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China's Patent Explosion
1. The Phenomena and Questions for Study
2. Data Sets: SIPO via Google linked to
Firms and USPTO
...
1. Patent Growth “faster than a speeding bullet”
The study of patents
Primary economic motivation is to explain growth. First major modern
researcher was Jacob Schmookler,...
Debate over innovation in China
May 2014, VP Joe Biden at Air Force Graduation: “Name to me
one innovative project, one in...
Goals for Innovation in 2016-2020 5 Year Plan
Rankings in National Innovation Capacity 18 15
Contribution of Science and T...
Five Big Questions
1 – What is quality of Chinese patents and impact of
quality on number and growth of patents compared t...
2. SIPO-Firm-USPTO data set
State Intellectual Property Office (SIPO): bibliometric data
1985-2012, by application year; G...
Data Set includes patent references/citations
Patent references are on the front page of a granted patent.
They identify “...
Identifying Same Patents in SIPO and USPTO as bridge between
patent offices from 35,989 candidate matches
National patents...
Incentives for more patents notwithstanding, Chinese firms
do not break one USPTO patent into several SIPO patents.
More l...
1 – What is quality of Chinese patents?
Patent quality is lower in China than in US and declined during
explosive growth b...
1.1 US firms make more patent claims than Chinese firms
Patent claims state the subject of inventions and are principle fa...
1.2 More Patent citations in USPTO than SIPO:
quality or patenting norm? same China patent cites less in SIPO
1.3 Decline in citations per China patent Relative to US
addressed patent in USPTO (from annual regressions)
1.4 China explosion of patents not just in SIPO
2010-2015 growth rates of 27% in SIPO; 25% in USPTO; 27%
EPO; and fastest ...
● Alternative Exchange Rates Between China Patents
in USPTO AND SIPO and US USPTO patents
Q2 How much patent growth is catch-up (inventions new
to China) vs frontier (inventions new to world)? Most
likely catch-u...
2.2 But Citations to China in USPTO fall from
above to normal for to other USPTO Patents
2.3 China Share of USPTO Citations Rises,
especially for newest cohorts of patents
2.4 Cosine Similarity Distribution of Chinese Patents
Converges toward US Patents in Technology Space
Patent offices use n...
q3 –What is impact of “ innovation” associated
with patents on economic outcomes?
China patents are associated with higher...
  (1) (2) (3) (4) (5) (6)
  Ln(output) Margin Employment
Growth
Ln(output) Margin Employment
Growth
Ln (patent stock+1) 0....
  (1) (2) (3) (4) (5) (6)
  Ln(output) Margin Employment
Growth
Ln(output) Margin Employment Growth
Ln (high quality
paten...
4—Conclusion and Future Work
4.1 Magnitude of China's explosion in patents overwhelms lower
and falling quality so that Ch...
Finally, our data set can be used to examine other questions
regarding the patent explosion in China.
Using data on the lo...
Appendix
Odd Patterns in USPTO Data
JUSPTO shows increased references by applicants in USPTO,
especially for US origin applicants w...
Technology Space Calculation
 
Comparing Groups to Measure Patent Quality and Trend
 
Comparison in USPTO (1998-2015)
Note: Robust standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01. We con...
Correlation of citations, claims, technologies
China SIPO patents
(1) (2) (3) (4) (5)
Citations Citations Citations Citati...
Richard Freeman: China's Patent Explosion
Richard Freeman: China's Patent Explosion
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Richard Freeman: China's Patent Explosion

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In the 2000s China moved from modest contributor to global patents to become the number one patent producing country in the world. What is quality of Chinese patents compared to those of US/other countries? To what extent is China’s patent growth frontier inventions vs catch-up of products new to China but not the world? What is the relation of patents with economic outcomes? This talk will answer these questions with statistical and case evidence.

Find out more at Iems.ust.hk/china-patent

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Richard Freeman: China's Patent Explosion

  1. 1. China's Patent Explosion 1. The Phenomena and Questions for Study 2. Data Sets: SIPO via Google linked to Firms and USPTO 3. Analysis and Findings 4.Conclusion: future work Richard B. Freeman, Harvard University, NBER Lintong Li, Peking University HKUST, Feb 22, 2017 Preliminary Analysis of New Data; Comments appreciated.
  2. 2. 1. Patent Growth “faster than a speeding bullet”
  3. 3. The study of patents Primary economic motivation is to explain growth. First major modern researcher was Jacob Schmookler, Invention and economic growth (Harvard University Press, 1962). Zvi Griliches developed econometric analysis with firm level data. “Patent and patent statistics have fascinated economists for a long time. Questions about sources of economics growth, the rate of technological change , the competitive position of different firms and countries……all tend to revolve around notions of inventiveness……In this desert of data, patent statistics loom up as a mirage of wonderful plentitude and objectivity. They are available; they are by definition related to inventiveness” (Griliches, 1990) Patents are not innovation in the Schumpeter/Oslo convention sense since most patents do not lead to new products or processes, but they are valuable indicator of new ideas intended to produce innovation and thus provide insight into China's move from developing economy to innovative knowledge-based economy.
  4. 4. Debate over innovation in China May 2014, VP Joe Biden at Air Force Graduation: “Name to me one innovative project, one innovative change, one innovative product that has come out of China” March 2014 Harvard Business Review, experts debated whether China's government structure is compatible with “true spirit of entrepreneurship” February 2015, Economist debate “Is China a global innovative powerhouse?” with debaters focused on how much government domination of economy discourages innovation Winter 2017 “ Chinese firms have ... a capacity to become more innovative in response to wage pressure and global opportunities…we should not be pessimistic about ... a successful transition to a more innovation-based growth model.” Wei, Xie and Zhang, JEP,
  5. 5. Goals for Innovation in 2016-2020 5 Year Plan Rankings in National Innovation Capacity 18 15 Contribution of Science and Technology to Production (%) 55 60 R&D intensity (%) 2.1 2.5 High-tech Firm's Revenue (Trillion RMB) 22.2 34 Share of value added from knowledge intensive service industry in total GDP (%) 15.6 20 Share of R&D expenditure in Revenue for above-scale Industrial Firms (%) 0.9 1.1 Rank in International Science Paper's Citations 4th 2nd Count of PCT applications 3.05 6.1 Patents per 10k people 6.3 12 Revenue of technology contract (billion RMB) 984 2000 Fraction of citizens with science literacy (%) 6.2 10
  6. 6. Five Big Questions 1 – What is quality of Chinese patents and impact of quality on number and growth of patents compared to US/other countries? 2 – How much patent growth is catch-up (inventions new to China) vs frontier (inventions new to world)? 3 – What is impact of “ innovation” associated with patents on economic outcomes? 4 – What are driving forces behind the patent explosion? 5-- Can patent-related innovation help ameliorate China's increased inequality and the pollution/ environmental costs of rapid growth?
  7. 7. 2. SIPO-Firm-USPTO data set State Intellectual Property Office (SIPO): bibliometric data 1985-2012, by application year; Google patent search: web scraping (using Java Jsoup package) with additional data. Data set includes references (backward citations) for SIPO patents granted in 2009-2015s/forward citations for earlier patents put in by examiners/applicants; technology classes of patents; addresses for assignees and inventors; names of firms matched with 1998- 2007 data in Annual Survey of Industrial Firms. United States Patent and Trademark Office (USPTO): 1976- 2015 (grant year)-- using public data but parsed for latest years (Used Python Element tree package) USPTO-SIPO Matched Patent subset for same patents in USPTO as in SIPO
  8. 8. Data Set includes patent references/citations Patent references are on the front page of a granted patent. They identify “prior art” upon which the current invention builds. The greater the number of backward citations, the more a patent relies on previous work Using references/backward citations, we construct forward citation measure for every patent. Since we only have backward citation data 2009-2015. the forward citations is downward biased for patents granted before 2009. The number of forward citations shows the impact of a patent on other inventions and is an indicator of the value of the patent. (Trajtenberg, 1990; B. H. Hall, 2000; Bloom and Reenen, 2002) and of the geography of knowledge spillovers (Jaffe, Trajtenberg and Fogarty, 2000; Thompson and Fox-Kean, 2005)
  9. 9. Identifying Same Patents in SIPO and USPTO as bridge between patent offices from 35,989 candidate matches National patents provide IP protection in country so companies will seek protection for more important inventions in more countries
  10. 10. Incentives for more patents notwithstanding, Chinese firms do not break one USPTO patent into several SIPO patents. More likely they take the same patent and translate it.MatchingbetweenSIPOandUSPTOforthe“MatchingPart” USPTO 1 2 3 4+ Total SIPO 1 11,472(83%) 1,050 687 109 12,871 2 330 76 42 8 456 3 9 30 9 33 81 4+ 33 26 24 324 407 Total 11,844 1,182 315 474 13,815 Number of matched SIPO-USPTO patents
  11. 11. 1 – What is quality of Chinese patents? Patent quality is lower in China than in US and declined during explosive growth but upward trend in Chinese patents raised its share of world patent citations as well as its share of world patents. 1.1 Chinese patents make lower claims than US patents 1.2 SIPO patents make smaller number of citations than USPTO patents, but part of difference is due to greater propensity for US firms to reference older patents in USPTO. 1.3 Trend decline in citations per SIPO patent 1.4 China explosion of patents occurs in all major patent offices. This means China had most rapid growth of top patents among major countries. (Has distribution by citations gotten more unequal?). 3. Analysis and Findings: answers to questions
  12. 12. 1.1 US firms make more patent claims than Chinese firms Patent claims state the subject of inventions and are principle factor in determining whether a proposed invention infringes on existing patents. Dependent claims refer to other patents and claims; independent claims have no references. ● Chinese firm SIPO patents have fewer claims than Chinese firm SIPO-SUPTO patents. 2005 decline in USPTO claims increase of $18 to $50 per claim in excess of 20. (Harhoff, 2016)
  13. 13. 1.2 More Patent citations in USPTO than SIPO: quality or patenting norm? same China patent cites less in SIPO
  14. 14. 1.3 Decline in citations per China patent Relative to US addressed patent in USPTO (from annual regressions)
  15. 15. 1.4 China explosion of patents not just in SIPO 2010-2015 growth rates of 27% in SIPO; 25% in USPTO; 27% EPO; and fastest of 43% in JPO
  16. 16. ● Alternative Exchange Rates Between China Patents in USPTO AND SIPO and US USPTO patents
  17. 17. Q2 How much patent growth is catch-up (inventions new to China) vs frontier (inventions new to world)? Most likely catch-up but rapid growth at frontier. 2.1 China origin patents grow rapidly in USPTO, country becomes #5 foreign source of patents
  18. 18. 2.2 But Citations to China in USPTO fall from above to normal for to other USPTO Patents
  19. 19. 2.3 China Share of USPTO Citations Rises, especially for newest cohorts of patents
  20. 20. 2.4 Cosine Similarity Distribution of Chinese Patents Converges toward US Patents in Technology Space Patent offices use numerical technology codes to categorize technologies of patents; USPTO has USPC 150,000 codes; SIPO, IPC 70,000 codes. Number of classes of patents increases in SIPO (improved patent office?); country patterns similar, save for China variability with small numbers in early USPTO
  21. 21. q3 –What is impact of “ innovation” associated with patents on economic outcomes? China patents are associated with higher productivity, higher profit margin and higher growth rate, within industry and weaker effects for same firm over time. Estimated effects on outcomes in production function regressions as comparable to those for US patents Relation associated largely with higher citation patents.
  22. 22.   (1) (2) (3) (4) (5) (6)   Ln(output) Margin Employment Growth Ln(output) Margin Employment Growth Ln (patent stock+1) 0.067*** 0.026*** 0.031*** 0.013*** 0.001 0.005 (0.002) (0.001) (0.002) (0.003) (0.001) (0.003) Industry FE Yes Yes Yes No No No Firm FE No No No Yes Yes Yes Observations 1911990 1911990 1351307 1788105 1788105 1258923 R2 0.947 0.079 0.019 0.971 0.574 0.216   (1) (2) (3) (4) (5) (6)   Ln(output) Margin Employment Growth Ln(output) Margin Employment Growth Ln (patent stock) 0.027*** 0.014*** 0.021*** 0.011*** 0.001 0.006 (0.003) (0.001) (0.002) (0.004) (0.001) (0.004) Industry FE Yes Yes Yes No No No Firm FE No No No Yes Yes Yes Observations 36644 36644 31590 33682 33682 28964 R2 0.971 0.090 0.047 0.987 0.631 0.261 Note: In column 1&4, ln(capital), ln(employment) and ln(materials) are omitted. We control for years, ages and ownership types. Cluster standard errors at firm level in parentheses. Output and input have been deflated by 2-digit industry deflators. * p < 0.10, ** p < 0.05, *** p < 0.01 Substantial positive patent effects on productivity, profitability and employment growth within a industry. and on productivity and weakly on employment growth for same firm
  23. 23.   (1) (2) (3) (4) (5) (6)   Ln(output) Margin Employment Growth Ln(output) Margin Employment Growth Ln (high quality patent stock+1) 0.063*** 0.025*** 0.031*** 0.015*** 0.002 0.008 (0.003) (0.002) (0.003) (0.004) (0.002) (0.005) Ln (low quality patent stock+1) 0.027*** 0.010*** 0.009*** 0.001 -0.001 -0.003 (0.004) (0.002) (0.003) (0.005) (0.002) (0.005) Industry FE Yes Yes Yes No No No Firm FE No No No Yes Yes Yes Observations 1911990 1911990 1351307 1788105 1788105 1258923 R2 0.947 0.079 0.019 0.971 0.574 0.216   (1) (2) (3) (4) (5) (6)   Ln(output) Margin Employment Growth Ln(output) Margin Employment Growth Ln (high quality patent stock) 0.021*** 0.009*** 0.009** 0.012 0.007** 0.001 (0.005) (0.002) (0.004) (0.009) (0.003) (0.010) Ln (low quality patent stock) 0.008* 0.003 0.006 0.001 0.001 0.000 (0.005) (0.003) (0.004) (0.008) (0.003) (0.008) Industry FE Yes Yes Yes No No No Firm FE No No No Yes Yes Yes Observations 10127 10127 9033 9125 9125 8151 R2 0.977 0.120 0.072 0.989 0.655 0.260 Relation Stronger for Highly Cited Patents and Outcomes
  24. 24. 4—Conclusion and Future Work 4.1 Magnitude of China's explosion in patents overwhelms lower and falling quality so that China's share of world patent citations and of world claims has increased. 4.2 Despite quality issues, China's patents have similar impact on production measures as patents in advanced countries. 4.3 China's patents converging in technology space toward US. Data on technical classes provides a route to study whether patent- related innovation could ameliorate China's increased inequality and the pollution/environmental problem and its movement toward higher-tech industries. Expect to see rapid growth in all classes and industries. Likely driving forces behind the patent explosion include: expanded number of university graduates, government incentives for patents, foreign direct investment and transfer of knowledge.
  25. 25. Finally, our data set can be used to examine other questions regarding the patent explosion in China. Using data on the location of patents, researchers can examined local knowledge spillovers effect – 25% citation pairs are located within a province. Using backward citations to USPTO patents; EPO patents and to JPO patents. Researchers can uncover the knowledge diffusion path from developed countries to developing countries and assess the effect of FDI on technology transfer With information on particular products in different industries, and of the share of new products and processes in firm sales the patent data can also tighten the link between patent-driven innovation and economic success.
  26. 26. Appendix
  27. 27. Odd Patterns in USPTO Data JUSPTO shows increased references by applicants in USPTO, especially for US origin applicants while examiners references remain stable. No such pattern in SIPO
  28. 28. Technology Space Calculation  
  29. 29. Comparing Groups to Measure Patent Quality and Trend  
  30. 30. Comparison in USPTO (1998-2015) Note: Robust standard errors in parentheses. * p < 0.10, ** p < 0.05, *** p < 0.01. We control assignee’s type, application year dummies, grant year dummies, 7 digit IPC dummies and 7 digit IPC dummies interact time trend. The benchmark for the set of dummies are a combination of countries unlisted here.   (1) (2) (3) (4) (5) (6)   Citations Citations (excluding self-citations) Citations (excluding own country ones) Citations(appl icant) Citations(exa miner) Claims US assignee 3.549*** 2.962*** -4.841*** 2.846*** 0.405*** 2.873***   (0.033) (0.032) (0.026) (0.028) (0.005) (0.019) CN assignee 0.543*** 0.405*** -2.393*** 0.357*** 0.067*** -2.532***   (0.034) (0.033) (0.029) (0.029) (0.009) (0.045) DE assignee -1.441*** -1.503*** -2.707*** -0.970*** -0.383*** -0.985***   (0.036) (0.036) (0.032) (0.031) (0.007) (0.027) JP assignee -1.766*** -1.929*** -3.423*** -1.646*** -0.077*** -4.131***   (0.033) (0.032) (0.028) (0.028) (0.006) (0.020) KR assignee -1.363*** -1.369*** -3.107*** -1.175*** -0.138*** -2.373***   (0.040) (0.040) (0.035) (0.034) (0.008) (0.029) TW assignee -1.163*** -1.153*** -2.888*** -1.156*** -0.069*** -2.546***   (0.042) (0.041) (0.035) (0.035) (0.009) (0.031) IN assignee -0.101 -0.065 -2.768*** -0.252*** -0.047** -0.814***   (0.090) (0.089) (0.078) (0.078) (0.019) (0.141) N 3495698 3495698 3495698 3495698 3495698 3495698 r2 0.236 0.239 0.171 0.198 0.259 0.0964 Y mean 8.665 8.165 3.815 5.738 2.042 17.07
  31. 31. Correlation of citations, claims, technologies China SIPO patents (1) (2) (3) (4) (5) Citations Citations Citations Citations Citations Firm (Dummy) 0.139*** 0.129*** 0.136*** (0.005) (0.005) (0.005) Institution (Dummy) 0.323*** 0.326*** 0.330*** (0.006) (0.006) (0.006) Number of Claims 0.010*** 0.009*** (0.001) (0.001) Number of Technologies 0.050*** (0.001) Application & Grant Year FE Yes Yes Yes Yes Yes Technology FE No Yes Yes Yes Yes N 807,202 806,689 806,689 806,689 806,689 Adjusted R2 0.078 0.135 0.139 0.139 0.142 Y mean 0.907 0.907 0.907 0.907 0.907 US USPTO patents (1) (2) (3) (4) (5) Citations Citations Citations Citations Citations Number of Claims 0.291*** 0.282*** (0.003) (0.003) Number of Technologies 0.566*** (0.008) Application & Grant Year FE Yes Yes Yes Yes Yes Technology FE No Yes Yes Yes Yes Assignee Type FE No No Yes Yes Yes N 2,254,907 2,247,091 2,247,090 2,247,090 2,247,090 Adjusted R2 0.083 0.208 0.208 0.219 0.221 Y mean 16.104 16.097 16.097 16.097 16.097

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