According to WIPO’s international patent filing statistics, the number of patent applications filed in South Africa in 2022 jumped by 63.9% compared to 2021. The South African Patent Office records indicate that this growth was mostly attributed to foreign applicants, with most originating from China and to a lesser extent, India. Usually, an increase in patent filing numbers from foreign applicants would indicate increased economic interest in South Africa, however, this has not been borne out in the economic outcomes of South Africa over the same period.
In 2008, China’s State Council issued a National Intellectual Property Strategy which included the long-term objective to “become a country with a comparatively high level in terms of the creation, utilization, protection and administration of [IP rights].” More recently, this target number was explicitly quantified as 12 invention patents per 10,000 people in China by 2020. To incentivize Chinese nationals to file more patent applications, the government introduced subsidies and tax-breaks for nationals holding registered intellectual property rights. For example, in 2007 the Beijing authorities implemented an incentive program whereby a Beijing entity could receive roughly US $720 for each Chinese patent application filed, and roughly US $72,000 for each international patent application filed. This saw a meteoric rise in patent filings by Chinese nationals with a concomitant increase in patent agencies filing patent applications for these nationals at a cost which is below that of the government incentives. Naturally, this has resulted in a proliferation of patents being filed which the applicant may have no intention of enforcing, and, in a lot of cases, where the applicant may know that the patent is invalid.
In 2021, the Dutch Patent Office noticed a peculiar increase in the number of Chinese foreign nationals filling patent applications in the Netherlands which did not claim priority from an earlier application, and which were requested to be granted on an urgent basis. Upon further investigation, the Dutch Patent Office determined that 50% of these applications were “re-used” patent applications, i.e., machine translations of previously published Chinese patent applications of which the time limits from which to claim priority had already expired. Accordingly, the Dutch Patent Office issued a directive that from 1 September 2022, it would no longer review these types of applications as they constituted an abuse of law.
The Dutch patent system is similar to the current South African patent system in that patent applications are not substantively examined, i.e., if the formal requirements are met, a patent will be granted. Furthermore, it was, up until recently, possible to request that the Registrar expedites the issuing of acceptance, which, in real terms, meant that a South African application could proceed to grant within three to five months of having been filed at the Patent Office. There are instances where the filing of such a request may be legitimate, e.g., where an applicant becomes aware of a potential infringement of the claims contained in their patent application, and wishes to institute legal proceedings in relation thereto, which can only occur after grant.
The above confluence of factors resulted in a large influx of patent applications being filed in South Africa on behalf of Chinese applicants, which filings were accompanied by requests to expedite acceptance of these applications. Despite this huge administrative burden, the South African Patent Office commendably rose to the occasion and processed most of these patent applications timeously, resulting in the staggering increase of granted patents in 2022.
When the recently appointed Registrar, Dr. Thandanani Cwele, became aware of the above abuse of the South African patent system, he issued Practice Note 21 of 2023, relating to requests for expedited acceptance, which came into force on 11 April 2023. In terms thereof, if such a request is filed within 12 months from the date of PCT national phase entry, or 18 months of having filed all other patent applications, the Registrar will require further evidence to be annexed to the request, which evidence shall include one of the following:
- for PCT applications, a copy of the Written Opinion or International Preliminary Report on Patentability issued during the international PCT phase, whereby at least one of the claims have been examined and found to be novel and inventive;
- a copy of a search and/or examination report of an equivalent foreign patent application issued by an examining patent office, whereby at least one of the claims have been examined and found to be novel and inventive; or
- an affidavit from at least one applicant, providing reasons that expedited acceptance is required.
This measure taken by the Registrar has been applauded by most South African patent practitioners as the South African Patent Office had already been under extensive administrative burden to issue acceptances for legitimate patent applications, long before this abusive practice transpired. Collectively, it is hoped that this measure will now give the Patent Office the breathing room to continue its laudable administrative efforts.
Chinese authorities have been aware of the possible abuse of the incentive system since its inception and have, over time, tried to legislate sanctions in an attempt to curb enthusiasm for “abnormal patent application behavior”. In 2020, the Chinese government noted that it had exceeded its target and had filed 15.8 patent applications per 10,000 people. In 2021, the Chinese government indicated that no more government funding would be provided for the filing of patent applications, however, local governments would still be entitled to provide financial incentives for patents (including foreign patents), but only after a patent had been granted. The government further indicated that local governments, however, would need to phase out the remaining financial assistance completely by 2025.
This gradual phasing out by 2025, does, however, leave a window of opportunity for Chinese nationals to potentially exploit other non-examining patent offices, and it has been suggested that non-examining jurisdictions should consider pre-emptively shoring up their legislative framework against the potential flood of junk patents.
Ending Patent Subsidies In China – Patent – China (mondaq.com)