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Markets for everything -- including creating new markets

China wants a dynamic, innovative economy. And that means patents. So China wants its citizens to apply for lots of patents. And so:

Professors who do so are more likely to win tenure. Workers and students who file patents are more likely to earn a hukou (residence permit) to live in a desirable city. For some patents the government pays cash bonuses; for others it covers the substantial cost of filing. Corporate income tax can be cut from 25% to 15% for firms that file many patents. They are also more likely to win lucrative government contracts. Many companies therefore offer incentives to their employees to come up with patentable ideas. Huawei, a telecoms-equipment manufacturer that craves both government contracts and global recognition, pays patent-related bonuses of 10,000-100,000 yuan ($1,500-15,000).

Such incentives produce results. In 2008 Huawei filed more international patents than any other firm in the world. China’s overall patent filings grew by 26% a year between 2003 and 2009, says a new report from Thomson Reuters, an information service. Growth was much slower elsewhere: 6% in America, 5% in South Korea, 4% in Europe and 1% in Japan. . . .

Yet there are reasons for scepticism. The bureaucrats in Chinese patent offices are paid more if they approve more patents, say local lawyers. That must tempt them to say yes to ideas of dubious originality. And the generosity of China’s incentives for patent-filing may make it worthwhile for companies and individuals to patent even worthless ideas.

By Ezra Klein  | October 18, 2010; 5:07 PM ET
Categories:  China  
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Comments

somebody should patent that!

Posted by: bdballard | October 18, 2010 5:13 PM | Report abuse

Sorry, the evidence is that patent systems reduce the level of dynamism and innovation in an economy.

Posted by: albamus | October 19, 2010 9:56 AM | Report abuse

I worked for HP during the Carly Fiorina era. She wanted HP do be the world's biggest patent generator (remember HP Invent?). We were paid $1000 for each patent application, not each patent awarded. As a result, I ended up with nearly 20 patents on trivial stuff that was meant to build up HP's patent portfolio. It's simple economics. Look at the incentives, and will see the future.

Posted by: sturgeonmouth | October 20, 2010 4:40 PM | Report abuse

I worked for HP during the Carly Fiorina era. She wanted HP do be the world's biggest patent generator (remember HP Invent?). We were paid $1000 for each patent application, not each patent awarded. As a result, I ended up with nearly 20 patents on trivial stuff that was meant to build up HP's patent portfolio. It's simple economics. Look at the incentives, and will see the future.

Posted by: sturgeonmouth | October 20, 2010 4:41 PM | Report abuse

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