IP-conditioned government incentives in China and the EU: A comparative analysis of strategies and impacts on patent quality

Abstract

This paper uses typological analysis to identify the strategies behind more than 70 IP-conditioned government incentive programs in China and 21 EU Member States, compares these strategies, and uses policy case studies to analyze the effects of patent subsidy programs in particular on patent quality. It finds that China and the EU both attempt to localize benefits of knowledge investment and discourage offshoring of taxable assets through controversial IP-conditioned tax incentives. At the same time, China appears to use IP-conditioned incentives on a larger scale, and more techno-nationalistically, than EU Member States; and although this strategy can be explained by China’s position as a latecomer, some of these incentives nonetheless appear questionably effective at enabling catch-up. The analysis notes that while IP-conditioned incentives in the EU are most commonly intended to provide needs-based commercial support to SMEs, it is not uncommon for such types of incentives to be provided to large firms/other entities in China. Additionally, it is shown how IP-conditioned incentives lowering costs of utility model patents, when combined with lack of Substantive Examination for such rights, can lower patent quality-a situation Chinese policymakers have sought to address by adopting a strategy for reforming such incentives that evolves with the country’s technological development trajectory.