Saturday, 28 June 2014

Balance of patents

Those of a mercantilist tendency will be interested in the balance of patents - the number of patents filed abroad from one's country with a view to keeping Johnny Foreigner in his place, minus those filed in one's own country by Johnny Foreigner, that might pose an inconvenience in one's home country.

Balance of patents = (Pout - Pin)/(Pout + Pin)

where
Pout = patent applications filed abroad
Pin = patent applications received from abroad

A crude narrative might be that:-
  • early in its development a country receives more patents than it files abroad: but it does not receive many because it is  not an interesting place to invest in;
  • as it develops, it receives more patents as it becomes a more attractive place to do business in; 
  • as it develops still further, it starts to generate more patents and its balance of patents improves.
Whether true or not, this is an interesting story.  

Different countries have different engagements with the rest of the world. Large countries tend to be more self sufficient, and smaller countries tend to trade more. As countries become wealthier they can more readily afford the luxury of filing abroad. A measure of a country's interest in the rest of the world is thus the number of foreign filings compared with the number of national filings made by applicants from that country.

Conversion ratio = Pout/Phome
where Phome = number of national filings by residents in that country

Thus for any country three numbers suffice to describe engagement of the patent system with the world:-
  • the number of patent filings by residents;
  • the number of patent filings by non-residents; 
  • the number of patent filings abroad.
It happens that such numbers are available from WIPO. The following graph shows calculated figures from 1997 to 2012 for USA, China, Japan, Korea, and for EPC countries as a block [treating all filings within Europe from EPC countries as being "domestic" [e.g. a German originating UK application counted as domestic and vice versa]]. 



The most telling squiggle is the change in balance of patents for Republic of Korea from a net importer to a net exporter of patents. The most interesting squiggle is the oscillation of the USA, showing its rapid response to economic conditions. The squiggle most indicative of a possible problem in the WIPO data is that of Japan which seems to show a random bump. Europe shows a remarkable outward looking behaviour.

The smallest seeming change is that of China. However, Chinese patent applications accounted for over a quarter of all patent applications in 2012 [~28%] and are increasing rapidly.

The increase in Chinese patent applications can be seen graphically below

Growth in Chinese patent filings [excludes utility models]
A ~40% per annum growth rate in domestic and foreign filings from Chinese companies swamps a ~6% per annum growth rate in patent filings into China.

The situation looks even more interesting when account is taken of utility models. The following shows the proportion of world utility models filed in various countries by nationals of those countries with "Others" being all other utility model filings.

Domestic utility model filings as percentage of world utility model filings

To a large extent, the utility model system is Chinese.

Looking to the total of utility models and patents, China accounted for nearly 45% of world filings in 2012.

Looked at on a GDP basis, China has ~19% of world GDP and ~45% of world patent and design filings in its territory. Is it over patented?

At the start of this post I mentioned the mercantilist desire to keep Johnny Foreigner in his place. Getting your domestic industry to file a lot of patents in your domestic market might be a way to keep Johnny Foreigner out of your home market. Does this explain the rapid growth in Chinese applications by Chinese applicants?

Lastly, to simply all of the above guff, it might be as well to plot countries or regions on a ternary plot. The following shows the above mentioned regions plotted as a time series. Where does your country sit and where is it going?

Patent filings - time series




Sunday, 13 April 2014

On the importance of good data

Having an idle moment I thought to look to the WIPO IP Statistics Data Center where all sorts of fun can be had by the avid nerd. The data centre enables one not only to look to individual countries, but also to regions.

In previous posts I have commented on stagnation in filings at the EPO and so naturally, in a totally non-scientific way, I looked for more data to support my previous "findings" but for Europe at large.

By producing a time series of patent filings classified by resident and non-resident; and comparing this with a time series of patent filings classified by resident and filings abroad; the following interesting graph resulted:-



This would indicate:

  • North America having relatively static demand for patents in the rest of the world in recent years, but becoming an ever greater recipient of filings from the rest of the world; 
  • Asia showing ever greater activity abroad, and being an ever greater recipient from the rest of the world;
  • Europe showing ever greater activity abroad, but with relatively stagnant demand from abroad; and
  • Africa, Latin America and Oceania having relatively low activity.

But something more was needed. What is the situation of the whole World?

Unfortunately, there are no figures for patent filings outside the World, but one can get figures for filings in the World divided by residents and non-residents. The numbers are as indicated below.

So what does this mean for off-World interest in the World economy? The following shows the percent of patent applications filed by non-residents of the World.


From the above two graphs it can be seen that 2008 marked a distinct drop in activity by residents and non-residents alike. The World economic crisis clearly influenced alien demand for patents. However it can be seen that although alien demand has recovered somewhat, domestic demand has increased dramatically. It is to be hoped that the World is not becoming an economic backwater, but at present it seems that the 2008 economic crisis was just a minor "blip" and the increase in domestic filings indicates strong growth in domestic innovation.

It can also be seen that there is a need for improved statistics from WIPO. In particular cooperation with the GIPO [Galaxy Intellectual Property Office] should be improved to enable data for off-World patent filings to be gathered.

In the mean time, it would help for WIPO to be clearer as to how they calculate resident and non-resident filings for regions so that users of the IP Statistics Data Center are not led to false conclusions.

By the way - my apologies that this is too late for 1st April.

Friday, 14 March 2014

A one horse town

In my posting last week [Pangloss strikes again] I looked to filing numbers at the European Patent Office.

A reader asks "Any idea why Netherlands has such a massive increase? Did some very prolific filers move their registered offices there?".  Well, Dutch filing numbers decreased from 2010 to 2012 by more than they have increased from 2012 to 2013, so it is not totally sunny yet.

And one prolific filer did not change registered office, but did take breath. From the following table showing European applications made over 2010-2013:-

2013

2012

2011

2010

Philips 1839 1160 1759 1765
% change from previous year 59% -34% 0%
Non-Philips 3987 3903 3852 4169
% change from previous year 2% 1% -8%
Netherlands 5826 5063 5611 5934
% change from previous year 15% -10% -5%

it is evident that:-
  • Philips provides innovation that matters to the Netherlands;
  • 2012 was important;
  • Philips is back on track.
It is up to guesswork as to how many of the 2013 filings represent deferred 2012 filings. 

If anyone from Philips is reading, would they care to comment?

Thursday, 6 March 2014

Pangloss strikes again

Here we are again

In a recurring ritual the EPO has announced in a press release today "Patent filings at the EPO reach all-time high".

As mentioned in previous posts EPO press releases excite more than inform. A more nuanced picture can be gained by looking to the raw data which can be found here.

So let us analyse some statements in the press release:-

"Patent filings at the EPO grew by 2.8% last year and hit another all-time high,"

Correct, but only if you define patent filings as including PCT applications that will never be subject of any activity in Europe. 

"The EPO granted 66700 European patents, which was 1.6% more than in 2012 (65600) and the highest number ever." 

Correct, and this is to be applauded. 

"Europe continues to be a key market for innovation" 

This is dubious. Looking into the statistics for patent applications [EPO filings and PCT applications entering the regional phase] a slightly different picture is presented:-


Country of Origin 2013 2012 % change
EP Member States 73,420 73,098 0.4%
United States of America 33,834 35,207 -3.9%
Japan 22,555 22,659 -0.5%
China, People's Republic of 4,056 3,732 8.7%
Republic of Korea 6,336 5,719 10.8%
Others 7,668 8,147 -5.9%
Total "rest of world" 74,449 75,464 -1.3%
Overall total 147,869 148,562 -0.5%

The overall total of applications received by the EPO has dropped by half a percent. The total from non-EPO applicants [the rest of the world] has dropped by more than one percent. 

"US with stable increase, Asian countries drivers of growth"

US declining strongly, which matters given its size. Japan down a little, only China and Korea advancing fast - but note the absolute numbers from China and Korea are still relatively low [this may change of course, particularly if the unitary patent comes into effect (see here)].

"In total, filings from Asia accounted for nearly three-quarters of the increase at the EPO in 2013"

It would be more correct to state that it was only the rise in China and Korea that mitigated the catastrophic drop in filings from the rest of the world.

"European industry maintained its patenting activities at the same level as in the previous year, with marked regional differences"

You could say that. 
Country of Origin20132012% change
Germany26,64527,276-2.3%
France9,7549,918-1.7%
Switzerland6,6516,685-0.5%
Netherlands5,8265,06315.1%
United Kingdom4,5674,717-3.2%
Italy3,7043,753-1.3%
Sweden3,6683,5303.9%
other EPO member states12,60512,1563.7%
Total EPO member states73,42073,0980.44%

Larger countries declined, smaller ones grew. Netherlands accounted for most of the growth.

Conclusions

Europe is beginning to fight its way back, but "stagnation" is the best word to describe the innovation landscape, so far as this is represented by patent applications. 

The number of patent applications [European and Euro-PCT] in 2013 was over 2% down on the maximum in 2010.  

The rest of the world is doing very well, but are losing interest in Europe [or at least the EPO - it would be interesting to see what is happening to national filings].

Press reports are not always the best publicity.  

If you have a problem, face it.




Tuesday, 17 December 2013

Will demand for the unitary patent save or sink the EPO?

In a previous post I commented on the lack of growth in patent filings at the European Patent Office. The World Intellectual Property Indicators - 2013 Edition confirms this lack of growth [see Fig. A.1.1.2 at page 46] and the low numbers of patent filings at the EPO compared with other leading offices [see Fig. A.2.1.2 at page 52].


On renewal fees for the unitary patent, I have commented in a first and second post  on what might be a "fair" level.

Assuming that the level of fees is not so high as to be a deterrent, what might be the effect on demand? The following graph plots number of European patents renewed in each country of validation, against total GDP for the countries concerned, and extrapolates this to a market just the size of DE+FR+GB and to a market the size of the unitary patent assuming all participating states (except Poland) sign up. As a sanity check, the number of patents in force in USA, China and Japan is indicated.



As can be seen, this implies a considerable increase in demand. A unitary right covering a market with a GDP of nearly €10 trillion is likely to be highly sought. It is also probable that those who think ahead will start to file more European patents once the unitary patent starts to look a reality.

It would appear that the EPO should be planning now for what they will do if there is a surge in demand. I would expect such a surge to occur once the level of renewal fees is apparent [fear is usually worse than reality].



Saturday, 6 July 2013

So how will it work?

While looking over the background to the unitary patent, and idly wondering what rules the EPO will introduce to manage it, I came across the following little conundrum. The ability of the EPO to act in respect of "special agreements" is governed by Part IX of the EPC.

Article 142(1) of Part IX states:-

Any group of Contracting States, which has provided by a special agreement that a European patent granted for those States has a unitary character throughout their territories, may provide that a European patent may only be granted jointly in respect of all those States.

Article 142(2) of Part IX states:-

Where any group of Contracting States has availed itself of the authorization given in paragraph 1, the provisions of this Part shall apply.

As the Contracting States to the unitary patent have not provided that a European patent may only be granted jointly in respect of those states, they have not availed themselves of the authorisation of paragraph 1, and so it appears Part IX does not apply. As Part IX governs the EPOs role in such special agreements this is a problem.

Accordingly, can the EPO do anything in respect of the unitary patent? It seems the EPC says no, but the regulation is ordering the contracting states to tell the EPO to get on and administer the system.  

All views are welcome.

Tuesday, 25 June 2013

An economic digression - Are the provisions of the UPC compatible with the internal market

The UPC states at s. 24 that Union law shall be a source of law and yet, in its infringement provisions, there appears to be a fundamental inconsistency with the functioning of the internal market which is a core feature of the European Union.

The law of several (all?) Member States concerning indirect infringement provides that there is a double requirement for infringement. Firstly the supply of means relating to an essential element of a patented invention has to be within the national jurisdiction: and secondly the means are supplied to put the invention into effect in that national jurisdiction.

So, a manufacturer who makes and supplies in a country, a product constituting means relating to an essential element of an invention and destined for incorporation into a patented article in that country, will infringe a patent in that country. If the product is  destined for incorporation into a patented article in another country then there is no indirect infringement (not here considering aspects such as joint purpose, that might lead to a finding of direct infringement).

Section 26(1) UPC states (emphasis added):-
A patent shall confer on its proprietor the right to prevent any third party not having the proprietor's consent from supplying or offering to supply, within the territory of the Contracting Member States in which that patent has effect, any person other than a party entitled to exploit the patented invention, with means, relating to an essential element of that invention, for putting it into effect therein, when the third party knows, or should have known, that those means are suitable and intended for putting that invention into effect.
This in effect extends the territorial effect of each national part of a "bundle" patent and of the unitary patent to sale in one Contracting Member State of "means, relating to an essential element..." for putting the invention into effect in another Contracting Member State.

The effect of the generalisation of section 26(1) UPC is thus not simply to provide an enhanced court system, but to extend the acts of infringement that result from a European patent [bundle or unitary] to downstream activities outside the "home" territory of the the supplier of the "means, relating to an essential element..." . 

The effect of this extension on our manufacturer can be appreciated by looking at his potential liability for indirect infringement of a patent in a source country, by making and supplying in the source country, a product incorporated into a patented article in a different destination country. The following two tables show the situation now, and post UPC.

Now
Destination country
Patented UPC country
Patented non-UPC country
Non-patent country
Source country
Patented UPC country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
Patented non-UPC country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
Non-patent country
No – no patent
No – no patent
No – no patent

Under UPC s. 26(1)
Destination country
Patented UPC country
Patented non-UPC country
Non-patent country
Source country
Patented UPC country
Yes if the product is “means relating to an essential element of that invention”
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
Patented non-UPC country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
No – as act of direct infringement only takes place in destination country
Non-patent country
No – no patent
No – no patent
No – no patent

A similar change in effect is seen when one considers the potential liability of a manufacturer for indirect infringement of a patent in a destination country, by making and supplying in a source country, a product incorporated into a patented article in the destination country.
Now
Destination country
Patented UPC country
Patented non-UPC country
Non-patent country
Source country
Patented UPC country
No – as supply did not take place in destination country
No – as supply did not take place in destination country
No – no patent
Patented non-UPC country
No – as supply did not take place in destination country
No – as supply did not take place in destination country
No – no patent
Non-patent country
No – as supply did not take place in destination country
No – as supply did not take place in destination country
No – no patent

Under UPC s. 26(1)
Destination country
Patented UPC country
Patented non-UPC country
Non-patent country
Source country
Patented UPC country
Yes if the product is “means relating to an essential element of that invention”
No – as supply did not take place in destination country
No – no patent
Patented non-UPC country
No – as supply did not take place in destination country
No – as supply did not take place in destination country
No – no patent
Non-patent country
No – as supply did not take place in destination country
No – as supply did not take place in destination country
No – no patent

So the effect of the UPC is that whereas at present the manufacturer who only sells product in his home market, only needs to consider patents in force in that country: post UPC he has to consider patents elsewhere in Europe, and his liability depends upon whether his products are subsequently used in a UPC country or a non-UPC country.

This differentiation in liability according to whether or not a downstream user is in a UPC or non-UPC country thus increases fragmentation of the internal market and may be contrary at least to:-
  • Article 26 TFEU concerning free movement of goods;
  • Article 36 TFEU concerning the extent to which industrial property may act as a disguised restriction on trade;
  • Article 20 TEU that only permits enhanced co-operation that will reinforce the integration process.


It should be further noted that this effect bears particularly strongly on SMEs who are most likely to be trading solely in their own country and not considering exports. At present such an enterprise need only look to patents valid in their own country and has no concern as to whether corresponding patents are in existence elsewhere. Post UPC this will change dramatically.

I do not believe that these issues have been considered by the European Parliament, the Commission, the Council, or the Courts in discussing the challenges by Spain and Italy. Perhaps it is not too late to think again?.