Discrimination in the Patent System: Evidence from Standard-Essential Patents

Are foreign patent applications known to be standard essential at the time they enter the substantive examination phase at the CNIPA treated less favorably than similar domestic applications?

Understanding the potential discrimination in patent systems, particularly against foreign applicants, is crucial as it may impact the willingness of foreign firms to invest in innovation and technology in markets like China. Discrimination in patent grants can distort competition and may lead to reduced technological advancements, possibly hindering international trade. As standards such as 3G and 4G are vital for global telecommunications, ensuring a fair patent process is important for maintaining a healthy competitive environment.

We conducted a detailed analysis of 1,653 patent applications filed at the CNIPA related to the 3G and 4G standards. We differentiated between applications disclosed as standard-essential patents (SEPs) before and after the substantive examination phase commenced. We employed an econometric approach to measure outcomes such as grant likelihood, examination duration, and changes in patent scope, controlling for various confounding factors using data from multiple sources.

We find that foreign-owned patent applications disclosed as SEPs before substantive examination were approximately 9 percentage points less likely to be granted compared to domestic applications. Furthermore, these applications experienced delays in the grant decision by about 1 year on average and had an increase of about 13.6 words per claim, indicating a significant reduction in protection scope. These findings suggest systematic discrimination against foreign patent applications in the Chinese patent system.

• 1,653 patent applications filed at the CNIPA, with 421 from Chinese firms and 1,232 from foreign firms, focusing on SEPs related to 3G and 4G standards.

• The timing of SEP disclosure is exogenous to the decision to file at the CNIPA.
• Patent quality is comparable between foreign and domestic applications as assessed through twin patents.
• Availability of search reports is controlled for and does not bias the outcomes.