25 October 2020

COVID Update – Surprise Surge in September Patent Filings

Rising arrowDefying the trend of almost every prior month this year, Australian standard patent filings in September were up by 8.1% on the same period in 2019.  This is the largest positive change for any month in 2020, beating pre-COVID January during which standard applications bested the previous year by 7.7%.  The September surge was driven by filings from all of Australia’s top sources of new applications – i.e. the US, Europe, China, and Japan, along with domestic applicants.  Applications originating elsewhere in the world were down, however, as has been the case throughout much of the year.

The boost in filings for September was dominated by PCT national phase entries, which are now higher by nearly 1% over the seven month period from March to September when compared with the same period in 2019.  At the same time, however, direct standard patent applications – including Convention applications, complete-after-provisional filings, and divisional applications – have fallen by just over 10%.  Most of this decline is in ‘original’ filings (down by over 23%), while the number of divisional applications has fallen only slightly in comparison (down by 1.4%).

Unfortunately, the news for September is not all good.  Australian provisional filings were down by over 11% for the second month in a row, and the third time this year.  Overall, provisional filings have declined by 3% for the seven month period from March to September, when compared with 2019.  The decline is entirely in applications that have been professionally prepared and filed by patent attorneys, which have fallen by 4.4%. The number of self-filed provisional applications is up by 0.6% on the same period last year.

Over in New Zealand, September was an even better month than in Australia, with complete applications up by 13.5%, and provisionals up by 35.6% over the same month last year.

Australian Standard Filings Up, Provisionals Down, in September

Since February, the best that monthly Australian standard patent application filings have been able to achieve is to remain roughly on par with 2019 numbers.  April and May were the worst months, with declines of 8.5% and 14.2% respectively.  Suddenly in September, however, standard application numbers were up by 8.1% on the previous year, which is the best result for all of 2020.  Provisional filings, on the other hand, were down by 11.1% – an almost identical result to August.

AU Standard and Provisional filings - monthly changes

The September surge is mostly due to an influx of PCT national phase entry (‘PCT NPE’) applications.  As the following chart shows, the total number of PCT NPEs over the ‘pandemic months’ of March to September is now higher (by 0.9%) than for the same period in 2019.  Overall, however, standard application numbers are down by 2.4%, due to a 10.1% decline in direct (‘Std Direct’) filings.  Provisional applications are down by 3.0% over this seven month period, while innovation patents – still driven by Chinese applicants – are up by 136%.

AU filings March to September - annual comparison

Increase in Filings from All Major Countries/Regions of Origin

Given that August/September generally marks the end of the summer vacation period in the northern hemisphere, I wondered whether there were any particular countries or regions that were contributing more substantially to the increased filings in September (notwithstanding that seasonal effects should be reflected in the 2019 numbers as well).  The chart below shows the monthly percentage change in Australian standard patent applications broken down by country/region of origin.  The top sources of Australian filings are shown – Australia, the US, Japan, Europe (all members of the European Patent Convention are included under ‘EP’, although the dominant origins within Europe are Germany, the UK, Switzerland, and France) and China – with all other countries of origin being combined into a ‘rest of world’ (‘ROW’) category.

AU Standard filings by origin - monthly changes

It is firstly notable that applications from all of the leading countries/regions of origin were higher in September 2020 than in 2019 – including domestic filings.  Overall, however, applications from the ‘rest of the world’ (i.e. all less significant origins) were down, as they have been throughout most of 2020.

Secondly, the significant growth in filings from China is plainly apparent.  Chinese application numbers have had more ‘up’ than ‘down’ months throughout 2020, and for the past four months in particular have averaged around 37% growth.  Meanwhile, the only other country/region of origin to have had more ‘up’ than ‘down’ months in 2020 is Japan.

The chart below shows the total number of Australian standard patent applications filed between the months of March and September each year for the past five years, broken down according to the same six countries/regions of origin.  Compared against 2019, filings over the ‘pandemic months’ of 2020 originating in Australia, the US, Europe, and the ‘rest of the world’ are down.  Japan is up slightly.  China, however, is continuing a trend of strong growth already evident in 2019, despite the pandemic.

AU standard filings March to September by origin - annual comparison

It is possible that Chinese applicants will file more Australian patent applications in 2020 than Australian residents.  If so, then this will mark a significant milestone.  Historically, the only single country to be the source of more Australian patent applications than Australia has been the US.

Adjustment in Numbers Due to ‘Converted’ NPEs

Astute readers may notice some slight variations in the percentage changes in standard patent filings in the first chart above, compared with my previous monthly reports.  This is due to an improvement to the way I count PCT NPEs that have been used as the basis for new innovation patent filings in Australia.  It is not possible for a PCT application to directly enter the national phase in Australia as an innovation patent application.  There are, however, two different paths by which the same result can be achieved.  The first – and, in my experience, more common – is to file an innovation patent application that claims divisional status from a pending PCT application.  In this case, only one new application record is created in IP Australia’s systems.

An alternative approach is to enter the national phase in Australia in the usual way, and then convert the resulting standard patent application into an application for an innovation patent.  In this case, two new application records – with different application numbers – are created.  The first is for the standard application created by national phase entry of the international application.  Upon conversion, however, a new innovation patent record is created, with its own application number, while the status of the original application changes from ‘filed’ to ‘converted’.

Previously, both of these applications were separately counted in my data.  As of this month, however, I am no longer counting ‘converted’ applications within my standard and PCT NPE filing numbers.  Once converted, the original application no longer has any effect – the position is just the same as if an innovation patent application had been filed in the first place.  In the case of PCT NPE applications that are converted immediately after filing, it is clear in any case that the applicant’s intent was to apply for an innovation patent, and the NPE/conversion process is merely the mechanism used to achieve this outcome.

The numbers of such applications are not large, affecting less than 0.5% of all PCT NPEs filed in the past 12 months.  Even so, I have made the decision that nobody deserves double credit for filing what is, effectively, only a single application!

This Month’s Token Coverage of New Zealand

I really would like to be able to provide more analysis of what is happening in New Zealand.  However, the relatively low numbers of filings, and associated high volatility, make it difficult to do much more than present the headline numbers.  The charts below show the monthly changes in filing numbers between 2019 and 2020, followed by the total number of filings annually between March and September.  September was a positive month for New Zealand filings, with both complete (standard) applications and provisional applications up, by 13.5% and 35.6% respectively, over 2019 – although the large relative growth in provisional filings corresponds with only 16 additional applications, off a 2019 base of just 45.  As in Australia, growth in complete application filings is driven by increases in PCT NPEs, with direct filings declining in 2020.

NZ Complete and Provisional filings - monthly changes

NZ filings March to September - annual comparison

If you are following developments in New Zealand, and would like to see any additional or alternative analysis of patent filing numbers that I have not thought of, please let me know.

Conclusion – Decline in Provisionals a Symptom of Recession?

I currently have no explanation for the September surge in patent filings.  Given that it has been driven primarily by PCT national phase entries, many of the new filings correspond with applications that were first filed up to 31 months previously, i.e. back in around February or March 2018.  However, as most months of this year have demonstrated, decisions to file in Australia tend to be driven by economic conditions at the time of the national phase deadline, rather than by events earlier in the application lifecycle.  There are no obvious reasons why a substantially larger number of national phase applications should have been filed in September 2020 than in the same month last year.  Indeed, we would more likely have expected the opposite based on both the state of the global economy and recent trends.

A further fall in the number of provisional applications filed in Australia is disappointing, but not at all surprising.  The country is now officially in recession for the first time since 1991, following ‘the biggest economic plunge on record’.  In Melbourne, in particular, around 5.1 million residents and associated businesses have spent many weeks under some of the toughest restrictions in the world.  It is worth noting that the number of people affected is larger than the entire population of many countries, including New Zealand and Ireland, so this represents a huge amount of suppressed economic activity.

As restrictions ease, and economic stimulus measures in federal and state budgets start to take effect, it would be nice to think that Australian businesses will look to innovate their way out of the downturn, and seek to protect some of their innovations through the patent system.  Based on past performance, however, I am somewhat pessimistic about the prospects of this happening.  As Mike Lloyd noted in his recent guest article, the federal government does not appear to be prioritising areas in which Australia has a history of generating patented innovations.  Furthermore, as I have commented in the past, Australian businesses do not generally demonstrate astute or sophisticated understanding and use of the patent system.  Still, I will be keeping my fingers crossed that the data over coming months may prove my pessimism to be misplaced.


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