China poised to lead patent activity, report finds

The report states that China has experienced an annual growth rate of 26.1 percent in total patent volume, compared to the 5.5 percent growth rate in the U.S. The findings suggest that patent filings in China will outpace the U.S. in 2011, one year earlier than previously forecast.

China is also expanding its IP protection overseas. From 2007-08, the growth rate of China's overseas patent filings in Europe, Japan and the U.S. were 33.5 percent, 15.9 percent and 14.1 percent, respectively. 

One issue helping patent growth in China is the country's research and development tax deductions, which can equate to a 150 percent deduction for companies that increase research activities by at least 10 percent from the year prior. The U.S. R&D credit hovers around 13 percent, when other credits are factored in, and is ranked 17 out of the top 30 OECD countries.

China this year became the world's second largest economy and is expected to be No. 1 between 2020 and 2027. Creating more patents will help the country obtain the No. 1 spot sooner rather than later.