Foreign applications for patents issued by China’s State Intellectual Property Office (SIPO) have seen explosive growth. From 1995 to 2004, foreign – primarily OECD and the Asian newly industrialized economies – applications for and grants received of Chinese invention patents had been growing at over 30 percent a year. Of these applications, over 90 percent have claimed foreign priority, which implies that patent applications had earlier been filed for the invention with a foreign jurisdiction. During the same period of time, patent applications at the US Patents and Trademark Office were growing at about 5 percent a year. Apparently foreign inventors are seeking to protect an increasing proportion of their patents in China. A number of forces could have contributed to the increasing foreign propensity to patent in China: strengthening of patent protection in China over time, expansion of foreign economic activities in China – foreign direct investment (FDI) and trade – imitative and innovative threat from domestic Chinese firms, and competition from other foreign firms in the Chinese market. It is hard to assess how the efficacy of intellectual property rights (IPR) enforcement in China has evolved over the years. Reported incidences of IPR violation might be a result of strengthened enforcement that leads to better detection of violation as well as rampant piracy. I will have little to say about the patent enforcement mechanism in China, and to the extent that it is an economy-wide concern, it will not be central to my industry-level analysis. I will instead focus on the other potential explanations.
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