Hear about IP Rights in China from the Horse's Mouth

Author: Unknown US serviceman or woman
Licence  Dedicated to the public courtesy of US Government

Jane Lambert

There is an awful lot of rubbish spoken about IP rights in China so here are some facts:-

• In 2015 some 2.9 million patents were applied for throughout the world (an increase of 8% over the 2.7 million applications the previous year). Of those 2.9 million, China accounted for 1.1 million (an increase of 18.7% over the 928,177 sought the previous year). The USA was number two in both 2014 and 2015 with 587,802 and 589,410 respectively and Japan came third with 325,989 in 2014 and 318,721 in 2015.  How many patents did we seek during those years?  A mere 23,040 in 2014. I have been unable to find figures for Britsh patent applications in 2015 (sources page 7 World Intellectual Property Indicators 2016 published by the WIPO and Building the Evidence Base on the Performance of the UK Patent System published by the IPO).
• According to the WIPO China is also number 1 on trade mark, industrial design and utility model applications (ibid).
• According to Gabriela Kennedy, a partner of the international law firm Mayer Brown JSM, China enforces the intellectual property rights that have been granted by SIPO (its national intellectual property office).  She writes in the current issue of her firm's IP and TMT Quarterly Review that 

"As of 2016, 224 Intermediate People’s Courts and 167 Basic People’s Courts have been designated as having jurisdiction over the hearing of IP-related matters. Between 1985 to 2016, the People’s Courts accepted 792,851 civil IP cases and concluded 766,101 cases. Between 1998 to 2016, the People’s Courts accepted 77,116 criminal IP cases and concluded 76,174 cases."

So much for the urban myth that China does not invent or create anything but instead copies other countries' technology and other intellectual assets.

China is already an important trading partner. Under its One Belt One Road programme (which I mentioned briefly in my article on the Shanghai Cooperation Organization in NIPC Brexit), it plans to invest trillions of pounds into new roads, railways, ports and other infrastructure projects between now and 2049. Some of that money could be invested in new technologies such as a 4,000 km/h train hovering above the tracks (see Steve Hanley China Proposes 4000 km/h Flying Train As Part Of Its One Belt, One Road Plan 11 Sept 2017 CleanTechnica).  As magnetic levitation and graphene were invented in the UK, there is no reason why businesses in this country could not get a share of the research work to develop, manufacture and install that train) as well as supply a range of other goods and services.

But British businesses will only be able to do that if their inventions, designs and brands are protected adequately in China. As few British business people and their professional advisors speak Mandarin that is not easy to do.  Happily, we do have a senior diplomat in our embassy in Beijing who does speak that language and is well connected with officials and advisors in the Peoples' Republic who can help.

That diplomat is Mr Tom Duke. He will be in Leeds between 09:30 and 12:00 and Barnsley between 14:30 and 16:30 to address business owners, creatives, designers. entrepreneurs, innovators and investors on how to protect and make money from their brands, designs, technology and works of art and literature in China.  His meeting at Leeds will take place at Northern Ballet at Quarry Hill, Leeds LS2 7PA and the meeting in Barnsley at Barnsley Business and Innovation Centre, Innovation Way, Barnsley, S75 1JL You can find full details in Meet our IP Attaché to China 21 July 2017.

There are still one or two spaces in Leeds and a few more in Barnsley but you will have to move fast.  Call 020 7404 5252 or email my clerk Steve Marshall without delay if you want to book your place. We look forward to seeing you there.

How far (if at all) is it possible to protect Innovation in Financial Technology?

Head office of the Yorkshire Bank

Photo Wikipedia

Although only three British companies were listed in the 2013 FinTech 100 rankings compared to 10 from India and many more from the USA our government aspires to make this country the world leader in financial technology (see "Plan to make Britain global centre of financial innovation set out by government" 6 Aug 2014). With over 42,000 people employed in the financial services in 2012 Leeds hopes to develop a local financial technology industry. As part of the International Economic Conference that took place shortly before the start of the Tour de France, Pinsent Masons hosted a half day seminar called "At the Forefront of FinTech" to discuss the opportunities for fintech businesses in the City Region. On 16 July 2014 the dotForge accelerator announced plans to set up the first fintech accelerator outside London in Leeds ("New “fintech” accelerator for Leeds" 16 July 2014 Yorkshire Post).

In Fintech The UK’s unique environment for growth UK Trade and Investment listed several advantages for the UK:

"– the presence of a large and technologically sophisticated customer base
– London’s position as a world-leading centre for financial services
– good availability of business capital
– a supportive regulatory approach
– excellent financial services infrastructure, and
– London’s position as a global trading hub."

All that is very true but the UK does suffer one important disadvantage in relation to its global competitors which is that it is very difficult to protect investment in the development of financial technology in this country.

The problem is that s.1 (2) of the Patents Act 1977 declares that

"the following (among other things) are not inventions for the purposes of this Act, that is to say, anything which consists of -
(a) a discovery, scientific theory or mathematical method;
(b) a literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever;
(c) a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer;
(d) the presentation of information......"

Much of the technology used in the financial services industry are computer programs. methods of doing business or the presentation of information. These exceptions are themselves subject to the following proviso:

"but the foregoing provision shall prevent anything from being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such."

Those words - particularly the last two - enable a skilful patent attorney occasionally to draft a specification for a software implemented invention that can be patented but that is not possible for all such inventions. Other countries that are party to the European Patent Convention which include all our EU competitors have similar statutory exclusions as their laws like ours have to correspond to art 52 (2) and (3) of the Convention; but there are no similar statutory exclusions in American, Chinese, Indian, Japanese or Korean patent legislation.

In his  speech at the launch of the new trade body for FinTech, 'Innovate Finance' 6 Aug 2014 the Chancellor of the Exchequer said:

"We’re introducing the right tax regime for this new industry.

• With major new incentives to encourage investment in start-ups

• Patent Box, so that if you invent in the UK you only pay 10% on those profits

• and now we will allow peer-to-peer lending in ISAs."

The exclusion of many software implemented inventions from patent protection renders nugatory at least one of the incentives to innovation that the Chancellor of the Exchequer announced in his. Without a patent nobody can take advantage of the patent box.

In Digital Opportunity A review of Intellectual Property and Growth Prof, Hargreaves advised the government to

"work to ensure patents are not extended into sectors, such as non-technical computer programs and business methods, which they do not currently cover, without clear evidence of benefit."

 HMG accepted that recommendation without demur in The Government Response to the Hargreaves  Review of Intellectual Property and Growth:

"The Government will resist extensions of patents into sectors which are currently excluded unless there is clear evidence of a benefit to innovation and growth from such extension."

There was no debate on the legal protection of financial technology during the passage of the Intellectual Property Bill through Parliament not even any detailed discussion of the topic during the extensive consultation on the implementation of Hargreaves' recommendations.

If they can't protect financial technology with patents then the new businesses that the Chancellor hopes to encourage including any that may be set up in Leeds will have to rely on other intellectual property rights. Traditionally software houses have relied on copyright and trade secrecy to protect their technology but that does not work terribly well with free open source software and decisions such as the judgment of the Court of Justice of the European Union in C-406/10 SAS Institute Inc v World Programming Ltd  [2012] WLR(D) 131, [2012] EUECJ C-406/10, [2013] BUS LR 941 do not help. That leaves trade marks that protect a business's brand but not its technology and the advantage of being first in the field.

In the USA there is extensive discussion on intellectual property protection of financial technology (see for example the slides for Wilmer Hale's webinar What Should Financial Institutions and FinTech Companies Be Doing?  6 March 2013 but I struggle to find similar discussion here. If I were a business angel or manager of a private equity fund I am not sure that I would be particularly happy with that.