China Relaxes Innovation Standard
After months of outcry from technology exporters, the Chinese government is proposing to scale down the most draconian IP requirements for ‘indigenous innovation' products.
In November 2009, China caused consternation in the international business community by issuing new rules for government procurement in high-tech sectors, such as computers, software, telecommunications, energy equipment and energy-saving goods. Agencies at all levels of government were mandated to give preference to ‘indigenous innovation products'. Among the main accreditation criteria for such a status were that a patented product's intellectual property rights must be fully owned by a Chinese entity, and that a trademarked product must be first registered in China (see article opposite for further details).
Taken aback by strong criticism from foreign business, as well as several governments, Chinese government agencies on 10 April issued a ‘draft for comment' that proposed number of important changes to the eligibility criteria, including:
- Intellectual property: Instead of requiring intellectual property of indigenous innovation products to be owned by a Chinese entity, accreditation would be granted if the IP has been licensed for use in China from overseas.
- Trademark registration: Accreditation no longer requires trademarks and brands to be first registered in China. Instead, applicants must have exclusive rights to the product's trademark, or have the right to use the trademark, in China.
- Technology requirements: Under the 2009 accreditation scheme, indigenous innovation products were required to possess technology that reaches or surpasses international standards. The April draft relaxes this requirement by proposing that eligible products must possess technologies that have proven effective in conserving energy, reducing pollution, and/or raising energy-efficiency, or ‘substantially' improve on an original product's structure, quality, material, craftsmanship, or performance.
The government invited public comments on the modifications until 10 May.
Cautious Approval, but Concerns Persist
Foreign companies generally welcomed the proposed changes, and China's vice minister of science Cao Jianlin told journalists in May that the draft revisions ‘basically resolved' their concerns. "We think that the different companies have agreed that the (latest) draft is non-discriminatory, market-oriented and also reflects the principle of IPR protection," Mr Cao said, adding that Chinese authorities were "looking closely at the comments we have collected so far and are working on the improvement and the modification of the wording."
Despite the reassurances, trading parners' persistent concerns about the indigenous innovation policy were evident in the grilling they gave to China during its trade policy review at the WTO in late May.
Next Steps in the Accreditation Process
Companies seeking indigenous innovation status for their products have until 20 October 2010 to submit a ‘product declaration', i.e. a detailed accreditation application, to the science and technology department of their administrative district. Local authorities will then undertake a ‘preliminary accreditation' of the products.
Their recommendations will be reviewed by the central government's science and technology ministry in collaboration with the National Development and Reform Commission and the ministry of finance. The three agencies aim to publish a ‘primary list' of qualified products before the end of the year. If there are no objections to the public notification of a listed product, it will be included in the National Indigenous Innovation Product Catalogue and thus be eligible for public procurement at all levels of government. The overall Chinese government procurement market was estimated at nearly US$90 billion in 2008.