Patents in the Knowledge-Based
Economy
Dominique Guellec
Chief Economist EPO
2005/12/1
1
Outline of the presentation
1.
2.
3.
4.
Recent evolutions in patent numbers
The new roles of patents in the economy
The economics of patents
Current challenges for the patent system
2005/12/1
2
Ever more patents
EPO and USPTO filings: Total num ber of applications
JPO filings: Total num ber of claim s
4,000,000
400,000
JPO filings
350,000
3,500,000
300,000
3,000,000
250,000
2,500,000
2,000,000
200,000
USPTO filings
150,000
EPO filings
1,500,000
1,000,000
100,000
500,000
50,000
0
0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
2005/12/1
3
Surge in filings to the EPO
Applications to EPO (2005: + 5%))
200 000
181000
175 000
Euro-direct
Euro-PCT
150 000
Total
125 000
120 100
100 000
75 000
58 743
50 000
25 000
0
1978
1980
1982
1984
1986
1988
1990
1992
1994
2005/12/1
1996
1998
2000
2002
2004
4
The surge in patent numbers
Patent filings have doubled in OECD over
the past decade. It is the sharpest increase
since the 1870s in the US.
... What happened?
2005/12/1
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The surge in patent numbers
=> Major sources of the surge:
-
increased innovation: Emergence of new
technology areas (software, biotech);
-
strengthened role of patents in competitive
processes;
-
changes in patent regimes.
2005/12/1
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The surge in patent numbers
Corresponds first with a surge in innovation:
-
Sharp increase in business R&D expenditure
notably in the US, during the 1990s
-
ICT and biotechnology contributed to 50% of the
surge: It is also areas where R&D expenditure
grew most rapidly and innovation was more
spectacular.
2005/12/1
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Growth in applications filed to EPO
(compound annual growth rate)
14
%
1995-2001
1991-1994
%
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
Total Patents
Biotechnology
2005/12/1
ICT
Other
8
Growth in Business funded R&D
GDP and Business Funded R&D in the OECD Area (Index 1970 = 100)
500
450
400
GDP
R&D
350
300
250
200
150
100
50
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
0
2005/12/1
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EPO applications per dollar R&D
0.8
European Union
Japan
United States
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0.0
0.0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
2005/12/1
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More than a surge in innovation
Patent per dollar-R&D increased in most
countries, or was stable in front of a long
term decline => increased innovation
explains part of the surge in patenting, but
far from all of it.
2005/12/1
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Patents per R&D Dollar
Applications to EPO over industry financed BERD*
by country of origin
180
Germany
160
EU-15
140
Japan
120
US
100
80
60
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
2005/12/1
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Changes in innovation systems
enhance the role of patents
-
-
Innovation is central to business strategy.
More competitive, globalised markets.
More co-operation between firms.
Increased importance of start-ups, with no other asset than
their technology.
Expansion of markets for technology (esp. licensing
contracts).
=> businesses require more patenting for
protecting their inventions and dealing with
other companies.
2005/12/1
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More competitive and globalised markets
Deregulation => more intense competition;
Competition induces patenting (≠ national
monopolies did not need much IP as they
had little potential imitators); e.g. telecoms.
Globalisation: larger and more differentiated
markets as products are sold world-wide,
more competition as national borders do not
keep foreign companies away.
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More cooperation in innovation
Innovation used to be mainly done in-house, centred
on the firm: It is now more based on knowledge
networks and markets.
Companies are increasingly specialised (vertically,
horizontally), they cannot rely on their own
competencies only for inventing new, complex
products: need to pool innovation through research
joint ventures and other types of cooperative
agreements and networks
=> need to be protected = role of patents
2005/12/1
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Increased importance of start-ups
In emerging technology fields (IT, software, biotech,
nanotech) much innovation come from start-ups:
companies with no other asset than their technology (no
complementary assets that can be used as indirect
protection) => need to protect their technology = IP
“Fabless” companies in semiconductors.
Biotech companies being taken over by big pharmas.
Venture capitalists require patents before committing funds.
2005/12/1
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Expansion of markets for technology
Market transactions related to technology, notably
licensing agreements, are expanding.
- Active policy by many large and small companies
to sell their technology (IBM = 1.5 Billion USD a
year in licensing revenue, Microsoft now)
... “Rembrandts in the Attic”
- Securitisation of IP (emerging)
Broadened range of ways to create value from
patents => increased incentives to file patents.
-
2005/12/1
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Royalty and Licensing fees (in billion USD)
120
100
Payments
80
60
Receipts
40
20
0
50
9
1
54
9
1
58
9
1
62
9
1
Source: Athreye and Cantwell 2005
66
9
1
70
9
1
74
9
1
78
9
1
2005/12/1
82
9
1
86
9
1
90
9
1
94
9
1
98
9
1
02
0
2
18
Strengthened patent regimes world-wide
-
-
Strong pro-patent policy by government in OECD
countries, which believe that patents favour
innovation (started with the US)
e.g. Bayh-Dole types of policies.
Active policy by the US (followed by the EU and
Japan) to promote their interest world-wide
(TRIPS, bilateral agreements)
2005/12/1
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Strengthened patent regimes world-wide
-
-
-
-
Upward harmonisation of patent regimes worldwide (TRIPs, 1994).
More powerful governing bodies (e.g. WTO,
central courts specialised in IP = CAFC, JP IP
High Court, EPO).
Enforcement is strengthened (increased damages).
Expanded subject matter: biotechnology, software,
business methods (cross-countries differences).
Narrowing research exemption in the US.
Bayh-Dole act types of policies
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Economics of patents
Expected effects of patents:
X Generate a rent which will incentivise
innovation.
X Disclose inventions which would otherwise
be kept secret.
But:
X Deadweight loss for consumers (static
effect).
X Barrier to accessing disclosed knowledge.
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Deadweight loss
Price/Cost
Demand
Consumer surplus
C
Monopoly profit
P
Deadweight loss
C’
Q
Q’
2005/12/1
Q opt
22
A good patent system...
... is one which maximises the positive effects
while minimising the negative ones:
X Incentivises invention.
X Minimises deadweight loss and barriers to
access to knowledge.
X and facilitates further uses of technology:
licensing, finance etc.
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Current challenges to the patent system
Maintaining and adapting quality in the new
context
X Encouraging the development of technology
markets
X
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Quality
Meaning of quality: Only those patents which
are good for the economy (invention,
diffusion) should be allowed =>
X Selectivity of the process
X Reduce delays in the procedure
X Monitor voluminosity of patents
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Selectivity
Only patents which contribute to invention
activities should be granted, and with a scope
which does not makes it to difficult further
use of the patented knowledge.
=> increased workload of patent offices
=> adapting rapidly standards and practice to
new fields (biotech, CII, nanotech)
Are there too many patents in the world?
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Backlog
The number of un-examined applications is
more than 600.000 in Europe, in Japan and
in the US (each), end of 2005
=> uncertainty for applicants themselves
=> unchecked titles which gives already
substantial rights to their holder
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Voluminosity
Patent applications and grants are not only
more and more numerous, but each of them
is increasingly "big" = number of pages,
number of claims.
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Voluminosity
Avg. number of claims per application
received by EPO*
22
20
18
16
14
12
1
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
19
9
19
9
0
10
*by year of application
2005/12/1
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26
24
22
20
18
16
14
12
10
7
USPTO
6
5
JPO
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
4
19
95
# claims at JPO
8
# claims at USPTO
Avg. number of claims per application
received by JPO and USPTO*
*by year of application
2005/12/1
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Avg. number of claims per application and Joint Cluster
at EPO, 1995 vs. 2004
40
35
30
15
10
1995
20
2004
25
5
0
BIO COM POC HN TEL MO
IC
AVM POL EEM ELE
2005/12/1
HP CET VGT
31
Pending applications and claims
950
Number of Pending Claims (in Mio.)
13
850
12
11
Claims
750
10
650
9
Applications
8
7
550
450
6
350
5
4
Number of Pending Applications (in Thsd.)
14
250
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
2005/12/1
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Voluminosity: Why it is a problem
Higher number of claims mean usually less
disclosure (the real invention is hidden
"somewhere"), excessively broad rights and
higher cost of processing for the patent
office.
=> need to be reduced (strict enforcement of
rules, claim fees etc.)
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Fostering markets for technology
Markets for technology are essentially good
for the economy
X Markets for technology (notably licensing)
do have certain failures due to imperfect
information, transaction costs, inadequate
regulation
=> A policy agenda needs to be set up.
X
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Markets for technology
Current work at OECD, with METI involved
(intangibles); Co-operation with EPO
=> policies should be cautiously designed and
implemented (avoiding interference):
e.g. Accounting framework for patents and
licenses, granting high quality patents,
fostering the diffusion of information on
supply and demand for particular
technologies (JPO), templates for licensing
contracts etc.
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European
Patent Office
Thank you for your attention
dguellec@epo.org
2005/12/1
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