Technology Protectionism and the Patent System: Evidence from China

Is there evidence of anti-foreign bias in the Chinese patent system, especially in strategic technology areas?

We care because understanding whether discrimination exists in patent grants against foreign applicants is critical, as it can influence innovation incentives globally and hinder international trade. The interplay between national patent systems and global diffusion of technology is vital in the context of contemporary economic dynamics, particularly for countries aiming to protect and advance their technology sectors while adhering to international norms.

We utilized a database of 477,854 patent applications to analyze the grant probabilities of foreigners versus locals at the Chinese patent office from 2001 to 2009. We employed an econometric framework that included fixed-effects and control-variable models to assess discrimination in patent grants, and we incorporated twin patents from multiple jurisdictions for robustness.

We find that foreign applications in strategic areas are approximately 4 to 7 percentage points less likely to receive a patent grant compared to domestic applications, translating to a risk ratio of about 1.5. Our findings suggest a potential home bias favoring local applicants, especially in strategic technology domains. Furthermore, controlling for various confounding factors reveals that overall discrimination against foreigners diminishes but remains significant in strategic sectors.

• 477,854 patent applications filed at the National Intellectual Property Administration (CNIPA) in China between 2001 and 2009, focusing on strategic technology areas.

• The model assumes that the twin patents provide a valid counterfactual for the probability of grant for foreign and domestic applications.
• It is assumed that the characteristics of applications filed in strategic areas do not differ systematically from non-strategic applications apart from nationality.
• The identification strategy presumes consistency in patent examination standards across jurisdictions.