China's Intellectual Property Policies for Transmission and Exploitation of Technological Knowledge

Abstract

The Chinese state has formulated a plethora of IP-related regulations and policies to try and increase transmission and exploitation of technological knowledge – including direct technology transfer, spillovers, and patent commercialization. Many of these measures are very recent. The measures include the technology import and export regulations (TIER), regulations governing the interface between anti-trust and IP/abuse of IP, regulations and practices governing the interface between technical standards and IP, policies considered by foreign firms to “force” technology transfer, a draft regulation for service/employee inventor remuneration and rewards (draft SIR), laws governing scientific and technological progress and achievements, state-supported technology markets and funds for IP development, financial incentives for development of “indigenous” IP, amongst other policies. The Chinese state currently faces the challenge of proactively encouraging transmission and exploitation of technological knowledge in an economy where firms are often reluctant or unable to do so. Further, the Chinese state faces the challenge of balancing the strategic goal of eroding incumbents’ IP-derived barriers to entry with the reality that absorption of external resources from foreign firms alongside dynamic use of internal capabilities is needed for sustainable indigenous innovation. These ongoing challenges are reflected by the fact that parts of the aforementioned IP measures are arguably not optimal for encouraging innovation investments, technology transfer (especially of frontier technology), patent commercialization, or spillovers in China because they are overly ambiguous or burdensome. This raises transaction costs of compliance and otherwise creates an uncertain legal environment for innovation in China. The Chinese state is currently considering several initiatives to reform some of these measures, although more could be done. Several ambiguous and overly-burdensome provisions in the aforementioned IP-related policies, laws and other legal measures should be revised or removed entirely. Perhaps most importantly, the draft SIR should not be instituted into law as is. Another priority should be to revise the TIER to make it less onerous and offer more appropriability to firms contracting-out research and licensing technology.