China’s Innovation Fetish

December 25, 2013

Merry Christmas everyone! This is one of my favorite “holidays.” I put that in quotes because I always work on the 25th, so it is technically not a holiday for me. However, I love it when things slow down and I can catch up on all the work that has piled up over the past weeks heading into the end of the year. I’ve spent a good chunk of today, in fact, wrapping up some longstanding projects and doing some training for newby lawyers on my team. Long discussions about contract templates should be part of everyone’s Christmas tradition.

Most bloggers out there are silent at the moment, but you can always count on us folks of the Jewish persuasion to chime in with an opinion, even when most of the Western world is otherwise occupied. Case in point Mr. David Wolf, consultant to the stars and author of the Silicon Hutong Blog, who penned a post on innovation in China earlier today.

I’ve written about innovation a lot over the years, from both a policy and legal perspective. However, I’ve rarely thought about a definition or the purpose of innovation itself. David goes there, so I think I should attempt to follow.

On the definition, David boils it down to this:

A good working definition of an innovation, then, is something that is novel, useful, and relevant to a given audience.

Old IP lawyer that I am, this language looked very familiar to me. Consider Article 22 of China’s Patent Law:

Inventions and utility models for which patent rights are to be granted shall be
ones which are novel, creative and of practical use.

Is that cool or what? At the very least, we’ve got novelty and usefulness overlapping here. What’s missing from David’s definition that would be important for patents is language relating to advancements and substantive features, and the patent law language does not specifically address commercialization, which is what David was driving at when he used “relevant to a given audience.”

Why is this interesting? Because China, and many other countries, substantially equate innovation and patents, going so far as to measure success in innovation by the numbers of invention patents granted.

But just because a country files a lot of patents, does that necessarily lead to innovation? I would say no, and the reason goes back to commercialization. What are patents after all but a State-granted monopoly allowing an inventor to recoup investment? Without commercialization, patents are meaningless.

Innovation without commercialization? That’s different.

What would happen if there were no patents? Would folks still come up with new ideas? Absolutely, it would just be much harder for them to get paid, and therefore a certain percentage of that creative activity, in the absence of commercial motivation, would never be initiated in the first place.

Society doesn’t need patents per se. Indeed, if folks were motivated to creativity without commercial rewards, then information could flow freely. Unfortunately, the real world doesn’t work that way (sorry, Corey Doctorow and friends), and a great deal of R&D only takes place when there’s cash to be had at the other end.

But to close the loop on the discussion of these two terms, what would we call that creative activity that now leads to patents if there was no patent system? I suppose we could just call it innovation.

That doesn’t mean to say though that such activity necessarily leads to where the government thinks. Equating patents, or other indicia of innovation, to economic activity presupposes quite a few things, which I suspect vary considerably by country.

For example, that patent you’ve just been granted may not be very useful if it cannot be enforced or if you have no access to credit or investment. It’s not like there is a Commercialization Fairy lurking outside the door of the State Intellectual Property Office who showers start-up funding on anyone walking out with an invention patent.

And by the way, even if that innovation leads to a patent, and if that patent leads to commercialization, does that mean that the country where that innovation took place will benefit?

To some extent yes, but probably much less than it used to. If I’m Thomas Edison living in 2013, I would set up my global HQ in a tax haven somewhere, hire folks as needed to do R&D in places like China and India, consolidate my IP portfolio in that tax haven (to the extent possible), and license the hell out of my innovation. Which country benefits from those innovative steps? Very hard to say. China’s innovators are mostly focused on the home market these days, but they are trying very hard to go global; one result of this effort will be to disperse the gains of future innovation to other countries.

All this makes me wonder whether the usual questions about which country is innovating the most even make sense anymore. Perhaps it’s better for nations to think about what their end game is (higher standard of living, full employment, clean environment) and then figure out whether, to what extent, and specifically how innovation will contribute to those ends. Assuming, for example, that a lot of R&D spending will lead directly (some day) to a lot of jobs is taking quite a leap of faith.

So to anyone who asks whether China is innovating, I would suggest taking several rhetorical steps backward before returning to that issue.

OK, lunchtime is over. And the rest of you have to attend a mass for Christ (I assume that’s what one does on this particular holiday).

Happy Holidays!