19 August 2020

COVID Update – July Filings Surprisingly Resilient, but Self-Filers & Chinese Applicants Remain Major Contributors to Small Gains

MaskI live in the Victorian capital city of Melbourne, where we have been in ‘Stage 4’ lockdown since 2 August 2020.  With just a few permitted exceptions, the wearing of masks is mandatory, we must stay home except for essential activities – which must be carried out within a 5km radius, and may include no more than one hour of exercise per day – and we are subject to a curfew between 8pm and 5am each day.  The reason we are allowing ourselves to be subjected to such draconian restrictions is simple.  COVID-19 is a highly contagious disease with (as yet) no known cure or vaccine (unless you believe the Russians, which nobody reputable does).  The virus kills a significant number of people who contract it, particularly those who are older and/or have existing medical conditions, and there is increasing evidence that it may cause a range of long-term health problems even in those who are relatively young and physically fit.  Given this, I have little patience for the opinions of ‘rationalists’ (most of whom, oddly, seem to be privileged middle-aged white men) who argue that the damage caused to the economy by restrictions is too high a price to pay in order to save the lives of a few old folk.  Quite aside from the fact that those ‘old folk’ have a lifetime of contributions to society behind them, and are other people’s beloved parents, grandparents, partners, friends, and carers, without a crystal ball we just don’t know what the counterfactual looks like.  What we do know, for an absolute fact, is that we can save people from COVID-19.  And, while we are making sacrifices to (hopefully) keep deaths in our country down to a few hundred, the world’s (supposedly) most advanced economy is providing us with an object lesson in the consequences of failing to make those sacrifices.  If we had the same per capita mortality rate as the US, there would be over 13,000 Australians dead today who are, instead, still alive.

Of course we are paying, and will continue to pay, a high economic price for those lives.  Within this cost, it is to be expected that an economic downturn, and the uncertainty created by the COVID pandemic, will have an impact on levels of research, development, and commercialisation, which will, in turn, affect the numbers of patent applications filed.  By way of comparison with another recent downturn, the charts below show the numbers of standard and provisional applications filed in Australia over periods encompassing the global financial crisis (GFC), which largely played out between mid 2007 and early 2009.  The data indicates that the effect of the GFC on provisional filings – predominantly made by domestic applicants as a first step into the patenting process – was almost immediate.  A notable decline in standard application filings lagged the GFC by a couple of years, due to the delays built-in to the patent system through international agreements such as the Paris Convention and the Patent Cooperation Treaty (PCT).

Patent filings spanning the GFC era

One aspect of the above numbers that may be concerning to those patent attorneys reliant on a domestic client base is that the 20% of new provisional filings that ‘disappeared’ in the wake of the GFC have never returned, whereas standard application filings (of which 90% originate with foreign applicants) recovered to pre-GFC levels (though not, it must be said, to pre-GFC growth rates) within about five years.  We would hope not to see a similar permanent reduction in new domestic filings as a result of the COVID-19 pandemic, for the sake of Australian innovation and the economy more generally, if not for the livelihoods of a few patent attorneys.

This is why I have been following patent filing numbers since March (see reports also on filings through April, May and June).  I now have numbers for July, which show filings to have been surprisingly resilient, despite the economic challenges created by restrictions and uncertainty.  Standard patent applications during the month were almost identical to the same period last year, while provisional application filings were significantly up on 2019.  While self-represented applicants once again made a substantial contribution to the strong showing of provisional filings, applications filed with professional advice and assistance were also higher in July.  Meanwhile, innovation patent filings continue to boom, up by an astonishing 189% compared to July 2019, once again almost entirely driven by Chinese applicants.

Over in New Zealand, monthly filings continued to fluctuate around the same levels as in 2019.  The relatively low application numbers, and associated volatility resulting from normal month-to-month variations, makes it difficult to discern whether there is, at this stage, any underlying trend in filing activity.

Read on for this month’s updated charts.

Australian Standard Applications Steady, Provisionals Up

The chart below shows the percentage changes in monthly Australian standard patent and provisional applications between 2019 and 2020.  As in June, the number of standard applications in July 2020 was on par with 2019 (there was actually only one application difference between the two).  Unlike June, however, which benefitted from two additional business days in 2020, the number of business days in July 2020 (23) was the same as in 2019. 

AU Standard and Provisional filings - monthly changes

Provisional applications in July 2020 were up by nearly 12% on the previous year.  As the following chart shows, self-represented applicants were once again significant contributors to the increase.  In contrast to June, however, applications filed with the assistance of a patent attorney were also higher than in 2019.

June provisional filings by agent type

Chinese Continue to Drive Growth in Innovation Patent Filings

As I write this, the Australian innovation patent system has only a little over a year before a phase-out begins, with an initial prohibition on new, non-divisional, filings.  In the meantime, Chinese applicants are increasingly taking advantage of the system while they still can, with the number of filings each month, relative to 2019, continuing to grow.  In July 2020, 240 (out of 387) innovation patent applications named at least one Chinese-resident applicant, compared with just 28 (out of 134) in July 2019.  Chinese applicants were thus responsible for the overwhelming majority of the 189% growth in innovation patent filings.  The remaining growth was mostly due to self-represented applicants, with (non-Chinese) self-filed innovation patents increasing from 36 in July 2019 to 65 in July 2020.

AU Innovation Patent filings - monthly changes

Filings Steady in New Zealand

In New Zealand, filing performance in July was similar to June, with the numbers of both complete (standard) patent applications, and provisional applications again being comparable to the same period last year.

NZ Complete and Provisional filings - monthly changes

Australian Patent Filing Fees

July was another good month for collection of patent filing fees, albeit largely as a result of the continuing boom in innovation patent filings by Chinese applicants – which is neither something that IP Australia will be particularly pleased to see, nor something that it will continue to benefit from after August 2021.  However, we all have to get through these challenging times somehow, and IP Australia will be glad of the upturn following two poor months for patent filings in April and May.

IP Australia monthly fee changes

Conclusion – Are Strong Provisional Filings Numbers Surprising?

Looking back at the nearest point of comparison we have for a significant global downturn, there is no great surprise in the fact that standard application numbers are holding up reasonably well in comparison to 2019.  It took around 12-18 months from the start of the 2007-2008 GFC before a significant drop in standard patent application filings became apparent.  However, the impact of the GFC on provisional filings was immediate and dramatic, with successive falls of 6.4%, 5.2% and 9.8% in 2008, 2009, and 2010, for a cumulative drop of 20% in just three years – filings that, as I have already noted, never returned to the system.

So far, there do not appear to be any signs of a similar fall in new domestic application filings as a result of the COVID-19 pandemic.  I find this surprising, if pleasantly so.  It may be that some reason can be discerned from a more detailed analysis of these filings. I will try to look into this before my next monthly update.


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