Patent Filings Up Worldwide, Outpacing GDP Growth

A new report published by WIPO today shows that intellectual property filings worldwide rebounded strongly in 2010 after a considerable decline in 2009.  In fact, the recovery in IP filings was stronger than the overall economic recovery. This is probably to have been expected given that patent filings in particular are a leading indicator of the introduction of new technologies into the marketplace.  The question now is whether the patent systems of the world can actually process these increased patent filings in a releavant time frame so that entrepreneurs and small businesses, who are the engine of growth, can be the catalyst pushing toward economic recovery.

According to the World Intellectual Property Organization (WIPO), patent and trademark filings grew by 7.2% and 11.8% respectively in 2010 compared to growth of 5.1% in the global gross domestic product (GDP).  Not surprisingly China and the United States accounted for the greatest share of the increased filings.  With China you have a growing economy in a country with over 1.3 billion people.  With the United States you have the largest economy in the world and the rights granted are undoubtedly very strong given the fact that, for the most part, the U.S. judiciary is not anti-patent.  Not to be outdone, however, in Europe the growth of IP filings in France, Germany and the UK also far exceeded the GDP growth rate of these three European economies in 2010.

The 7.2% growth in patent applications in 2010, which is the highest growth rate in five years,  follows a 3.6% decline in patent filings globally in 2009. The total number of patent applications worldwide — 1.98 million — was also an all-time high. Similarly, trademark filings rose by 11.8% in 2010 to reach 3.66 million, which was an all-time high for trademark applications, and comes after having fallen by 2.6% in 2009.

The USPTO saw 7.5% growth in patent application filings in 2010, after two years of near zero growth,  and received the largest total number of applications (490,226).  The Patent Office of China (391,177 filings) overtook the Patent Office of Japan (344,598 filings) to become the second largest recipient of patent applications in 2010. This changing of the guard between China and Japan also mirrored wider economic trends in a year where China overtook Japan to become the second largest economy in the world, as measured by GDP.  The increasing dominance of China was also felt when one analyzes the numbers of filings by resident applicants. Chinese residents (293,066 applications) overtook Japanese residents (290,081 applications) to become the most active patent filers in 2010.

In terms of percentage of growth, the majority of the top 20 Patent Offices saw growth in applications in 2010 when compared with 2009. Double-digit growth was reached in China (24.3%), the European Patent Office (12.2%), Singapore (11.9%) and the Russian Federation (10.2%).  Such double-digit growth was, however, not limited to well developed economies.  Indeed, patent applications at Patent Offices located in middle and low-income economies also rebounded strongly in 2010 after falling in 2009. For example, Colombia, Malaysia, Philippines, Ukraine and Viet Nam all saw double-digit growth in growth of patent application in 2010 compared with 2009.

While Chinese residents filed the most domestic patent applications, they filed only a small proportion (5%) of applications abroad.  The highest total number of patent applications filed abroad went to the residents of Japan (172,945 applications) and the US (178,355 applications), who by far filed the largest number of patent applications outside their own country. In terms of percentage of patent applications, however, residents of Canada, Israel, the Netherlands and Switzerland filed more than 80% of their total applications abroad.

Looking at patenting activity across different technology fields, the Report shows that computer technology, electrical machinery, audio-visual technology and medical technology accounted for the largest shares of patent filings worldwide. However, the relative importance of different technology fields varied substantially across countries. Broadly defined information communications and technologies accounted for the largest share of filings in Finland and Sweden, with pharmaceuticals more prominent in Belgium, India and Switzerland.

In his foreword to the 2011 World Intellectual Property Indicators (WIPI) Report, WIPO Director General Francis Gurry explained that the upturn in IP filings shows that companies across the globe have been continuing to innovate. “This can help to create new jobs and generate prosperity once macroeconomic stability is restored,” he writes, while cautioning that “if economic conditions were to deteriorate sharply in the short term – as happened in 2009 – companies might be forced to curtail or abandon their investments in innovation, stifling an essential source of growth.”

The question, however, is whether this increased inventive activity is sustainable in light of the overwhelming backlogs faced by Patent Offices around the world.  It is great to have a lot of inventive activity and interest in obtaining patents.  That shows that there is increased interest in business activities because few, if any, pursue a patent for the sole purpose of obtaining a patent.  There is almost universally some business goal with associated hopes, dreams and potential positive impact for the economy.

Of course, a filed patent application does not pay the bills for a small business or start-up company that is dependent on investors for financing.  Can the Patent Offices of the world help facilitate the recovery or will they continue to stand in the way as a result of bureaucratic mismanagement by political leaders who steadfastly refuse to provide adequate funding?

The number of pending patent applications across the world totaled 5.17 million in 2010, which is a 3.3% reduction over 2009. The world total is based on data from 70 Patent Offices, which include most of the top 20 offices (with China among the exceptions). The Patent Office of Japan saw a significant reduction (-20%) in pending applications undergoing examination 2010. The EPO (-6.9%) and the US office (-2.3%) also had fewer pending applications in 2010 compared to 2009. Medium-sized offices, such as Chile (-11.6%), Israel (-8.8%), Mexico (-3.6%), Poland (-14.6%) and Ukraine (-5.9%) also saw considerable reductions in pending applications.

While it is better to have a decreasing number of patent applications, a look at the numbers shows a bleak outlook. In the United States, for example, the backlog of patent applications awaiting a first office action as of the end of October 2011 was 671,409.  While this is impressive in some regards, namely the number continues to decrease despite more patent applications being filed, this number is still unacceptably high.  There is only so much that the USPTO can do without cooperation from Congress, which unfortunately has been impossible to achieve.  Congress continues to layer on responsibilities to the USPTO, so they get an ever increasing workload, but they get no additional funding.  For crying out loud they cannot even spend 100% of the user fees collected to run the Patent Office without prior Congressional approval, which never seems to be forthcoming.

Additionally, at the close of October 2011 the average pendency of patent applications in the United States, including Requests for Continued Examination, was 41 months.  This, however, doesn’t tell the whole story.  With many patent application in a variety of popular technological areas there is simply little chance to acquire a patent without at least one RCE filing.  Some art units and some patent examiners have upwards of 80% of the applications they handle resulting in at least one RCE filing.  For these applications with an RCE filing the total average pendency balloons to 63.1 months.  If you need to go to the Board of Patent Appeals and Interferences the total average pendency ballons to 81.8 months.

These RCE and Appeal average pendencies are wholly unacceptable.  Why?  Ask yourself this: If you have a marginal technology and you get rejected are you going to spend more money and time filing an RCE?  Would you invest the time and money to file an appeal on a technology that isn’t really important?  Of course not.  So the reality is that the overwhelming number of patent applications that could have the most dramatic positive impact on economic activity and job creation are tied up in the USPTO between 63.1 and 81.8 months on average.  This is why we haven’t felt the economic impact of increased innovative activities during our attempts to rebound from the Great Recession.

I don’t want to rain on WIPO’s parade completely.  It is definitely good news to learn that individuals and businesses are more interested in patents.  That means they have technologies that excite them and some kind of a business plan to exploit their intellectual property.  Whether this increased innovative activity can and will be something that produces an associated economic boon remains to be seen and is largely, if not completely, dependent on the political machinations of those in Washington, DC and other capitals around the world.  Talk about a depressing though!