service providers also includes disputes over ownership of rights, disputes over authorization contracts, disputes over unfair competition, etc., indicating that foreign companies operating in China are increasingly likely to face complex intellectual property challenges and legal risks. On the other hand, although the number of patent and trademark applications that have increased sharply in recent years has brought growth to the overall intellectual property service industry, it has also caused chaos in the market order and uneven service quality.

Vicious competition in the market may affect the long-term development of China's intellectual property service industry:

In addition, the cultivation and retention of talents is also a major problem. 38% of industry operators said that high-end talents are scarce, and 32% believe that the turnover of personnel is too high. On the one hand, intellectual wealth service providers have to rely on bargaining or other more drastic means to win business, but they have to pay high costs to win or retain outstanding talents, and the operating pressure of providers is quite high.

To rectify the market order of the intellectual property service industry, The CNIPA (China National Intellectual Property Administration) has launched a series of control measures since 2019 and has also started to rectify malicious registration of trademarks in 2020. However, in the past six months, there have been trademark applications related to "Metaverse" in China. The fact that the annual authorization of patents continues to climb, means that control may need to be more stringent to truly guide the market order.