16 September 2020

COVID Update–Australian Patent Filings Down by Five Per Cent Since March

Masked VirusMost of the developed world has been in the grip of the medical, social, and economic effects of the COVID-19 pandemic since around March this year.  I published my first monthly review of the impact on patent filings in early April, at which time it was really far too soon to discern any trends.  But with data now available for the month of August it is becoming clear that – a surge in innovation patent applications by Chinese applicants aside – 2020 is likely to be a low year for patent filings in Australia.  I reported last month that the number of standard patent applications filed in July had been virtually identical to the same month in 2019, following on from a similar result in June.  However, August has marked a return to the negative trends of April and May

Overall, for the six months from the beginning of March to the end of August, the number of standard patent applications filed is down by just over 5% compared to the same period in 2019.  Hardest hit are new ‘original’ filings, i.e. applications filed directly in Australia that are not derived from an existing international application under the Patent Cooperation Treaty (PCT) or divided from an existing Australian standard patent application.  PCT national phase entries are down by around 2%, while divisional applications have declined by just under 3%.  However, new direct national filings between March and August fell by 28% compared with the same period last year, following two years of growth in this category of applications.

The number of provisional applications filed in Australia between March and August is also down, by 1.5% over 2019.  While this may not seem like much, patent attorneys are bearing the brunt of this decline – attorney-assisted filings fell by almost 4%, while the number of applications filed by applicants not represented by an attorney actually increased.

Chinese applicants continued to drive growth in innovation patent applications in August, with filings up by an astonishing 230% compared with 2019.  Over the period from March to August, innovation patent filings increased by nearly 130%.

Meanwhile, New Zealand continues to shrug its shoulders in the face of COVID-19.  Despite an overall decline in filings in August, PCT national phase entries have actually increased compared with 2019 during the six months since the start of March.  And while direct filings were down, this may simply continue a longer-term trend that seems to have been occurring anyway.

Australian Standard and Provisional Filings Down in August

Following a couple of ‘good’ months in June and July, August saw a significant drop in standard and provisional filings in Australia, down by 9.1% and 11.6% respectively compared with the same month in 2019.

AU Standard and Provisional filings - monthly changes

As far as standard patent applications are concerned, it appears that roughly equalling 2019 numbers is about the best that can be expected in any month in pandemic times.  Overall, however, filings are well down on 2019.  It is not clear why provisional filings spiked in July (and, to a lesser extent, June), however the fact that 30 June marks the end of the financial year in Australia may have been a factor.

Chinese ‘Love Affair’ with Innovation Patents Continues

Innovation patent filings, meanwhile, carry on beating previous increases with every passing month since April, being up again in August, by 230% on 2019.

AU Innovation Patent filings - monthly changes

This growth continues to be driven by Chinese applicants, which in August once again dominated ‘original’ (i.e. non-divisional) innovation patent filing numbers.

August original innovation patent filings by origin

These Chinese applicants – which I presume are gaining the benefit of government subsidies for collecting foreign patent certificates – are clearly making hay while the sun shines.  There is now less than year to go now before the phase-out of the system begins, after which it will no longer be possible to file new original innovation patent applications.

Six-Month Impact of COVID-19 on Australian Filings

The following chart shows the total number of Australian patent filings over the six months from the beginning of March to the end of August every year since 2016, broken down into PCT national phase entries (‘PCT NPE’), direct standard patent applications (‘Std Direct’, including Convention applications, complete-after-provisional filings, and divisional applications), provisional applications, and innovation patent applications.

AU filings March to August - annual comparison

Compared to the same period in 2019, PCT national phase entries are down by 1.8%, direct filings by 12.8%, and provisional applications by 1.5%.  The overall decline in standard applications (i.e. PCT NPE and direct filings combined) is 5.2%.  Ignoring the impact of the Raising the Bar reforms in 2013/2014, this is the largest decline (both as a percentage, and in absolute numbers) over the six-month period since an 11.4% drop in 2009 in the wake of the Global Financial Crisis.

‘Original’ Applications Hit Harder than Divisionals

Further breaking down the direct standard patent applications into ‘original’ and divisional filings, we see that original direct filings have been the hardest hit, with a decline of 28.3% over the March to August period compared with last year.

AU direct standard filings March to August - annual comparison

While the number of divisional applications has also declined by 2.6%, this looks to be consistent with a pre-existing downwards trend, whereas the larger drop in ‘original’ filings bucks a two-year streak of increases.

Attorney Filings versus Self-Represented Applicants

While less than 2% of Australian standard patent applications are filed without the assistance of a registered patent attorney, around 30% of provisional applications each year identify an applicant, inventor, or other non-attorney as the filing agent.  As I have previously shown, the overwhelming majority of these applications go nowhere, and it has thus been pleasing to observe a decline in the number of self-represented applicants in recent years.

We might expect that an economic downturn would have a lesser effect on behaviours that avoid expenses than on behaviours that incur costs.  It is therefore no great surprise to find that the decline in provisional filings over the six months from March 2020 is entirely the result of a drop in attorney-assisted applications.

AU provisional filings March to August - annual comparison

Overall, provisional applications filed using the services of registered patent attorneys are down by 3.7%.  This compares with an increase of 4.2% in filings by applicants without professional representation.  The last time – and the only other year in the past decade – that attorney-assisted provisional filings fell below 1800 over the March-August period was in 2013.  And that drop, which was not reflected in the final six months of the year, was probably due to some applicants choosing to file standard applications instead of provisionals shortly prior to commencement of the Raising the Bar reforms in April 2013.

Innovation Patents Buffer Drop in IP Australia Filing Fees

With filings down overall, IP Australia took another hit to patent application fee collections in August, to the tune of A$26,410.  The chart below shows total patent filing fees, based on applications filed for the six months from March to August each year since 2016.  These fees have fallen by 1.8% – or nearly A$110,000 – from last year’s level during the COVID-19 pandemic.

IP Australia patent filing fees March to August - annual comparison

The good news for IP Australia, of course, is the surge in innovation patent filings.  Without this, the drop in filing fees would have been at least A$280,000 – assuming innovation patent filings kept pace with 2019, rather than declining in line with other application types.

New Zealand Keeps Calm and Carries On

In New Zealand, PCT national phase entries have bucked the trends seen in Australia, increasing by 2.8% during the six months from March when compared with the same period last year. 

NZ filings March to August - annual comparison

The number of direct filings in New Zealand fell by 23% for the March-August period, while provisional applications were down by 14%, however it is hard to assess the extent to which the COVID-19 pandemic has affected these figures.  Direct filings have been in decline for many years, with applicants increasingly favouring the PCT route, and higher filings in 2019, rather than a drop in 2020, appears to be the outlier in the face of this trend.  Provisional filing numbers are generally quite low in New Zealand, and for the pertinent six-month period are consistently in the range of 300-400 applications.  A variation of 14% (fewer than 50 applications) is not unprecedented, even in ‘normal’ times.

Conclusion – Drop in Filings Will Have Long-Term Effects

It now seems clear that the economic effects of the COVID-19 pandemic are having an impact on patent application numbers in Australia, with standard patent filings down by just over 5% for the six months from March to August 2020, as compared with last year.  Innovation patent filings are bucking the trend strongly, thanks to Chinese applicants, but this is unrelated to the pandemic.

Notably, actions generally associated with higher costs have been most strongly affected.  ‘Original’ direct standard application filings – which are more likely to involve professional advice and drafting services – have experienced a greater relative decline (28%) than PCT national phase entries (1.8%) and divisional applications (2.6%), which can be completed on the basis of existing filed specifications with minimal, or no, immediate professional input.  Similarly, there has been a decline in provisional applications prepared and filed with professional assistance (3.7%), while those filed by self-represented applicants have increased.

A 5% drop in filings is obviously not good news for the Australian patent attorney profession.  Anecdotally, however, a number of attorneys to whom I have spoken report that they remain fairly busy.  There are a number of reasons why this might be so.  Firstly, the decline may not be evenly distributed across the profession, and I may have been speaking to people in less-affected firms.  More importantly, however, the immediate impact of a drop in application numbers falls primarily upon administrative staff, rather than professionals.  The work that many attorneys are currently performing stems from applications filed in past years that are currently under examination, or subject to other procedures, such as oppositions, amendments, or disputes.  These activities can certainly keep attorneys very busy.

The full impact on the profession of fewer filings due to COVID-19 is therefore likely to be seen over the longer term.


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