18 March 2020

New Zealand Patent Filing Data Shows a Two-Decade Decline in Applications by Domestic Residents

NZ FlagSince 24 February 2017, patent attorneys in Australia and New Zealand have been subject to a single regulatory regime, under which there is no such thing as an ‘Australian’ or ‘New Zealand’ patent attorney.  Rather, we are all ‘Trans-Tasman’ patent attorneys, qualified and registered to practice in both countries.  Looking just at Australian patent filings, as I have up until now, therefore provides only a partial picture of the market in which trans-Tasman attorneys operate.  However, I am now able to analyse New Zealand patent information, using data sourced from the online patent search system provided by the Intellectual Property Office of New Zealand (IPONZ).

Of course, Australia and New Zealand are separate countries, with their own distinct governments, policies, laws, and economies.  The behaviour of patent applicants in each country is obviously more strongly influenced by these factors than by the regulation of the patent attorney profession!  There is, accordingly, no reason to expect that filing patterns in New Zealand should mirror those in Australia, and in fact they do not.  I have previously bemoaned stagnation in patent filings by Australian residents, and the poor outcomes achieved by self-represented applicants.  However, it turns out that the situation is even worse in New Zealand, where filings by domestic applicants have been in serious decline for most of the past two decades, and a larger proportion of applications are filed without professional assistance.  Between 2005 and 2019, the proportion of non-provisional New Zealand patent applications filed by New Zealanders fell from around 15% to less than 6%, while in 2019 nearly a third of provisional applications and over a sixth of non-provisional applications made by domestic applicants were self-filed.

At the same time, foreign residents – most particularly from the US, but also from Australia – have become proportionately larger users of the New Zealand patent system.  Overall, and in contrast with global trends, there has been no growth in New Zealand patent filings over the past two decades, and New Zealanders have become ever more minor users of their own national patent system.

Annual Patent Applications

The chart below shows the total numbers of provisional and ‘complete’ patent applications filed in New Zealand each year between 2000 and 2019.  (Note that for Australia the term ‘standard’ is typically used in place of ‘complete’, to distinguish between regular 20-year-term patents and second-tier innovation patents.  For New Zealand filings, I may use the terms ‘standard’, ‘complete’, and ‘non-provisional’ interchangeably.)  The separate sub-totals for direct/convention filings, and national phase entries (NPE) of international applications under the Patent Cooperation Treaty (PCT) are also plotted.
Annual NZ Applications
While there have been fluctuations over the two decades, the total number of complete applications has remained remarkably consistent, at around 6000 each year.  This is particularly notable, considering that over the same period the number of standard applications filed in Australia has grown by over 35%, from around 22,000 to nearly 30,000 while, according to data from the World Intellectual Property Organization (WIPO), global patent filings more than doubled (from just under 1.6 million to over 3.3 million) between 2004 and 2018. 

The data also shows that provisional applications – which are filed almost exclusively by New Zealand residents – declined significantly, with just 604 filed in 2019 compared with a peak of 1,251 in 2001.

Top Countries of Origin

The following chart shows the annual percentage of applicants for New Zealand patents (i.e. non-provisional filings) for the top six countries-of-origin, namely the US, New Zealand, Australia, the UK (GB), Germany (DE), and Switzerland (CH).
NZ Applications by Country-of-Origin
US-based applicants are by far the largest users of the New Zealand patent system, and the proportion of US-originating filings has grown over the past decade from just over 35% to nearly 45%.  The proportion of Australian residents filing for New Zealand patents grew throughout the first half of the 2000’s, and has remained steady since then.  The proportion of filings by New Zealand residents, by comparison, has generally been in decline since 2004, falling from over 15% to just under 6% – comparable with UK, German, and Swiss applicants.  Australians have, as a result, become the second largest users of the New Zealand patent system, being responsible for just over 10% of complete filings (ironically, a greater proportion than in Australia, where Australian residents made up less than 8% of standard patent applicants in 2019).

Domestic Applicants and Self-Filers

The two charts below show the total numbers of provisional and complete applications filed by New Zealand residents (i.e. applications having at least one New Zealand-based applicant), including the breakdown between those that self-filed, and those that used the services of a registered trans-Tasman patent attorney or firm.  A number of general observations can be made about this data:
  1. total numbers of both provisional and complete applications filed by domestic applicants declined significantly over the past two decades;
  2. self-filing activity did not decline to the same degree as attorney-filed applications, i.e. a greater proportion of New Zealand-based applicants are now electing to ‘go it alone’, without professional advice and assistance; and
  3. applicants who obtained professional advice exhibited markedly different filing behaviours around the commencement of the new Patents Act 2013, in September 2014.
Provisional Applications by NZ Residents
Complete Applications by NZ Residents
New Zealanders now outdo Australians in their propensity to avoid paying for professional advice and assistance by filing their own patent applications.  In Australia in 2019, around 28% of all provisional and innovation patent applications made by Australian residents were self-filed, while the corresponding figure for standard applications was around 7.5%.  In New Zealand, 33% of provisional applications and 17.5% of standard applications by New Zealand residents were self-filed.

The behaviour of professionally-advised applicants between 2012 and 2014 is significant, and illustrates the benefits of obtaining expert assistance.  The Patents Act 2013 raised a number of standards for patentability, brought in new restrictions on patenting of computer-implemented inventions, and introduced, for the first time, examination for inventive step.  There were, accordingly, clear benefits to filing applications prior to 13 September 2014, such that they would be subject to less stringent provisions of the former law.  Canny applicants, being advised of the anticipated changes, made additional use of provisional applications in 2012, when the timing for passage and commencement of the new legislation remained uncertain.  Furthermore, where possible they brought forward filing of complete applications into 2013 and the first three quarters of 2014, resulting in a surge of filings subject to the old law.  There is no evidence of corresponding strategies by self-filing applicants, to their detriment.

Other Effects of the Patents Act 2013

The following chart shows the total number of New Zealand patents granted annually, between 2005 and 2019.  From 2015 onwards, it also shows the breakdown between patents granted subject to the former Patents Act 1953, and the new Patents Act 2013.
Annual NZ Patent Grants
Following commencement of the 2013 Act, the number of applications still proceeding under the 1953 Act – and thus the number of patents granted under that Act – unsurprisingly declines.  It is notable, however, that the number of patents granted under the 2013 Act has not increased at a comparable rate.  As a result, the total number of patents granted each year in New Zealand has declined significantly since 2015.

It is not entirely clear to me why the decline has been so sustained.  Certainly, applications (and particularly direct applications) were examined more promptly under the 1953 Act.  The 2013 Act introduced a new system under which examination does not commence until and unless expressly requested by the applicant, with payment of an additional examination fee.  The examination request can, in principle, be delayed by up to five years from the original complete filing date (international filing date, in the case of a PCT application).  This would have created an initial delay in the examination of new 2013 Act cases, and a consequent temporary drop in the number of granted patents.

However, the examination request system also includes provision for IPONZ to direct applicants to request examination earlier than the five-year deadline – a mechanism intended to enable the office to maintain a pipeline of work commensurate with the available examination resources.  By now I would have expected that the pipeline would be full, and that grant rates should have returned to 1953 Act levels, given that the arrival rate of new applications has remained fairly consistent.  That this has apparently not happened suggests either that rejection rates have significantly increased, or that IPONZ Is under-resourced, which would imply that a backlog of unexamined applications is developing.  However, current timeframes for commencement of examination following a request do not seem excessive, being from 4.5 months for mechanical inventions, up to 10 months for biotech inventions.  Certainly, delays of this magnitude do not explain a drop in patent grants sustained over multiple years.

If any readers can shed any light (in the comments below, or via the email link in the menu bar above) on the low numbers of New Zealand patent grants under the 2013 Act, I would be grateful.

Conclusion – Numbers are Not Good News for New Zealand

I am generally of the opinion that patenting activity, whether by domestic or foreign entities, is positively correlated with levels of innovation and technological development within a jurisdiction.  I realise that not everybody agrees with this view, and that economic evidence on the issue is often equivocal, at best.  For a net importer of technology like New Zealand (or Australia, for that matter), many economists would argue that there is something to be said for granting fewer patents to foreign companies, given that they can typically be expected to use the resulting exclusivity to charge premium prices for their imported products or services.  But this is the incentive that the patent system is designed to provide, and the alternative – being overlooked as a profitable target market for new and innovative products – is potentially worse unless there is someone else willing and able to take advantage of the absence of patent protection to supply the market at a lower cost.  Effectively applied, innovative technologies can improve efficiency, productivity, and quality of life, regardless of whether they are home-grown or imported.

The bigger problem in New Zealand, however, is not how much use foreign entities make of the patent system, but how little use is made by domestic applicants.  In 2019, New Zealand companies and individuals filed just 348 complete patent applications, and 583 provisional applications.  And even when they did file, a significant proportion of New Zealand resident applicants did not consider it worthwhile to invest in engaging professional assistance, despite the significant legal and technical complexities of the patent system.

I have previously written about Australians’ lack of business sophistication when it comes to IP, about the poor appreciation in this country of the value of IP and corresponding decline in per capita patent filings, and about the particular failures of small and medium enterprises (SMEs) to identify, manage and protect their IP assets.  If the above data is anything to go by, it would appear that all of the same concerns apply, but to a greater extent, in New Zealand.


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