The United States Patent and Trademark Office (USPTO) recently issued a report on how the Chinese government is encouraging an unusually high rate of patent applications and other IP filings, in China, the US, and elsewhere.

One area in which Chinese government entities encourage patent applications is blockchain.

As we explained in this blog,

The blockchain is an online ledger, with multiple copies that update simultaneously. Another application of the blockchain involves “smart contracts” — contracts that execute automatically upon the happening of the defined conditions.

The most famous application of blockchain technology is cryptocurrency, such as Bitcoin, which has made headlines recently for rising from a value of zero to $30,000 per coin in the past decade.

(Bitcoin has also made headlines for how easy it is to lose access to. As the New York Times reported, “the people who own some 20 percent of the 18.5 million Bitcoin in existence have apparently lost their keys, or passwords, to some $140 billion in those coins.”)

But blockchain has applications well beyond the currency (and speculation), including managing patents, as we discussed in this blog.

As CoinTelegraph reported, in 2019 Chinese President Xi Jinping called for his country to accelerate the adoption of blockchain technologies, telling a Politburo Committee:

We must take blockchain as an important breakthrough for independent innovation of core technologies, clarify the main directions, increase investment, focus on a number of key technologies, and accelerate the development of blockchain and industrial innovation.

China actually disfavors cryptocurrencies like Bitcoin, which some view as a vehicle for gambling, which is banned in mainland China. China banned Initial Coin Offerings (ICOs) in 2017. However, China is also reportedly considering its own central bank digital currency.

China offers various incentives for blockchain startups, including a $1.6 billion fund backed by the city of Hangzhou, home of a new Blockchain Industrial Park.

Following President Xi’s endorsement, blockchain-related patent filings by Chinese entities boomed. As reported by CoinTelegraph, companies in China have filed for over half of all global blockchain patents – more than 4,435 since 2019.

Alibaba Group applied for the most blockchain patents in 2020, with 200 – ten times more than IBM applied for in the same time period.

Another major Chinese filer of blockchain patents is Tencent Holdings, which filed applications for blockchain-based solutions for fund management, advertising, and media storage.

However, while China is clearly leading the world in terms of the quantity of blockchain patent applications, the quality of those applications is unclear.

According to the USPTO report mentioned above,

In 2019, relevant authorities in China received 7.8 million trademark applications and 1.5 million utility patent applications, accounting for nearly half of the global totals. These numerical trends have attracted considerable attention.

In 2019, China also became the top source of international patent applications, passing the US which had been number one for forty years, according to China Daily.

Chinese companies and educational institutions filed 58,990 patent applications in 2019 via WIPO’s Patent Cooperation Treaty (PCT) – more than the 57,840 applications filed by US companies and universities.

According to the USPTO,

Patents confer commercial value to patent holders by affording exclusive rights relating to the claimed invention for a limited-term, and they facilitate innovators’ attempts to enter into commercial relationships with others and to access capital. Like trademarks, patents serve this function in China, as elsewhere, but patent filings in China are also influenced by non-market factors. These factors include subsidies and government mandates of various types. Their existence may in part explain why the commercial value of China’s patents is low, by several measures, relative to some other countries.

As the USPTO reports note,

All 31 provinces/municipalities in mainland China have a patent subsidy scheme. That observation is consistent with 195 reported subsidy measures in China. As with trademark subsidies, many of these patent subsidies provide financial incentives greater than the cost of obtaining the patent…

The report concludes:

The influence of non-market factors such as subsidies and government mandates on patent filings in China calls into question the commercial value of subsequently issued patents. By a number of measures, the commercial value of patents issued in China is low compared with that of patents issued in the United States and a number of other countries. Two of these measures include the rate at which domestic inventors file for patent protection overseas and the extent to which inventors commercialize patents.

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