11 July 2011

IP Australia Director General 'Talks Up' Economic Recovery

According to a story posted on ABC News Online, entitled Business confidence boosts patent applications, new filings 'for patents on inventions ... for Australian businesses have increased for the first time since the global financial crisis', going on to claim that 'patent applications protecting intellectual property are creeping back to levels recorded three years ago, reaching 26,473 in 2010-11.'

We are not sure that there is a great deal of evidence for this, although it is only natural for IP Australia, as the national IP rights-granting authority, to wish to put a positive spin on the numbers as we move into a new financial year.

IP Australia Director General Philip Noonan is quoted as saying:

"It's a very welcome sign that patent applications are coming back on line, ... [b]ecause intellectual property is really the cornerstone of new industries in the future, and the sustainable source of jobs in the future."


"When the global financial crisis hit, and funding is withdrawn, but it is a little while before that flows through to effect the number of patents," he said.

"So the pattern for patents has been that applications were down more slowly and are only just starting back up."

We wish that all of this positivity was entirely convincing, and that we could believe that everything is looking up.  But, as we have noted before (most recently in The Fate of Australian Industries for 2011-12), there are plenty of signs that the current relative strength of the Australian economy (and currency) continues to be based more on the exploitation of natural resources than it is upon investment in innovation.


We are not sure where that figure of 26,473 comes from, because we have been unable to duplicate it through search criteria entered in IP Australia's AusPat online service.  It is no doubt a combination of some or all of provisional filings, direct Australian patent filings, Australian-originating PCT filings, and PCT national phase entries.  However, whatever the criteria applied to determining a '2010-11 filing', we very much doubt that the figure encompasses only filings made by Australian applicants!  So, while we agree with Mr Noonan that IP is an important foundation for new industries and sustainable employment, we are not at all sure that the patent filing statistics necessarily reflect any significant increase in 'business confidence' in Australia specifically.


In fact, there are disturbing figures that Mr Noonan is (understandably) not talking up at this time.  If we look only at provisional patent application filings over the past four years we see a very different picture emerging.

PeriodNo. of Provisional Applications Filed

Assuming IP Australia's data is complete, it appears that provisional filings in the past financial year have dropped to the lowest level in many years, 23% below the 'pre-GFC' levels, and 13% below the previous year, during the (supposed) height of the GFC.

This is an especially disturbing sign for the state of Australian innovation considering that, in contrast to nonprovisional filings, provisional applications are made almost exclusively by local (i.e. Australian) applicants.  While many provisional applications do not proceed further, and simply expire after 12 months, many others form the basis for priority claims in patent applications filed in Australia and overseas.  A drop in provisional filings in the past year may be indicative of ongoing reduced investment in innovation and R&D in Australia, and is likely to mean fewer nonprovisional applications by Australian applicants in the coming years.


Perhaps we are being unduly pessimistic.  Another explanation for the drop in provisional filings may be that Australian applicants are becoming more selective and sophisticated in their intellectual asset management (IAM) strategies.  If the provisional applications that are not being filed are those relating to the least valuable innovations that are unlikely to proceed further in any event, then the drop in provisional filings may not be reflected in a proportional drop in future nonprovisional applications.

We think, however, that it would be overly-optimistic to assume that the entire drop in filings can be attributed to improved management, much as we might wish it to be so.  Our experience suggests that most Australian companies are far from being among the most sophisticated in capturing and managing their intellectual assets. 

No doubt time will tell which explanation is closer to the truth.


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