BEIJING—A foreign business group urged China to make extensive changes to a patent system it said hampers the country’s ability to innovate and might hurt global companies.
The European Chamber of Commerce in China said the system awards too many patents for work that is not real innovation.
Unclear rules on national security reviews and low standards allow applicants to acquire unjustified patents only to extract license fees from other companies.
Communist leaders have made innovation a cornerstone of efforts to transform China from the world’s low-cost factory into a creator of profitable technology. They have boosted research spending and reward companies that are awarded patents and the officials that oversee them.
China has risen to the top ranks of countries in numbers of patents granted but the European Chamber said many of those are “low quality.”
Indeed, about one-third of patents awarded by Beijing are process patents for small improvements on other products that require little proof of innovation.
The report includes 52 recommendations for changes ranging from requiring patent applicants to do more to show their work is truly innovative to increasing penalties for “bad faith” applications.
It recommends limiting use of national security reviews that Beijing requires before companies can apply abroad for a patent on technology developed in China. The report urged Beijing to clarify its rules and limit reviews to inventions that directly affect national security.
Chinese regulators have tried repeatedly to compel foreign companies to hand over know-how in mobile phones, encryption, electric cars and other fields in exchange for market access. Many of those initiatives have been dropped after protests by Washington and other trading partners.
In a reflection of foreign unease about the safety of intellectual property, the European Chamber report noted that only 2.2 per cent of European companies’ investment in research and development outside Europe was in China. Some 13 per cent went to the U.S. and Canada.
Other groups, including the American Chamber of Commerce in China, have said companies are reluctant to bring their most advanced technology to China for fear it will be stolen.