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Wednesday, 1 October 2014

The Great British Vanishing Act Part 2: where has home-grown patent filing gone?

Last month, in "The Great British Vanishing Act: where has home-grown patent filing gone?", Peter Arrowsmith (partner in London-based patent attorneys Cleveland) opened what turned out to be a lively debate as to whether current statistical trends are describing the end of the British inventor or can be explained by other, less depressing reasons.  In the post below, Peter responds to some of the hypotheses that have been offered for an apparent decline in UK patent filings by UK applicants that does not seem to be reflected by filing figures for some of the UK's closest trading partners.  This is what he says:

In my recent post I shared my discovery of an apparent decline in the number of UK patent applications filed by UK companies.  This article provoked some stimulating debate and interesting comments, some of which is set out below.

The key trend can be understood with reference to the graph below, which shows the number of patent applications filed by UK applicants in the last ten years.  
 
The graph reveals a steady year-on-year reduction in the number of UK patent applications filed by UK applicants.  In fact, the figures for 2013 are around 25% less than those of 2003.  However, the figures for European and Patent Cooperation Treaty (PCT) applications filed by UK applicants remain reasonably stable over the same period. 

The reason for the decline is not immediately apparent, and it is likely that a number of factors will be influential.  It could be an interesting area of study to analyse the relevant applicants on a case-by-case basis and investigate the pressures causing a change in patent filing behaviour.  In the absence of this research we can only speculate on possible causes, and I provided a number of possibilities in my previous post.  Some contributors have suggested further possible explanations, which are outlined below. 


Security Provisions – Section 23 of the Patents Act 
Many practitioners will recall that Section 23 of the Patents Act 1977 was amended on 1 January 2005 as part of the Patents Act 2004.  The amendments relaxed the restrictions on filing patent applications abroad by UK residents.  Before 2005 all patent applications made by UK residents had to be filed first in the UK, or else a foreign filing licence was required.  In practice, foreign filing licences were rarely obtained because it was easier simply to file applications first in the UK and then file other applications if no secrecy order was issued within six weeks.  
After 2005 the foreign filing restrictions applied only to patent applications containing information relating to military technology, or for patent applications the publication of which might be prejudicial to national security or public safety.  Although there is some vagueness in the extent of these restrictions, it is clear that they should not apply to the majority of patent applications.  The amendments therefore enable direct foreign filing for many patent applications. 

The relaxation of Section 23 of the Patents Act could have some influence on the reduction in the number of UK patent applications.  In particular, some applicants may file applications directly in the US and/or at the European Patent Office (EPO).  One advantage in filing early at the EPO is to receive an early European search.  However, other applicants may still prefer to file first in the UK in order to maximise the potential term of their European patents. 
A Shrinking UK Industrial Base and/or Transition to a “Knowledge Economy” 
Some commenters have suggested that the reduction in UK patent filings could be related to a shrinking industrial base.  It is debatable whether this change in the UK economy has actually occurred in the period under consideration (2004-2013).  In addition, even if it has occurred then it fails to explain why the number of European and PCT applications has remained stable.  In my view, this suggestion cannot be a complete answer. 

Another suggestion has been a change in focus in the UK economy from traditional industry towards software.  In this case one may not observe a shift in the technological areas in which patent applications are filed because of the difficulty in obtaining UK and European patent protection for software inventions.  It is certainly true that some of these inventions are filed as patent applications only in the US, especially since the amendments to Section 23 of the Act relax the requirement for filing first in the UK. 

It has also been suggested that technology cycles are shorter in software industries, which drives up the cost of patent applications in relative terms, and therefore reduces their number.  This may be true, but the proliferation of software patents in the US demonstrates that there is still commercial value in protecting these types of invention. 
A European malaise?  
Other commenters have questioned whether the statistics for the UK are symptomatic of a general decline in patent applications by European countries.  An analysis of data from the EPO suggests that this is not the case.  The graph below shows the number of European patent applications (direct European applications + PCT applications entering the European regional phase) filed by applicants from the UK, France and Germany.  
 
Applications from the UK appear to be stable, whereas applications from French and German applicants have increased.  The absolute number of applications is also significantly lower from UK applicants, especially in comparison with Germany.  

None of this seems like good news from a UK perspective.
This blogger suspects that the debate is far from over. For one thing, it might be worth taking a look at grants. If the overall figure for applications is continuing to slide but granted patents are on the increase or holding their own, for example, the decline might be attributable to better filtering out of likely unsuccessful application by the aspiring applicant's professional representative.  And while there are no handy statistics available, might it be that some British businesses -- anecdotally less averse to risk than some of their competitors elsewhere in Europe -- are viewing features such as first-to-market, strong trade mark protection or confidentiality as offering better returns on their investment of limited resources?

9 comments:

Anonymous said...

You cite: "
Another suggestion has been a change in focus in the UK economy from traditional industry towards software."

This is only half-true - there has been a shift but from industry towards banking and the like. The two sectors that the UK is still world-class (banking and espionage) are those where you do not patent.

Everything else has been "shifted" (or shouldn't we say: deliberately been destroyed) by politics since the late 1970s.

Anonymous said...

Thatcher was right to destroy Britain's Coal and Nuclear industries and ship-building and engineering and science industries. There is no future in any of them. The British can spend their days texting on mobile phones and chatting on the internet on computers, all made elsewhere.

MaxDrei said...

When comparing UK and Germany, there are different explanations for the absolute level of filing and for the slope.

The German Employee Inventor Law, in force since the time of A Hitler, puts responsibilities equally on both employees and employers. The UK Patents Act of 1977 replicated only the bit of it that suited the top 1%.

To simplify to the bare bones of it, in Germany, the employee has to notify the employer of every technical problem solved, and the employer must then choose within 3 months either to file at the Patent Office or cede ownership to the employee. Is it any wonder then, that the absolute numbers of filings are high? Is it any wonder that everybody involved in engineering in Germany is patent-conscious?

As to the slope, the engineering patent game world-wide has turned into an arms race. To survive, keep your investors onside and your CEO and lawyers comfortable, you just have to have a bigger pile of patents than your competitors.

Germany still does engineering, in an ever-bigger way. England still does engineering, barely, and only in isolated pockets. Not enough to turn around a downward trend in filings.

For The City now to declare a "march of the makers" is akin to a shake of a Magic Wand to return a dustbowl of exhausted soil overnight to its former glorious fertility. Wishful, pie in the sky thinking.

Anonymous said...

I slightly disagree with Anonymous of 8:46's very short list of sectors where the UK is still world class. I would add universities, pharma and computer hacking (many members of Anonymous are British), and perhaps also innovation (though not commercialisation of innovation)

Anonymous said...

Anon at 11:43, I am afraid you have been listening to too many politicians (pick any party over the past decade). The UK pharmaceutical industry has as the life of a dodo - stuffed. It is now world class in the property market where it has been satisfying the demand for brown field sites for house-builders.

Anonymous said...

I would take issue with Anonymous @ 11:43 and her comment of " and perhaps also innovation (though not commercialisation of innovation)"

Some of the innovation thinkers define innovation as the commercialisaztion of invention, thus at the same time resolving the circularity imposed, and recognizing that innovation comes about from the putting of the captured invention into practice.

Patent systems are geared for promoting innovation by rewarding invention - not by rewarding that next step of putting invention into practice. It is by design that the reward for that next step is outside of the government system of Quid Pro Quo and instead is left to market forces. Having a patent does NOT guarantee that you will be a success in the market. This is a subtle - but critical - distinction that should be understood by anyone discussing patent systems.

Anonymous said...

I worked in the uk pharmaceutical industry for 30 years, when in 70's there were 25 reputable British independent companies. Following mergers, US acquisitions, the biotech revolution and lack of government recognition for independent competitive industrial research, there are perhaps 2 majors left. In the UK, the biotech model never materialised, and University and government search are mostly ambivalent to patenting novel inventions. Proof? Cesar Milstein did not patent monoclonal antibodies.

Anonymous said...

Also, Prof wotsit from Manchester didn't patent graphene.

Anonymous said...

The amount of engineering development (software or hardware) is highly dependent upon the rate of generation of problems with existing devices and the freedom to cross-fertilize technologies. This very highly interconnected aspect of the technology development makes even the loss of one small engineering or manufacturing company probably have hugely disproportionate effect upon the number of engineering ideas bandied about. Hence the decline in UK patent applications is probably a powerful non-linear indicator of not just the nascent absence of commercially useful ideas, but also an absence of knowledge as to what technology would flourish in the market. The non-patentability of computer programs designed to facilitate methods of doing business also means however that there is a vast commercial and intellectual activity which would never be measurable by the number of patent applications. The jury is out on which economic culture produces more GDP per person and a healthier national finances. The mix in the economy is probably more important in this regard than one indicator like patent applications.

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