Don’t let “bad money drives out good”
By Tommy Zhang (China IP)
Updated: 2014-09-18


“Bad money drives out good,” also known as Gresham’s law, applies specifically when there are two forms of commodity money in circulation which are legally required to have similar face values but different actual values, then the artificially overvalued money (bad money) tends to drive an artificially undervalued money (good money) out of circulation.

In the IP field, this is not an uncommon phenomenon that “bad money drives out good.” For example, currently governments have introduced various policies in specific patent promotion activities for awards, subsidies and evaluations to encourage enterprises to apply for more invention patents and clearly indicated that one invention patent is worth several design patents or utility model patents. The imposition of a fixed exchange value on the three types of patent due to differences over the degree of innovation is tantamount to imposition of a fixed conversion rate between different forms of money, which may easily lead to the phenomenon of “bad money drives out good.” Many enterprises have filed a large number of applications for utility model and design patents in order to pass certain accreditations or obtain more subsidies, and acquire relatively equally competitive advantages by intentionally stacking patents quantitatively. Chances are that there will be significantly higher number of design and utility model patents than that of invention patents.

The phenomenon of “bad money drives out good” also takes place among enterprises and industries due to unreasonableness of IP-related rules and regimes and inadequate enforcement. For example, it can be easily seen from this issue’s cover story “Plight of IP Protection in China’s Furniture Industry” that in recent years, counterfeiting has been running rampant in the furniture industry and there have been cases of IP infringement frequently. Due to a variety of thorny issues, such as decline in relative profits, difficulty in burden of proof, high cost and low compensation in battles for rights protection, enterprises are no longer willing to be innovators, they are more willing to be copycats. If such phenomenon persists for a long time, the whole industry will see a decline, thereby affecting the healthy development of the national economy.

The design and implementation of IP-related rules and regimes will play a crucial role in encouraging innovation and maintaining a fair market order. Currently the major issues of lack of an IP regime and weak enforcement should be revised and adjusted to keep “bad money from driving out good.”


The J-Innovation

Steve Jobs died the month that the latest Nobel Prize winners were announced. The coincidence lends itself to speculation about inevitability.

Recommendation of Global IP Service Agencies with Chinese Business

Washable keyboard

The future of China & WTO

JETRO: A decade of development in China