Australians Must Step-Up On Patents, Stop Giving Away Free IP!

There is a famous story about how the insect repellent Aerogard^® became a household name in Australia.  It involves a visit to Australia in 1963 by Queen Elizabeth II, in the course of which Her Majesty was sprayed with a formulation developed by CSIRO entomologist Doug Waterhouse, containing the chemical N, N-diethyl-meta-toluamide (DEET), to ward off the country’s numerous and persistent flies.  (Apparently, clouds of the insects had interfered with the famous Royal Wave on a previous visit.)  Within days, the Mortein company requested the formula from Waterhouse, who obligingly handed it over gratis, as was CSIRO policy at the time – three cheers for the great generosity of the Australian taxpayer!  The rest, as they say, is history … including the inevitable 1969 acquisition of the Australian Aerogard product and brand by British company Reckitt & Colman (now the massive multinational conglomerate Reckitt Benckiser).  Other innovations commonly touted as having originated in Australia, but capitalised upon elsewhere, include the black box flight recorder, heart pacemaker, photovoltaic cells, and X-ray crystallography.

While CSIRO is no longer in the game of giving away valuable intellectual property for free, sadly it seems the same cannot be said for Australian innovators more generally.  Otherwise, how are we to explain a stagnation in patent filings by Australian residents?  Over eight years, from 2009 to 2016 – the most recent year for which numbers are available at the World Intellectual Property Organization (WIPO) IP Statistics Data Center – the number of Australian patent applications filed by Australians barely varied from around 2500 per year.  Australians actually file more US patent applications than they do Australian applications, however these numbers are also stagnant, fluctuating around 3700 applications over the same eight-year period.  In 2016, the rate of US patent filings by Australian applicants was 152 applications per million population.  In the same year, US applications by US applicants ran at 913 per million population.

Surely the reason for the low filing rates, and lack of growth in filings, cannot be a lack of Australian innovation?  According to the 2017 Global Innovation Index (GII) Report, Australia ranks 23^rd out of 127 countries for innovation performance, which is not great.  Significantly, however, Australia fares much better on ‘input’ metrics than on ‘output’ metrics.  Input metrics capture elements of the national economy that enable innovative activities, and encompass institutions, human capital and research, infrastructure, market sophistication, and business sophistication.  Australia ranks 12^th on the innovation inputs sub-index, and performs particularly well on infrastructure (ranked 7^th), human capital and research (9^th) and market sophistication (9^th). 

But even though Australia is (mostly) well-placed to generate positive innovation outcomes, it has long lacked the ability to follow-through.  On the GII outputs sub-index Australia ranks a lowly 30^th, while on the innovation efficiency ratio (outputs divided by inputs) the country ranks an abysmal 76^th.

Furthermore, on the input side Australian businesses lack sophistication, with the country ranking 27^th on this group of metrics.  Tellingly, the business sophistication group of metrics includes ‘patent families filed in two or more national offices’ (relative to GDP by Purchasing Power Parity), in which Australia performs appallingly, by any standard.  Australia’s score on this metric is just 1.0, which compares to the USA on 5.0, Japan on 15.5, Korea on 16.3, and New Zealand on 4.7.  It is hardly any comfort that the UK (2.5) and Canada (2.9) are not great performers on this metric, either – they are still doing a lot better than Australia.

In my experience, ‘lack of sophistication’ pretty much sums it up when it comes to many Australians’ attitudes towards intellectual property generally, and patents in particular.  Too many Australian innovators and businesses simply do not understand intellectual property.  They ignore it, put it in the ‘too hard’ basket, are ignorant about it, or are sceptical or even actively hostile towards it.  Certainly they do not value it highly, and many are extremely reluctant to spend any money on it.  But in choosing not to protect their intellectual property, these businesses are, in effect, just giving it away for free, as surely as CSIRO once did as a matter of policy.

Australians Should be Filing for More Australian Patents

The good news is that Australian resident applicants are the second largest users of the Australian standard patent system, after US residents, as the chart below – which plots the numbers of Australian applications filed in 2016 from the top ten countries of origin – shows.

The not-so-good news is that around 2600 applications by residents of a country with a GDP (in 2016) of US$1.2 trillion is really not that great.  By comparison, US residents filed nearly 300,000 US patent applications in 2016, i.e. more than a hundred times the number of Australian applications filed by Australians, despite the fact that US GDP in that year was just under 16 times that of Australia.

Australians’ relatively low use of their own national patent system is not a reflection of any generally low regard in which Australian patents are held, internationally.  The chart below shows the top 20 patent offices worldwide, by total number of filings in 2016.  Australia actually ranks quite highly as a filing destination, coming in tenth behind a list of offices that should surprise nobody.

Australians Should be Filing for More Foreign Patents

The chart below shows the number of patent applications filed by Australian residents in the top 20 destination countries in 2016.

As I have already indicated, Australians actually file more US patent applications than they do Australian applications.  Of course, this is not necessarily a bad thing – the US is a much larger market than Australia, so there may certainly be greater value in obtaining patent protection there than in Australia.  However, this does not explain why Australian residents file so few applications in patent offices representing other large markets.

At least Australians are not alone in disproportionately favouring the USPTO as a filing destination.  By way of comparison, I took the top eight ‘users’, by national origin, of the Australian patent system (i.e. residents of the US, Australia, Japan, Germany, UK, Switzerland, China and France), and charted the total number of applications in 2016 originating in these countries in the corresponding top-ten patent offices.  The result is shown in the following chart.

For the most part, the top-eight countries of origin listed above – which account for around 84% of all Australian patent applications – have, collectively, a similar influence in each of the destinations covered by the preceding chart.  The following chart shows the percentage of applications in each of these offices filed by residents of the eight countries.  Where an office is the ‘home’ national patent office of one of the eight, I have further broken the data down into ‘resident’ and ‘non-resident’ components.

With the exceptions of Korea and India, the eight countries of origin that provide 84% of Australian patent applications also account for over 75% of applications in the other top-ten patent offices.  Australia and Canada stand out, however, as the only offices of the ten where resident applications are significantly out-numbered by non-resident applications.  (Note that since Korean and Indian residents are not among the Australian top-eight, the above chart does not include resident filings for these offices, which actually dominate the remaining proportion of applications.  Additionally, I did not identify German and UK applicants as EPO ‘residents’, since this does not make sense unless all of the other European Patent Convention countries are included.)

Australian Applicants Show No Growth in Filings

As shown in the ‘Australian-Originating Applications’ chart above, the top eight destinations for filing by Australian patent applicants are the US, Australia, Europe (EPO), China, New Zealand, Canada, Japan and India.  The graph below shows the number of filings by Australian residents in each of these eight offices over the eight-year period from 2009 to 2016.

Filings in Australia show a ‘spike’ in 2013, and corresponding correction in 2014, as a result of applications being brought forward ahead of the ‘Raising the Bar’ patent law reforms.  A similar effect occurs in New Zealand in 2014/2015 due to the commencement of the new Patents Act 2013.  Other than those variations, however, it is clear that there is no significant change in the numbers of patent applications being filed by Australian residents in any of these eight offices over the entire period.  Patent filings by Australians are completely stagnant.

Technologies

Often when I write these types of articles, I am asked about technologies – perhaps Australians are performing better in some fields of technology than others?  The WIPO data does include a technology breakdown, based on a concordance table that links International Patent Classification (IPC) symbols with thirty-five fields of technology.  Since Australians file more patent applications in the US than in any other country, I have identified the top 10 technologies covered by Australian-originating applications from the WIPO breakdown based on US patent publications, between 2009 and 2016.  The resulting chart is shown below.

There are a few notable aspects to this chart:

1. there has been a significant decline in applications relating to ‘textile and paper machines’ – I suspect that a closer investigation of the data would reveal that this is connected with one or more specific applicants (and I am tempted to speculate that many of Silverbrook’s applications fell into this category);
2. there has been some growth in applications relating to ‘medical technology’ – this is widely-regarded as an area of strength for Australian research and development; and
3. there appears to have been some decline in applications relating to ‘computer technology’ – this could be due to applicants cutting back on filings as a result of developments in relation to patent-eligibility, however it may also be that this is an area in which many applicants are choosing to file only in the US, and to request non-publication prior to grant.

Conclusion – Australia Needs to Lift Its Game on IP Protection

Australia is underperforming in terms of translating strong foundations for innovation into successful innovation outcomes.  One factor in this underperformance, as the GII indicates, is a lack of business sophistication.  And one component in this lack of business sophistication is a lack of sophistication in relation to intellectual property.  While this is far from being the only challenge that Australia faces in improving its innovation performance, it is one of the easier challenges to address – innovative Australian businesses and individuals simply need to get better at capturing and protecting IP.  This is an achievable goal that may require little more than some effort at self-education (I would like to think that this blog can make a small contribution in this regard), and a bit of a change in mindset.

Instead of thinking ‘patents are too expensive’, or ‘patenting is too difficult’, or ‘we could never afford to enforce a patent anyway’, or ‘I don’t like patents, it seems wrong to try to own ideas’, Australian innovators need to start thinking about patents (and other forms of IP) as business assets that represent real value which can – and will – simply be taken by competitors if not protected.

Having a history of poor performance in this area means that there is a relative lack of experience in Australia when it comes to IP capture and protection.  There are plenty of countries in the world where there is a similar lack of experience, including developing nations like China and India, but they are not letting this stand in the way of building up their skills and capabilities in this area.  Chinese residents filed 1.26 million national patent applications (most, admittedly, in China) and over 43,000 international (PCT) applications in 2016.  While many of these may be of low quality, that is hardly the point, which is that these numbers represent 1.3 million instances of Chinese applicants gaining experience with the patent system, and making it part of the way in which they think and operate.  Chinese applicants overtook Japan in PCT filings in 2017, with nearly 49,000 applications, to become the second-largest users of the international filing system globally, after the US.

Australians need to get over whatever cultural biases they may have against IP protection in general, and patents in particular, and get with the program!

Tags: Innovation, Innovation policy, Patent analytics