What Can Patent Data Tell Us About the Australian Government’s Plan for Local Manufacturing?

This is a guest contribution from Mike Lloyd of Patent-Insights.  Mike previously contributed an article on the impact, from an Australian perspective, of COVID-19 on international patent, trade mark, and registered designs filings.  Further details about the author can be found at the end of the article.

The Australian Federal Government on 1 October 2020 announced a renewed focus and A$1.5 billion investment in manufacturing, in particular in the following six target areas of technology:

1. resources technology and critical minerals;
2. food and beverages;
3. medical products;
4. recycling and clean energy;
5. defence; and
6. space.

The arguments put forward by the Government include wanting to ‘focus on areas of strength’ and wanting to avoid the lesson of ‘don't try to do everything’.

There are merits in these arguments, and there are also arguments for letting market forces rather than governments select our area of strengths.

But because this is a patent blog, I want to ask whether patent data can help to find Australia’s areas of technology strength.

There are many ways we could ask this question, and the most obvious of these might be to look at overall patent filings.  However, this is an imperfect method, as this data risks being corrupted by low quality patents, and there are many low quality patents out there.

Another approach is to look for highly-cited patents. The citing of a patent by another is generally a recognition that the cited patent has made a contribution to the patent literature, and therefore technology in general.  The number of citations for a granted patent can range from zero to over a thousand, but as a simple rule, we could say that any granted patent with 50 or more forward citations is ‘highly-cited’.  To put this into context, the commercial patent search database Patseer lists 8.4 million active and granted patent families (a family with one or more currently granted patents), but only 163,000 (1.9%) of these have 50 or more forward citations.  In contrast, 5.1 million (61%) of granted patents have no forward citations at all.

These ‘highly-cited’ patents could be regarded as the most important patents, and the filers of these patents as leading applicants, i.e. strong in their area of technology.  We could also argue that the more of these highly cited patents that companies have, the more they can be regarded as technology leaders in their space.

Top-Cited Australian Patent Filers

So who are the top Australian filers of highly-cited and granted patents, i.e. our technology leaders?  To answer this question, I ran a query in Patseer for all granted patent families filed by Australian companies, and with 50 or more forward citations.  This returned 483 patent families, with the most cited patent being US7,152,972, Combination printer and image reader in L-shaped configuration, which had 2727 forward citations.  This patent was filed by the former Sydney company Silverbrook (which is now defunct, with its IP transferred to an American company).

In the figure below, I have listed the most prolific patent owners among the results, along with their number of active patent families with 50 or more forward citations.

For each of these patent owners, I have identified their general area of technology.  Technologies falling within the Australian Government’s now preferred six sectors of technology are identified using green bars, otherwise the bars are coloured red.  Of note, the list includes CSIRO and the University of Melbourne, and while both organisations file patents in a range of technologies, this range does include the preferred areas.

Some of these companies are foreign owned rather than Australian companies, but this data is for patents filed by Australian inventors working for Australian based operations for these companies.

Of these 22 companies, 12 are working in just one of the preferred sectors (medical products), while the nine of the others are IT companies.

What is this Telling Us?

This data has a couple of implications.

Firstly, at least for these top 20 companies, there is no data here to support the selection of the following sectors:

1. resources technology and critical minerals;
2. food and beverages;
3. recycling and clean energy;
4. defence; or
5. space.

Of course, it is self-evident for other reasons that the resource industry is critical for Australia – and unfortunately this survey understates some of the very advanced technologies being used by some sectors of the mining industry.  However, it is less self-evident that some of the other named sectors are the leading areas of technology for Australia.

Secondly, this does raise the question of why the Government appears to be ignoring the strength of our IT sector.

IT is enormously important and valuable on a global scale – seven of the world’s ten most valuable companies are IT companies, for example Microsoft, Apple and Amazon.

Australian IT companies have also been very successful on a global stage, with Atlassian (NASDAQ:TEAM) leading the list with a market capitalization of AUD$63.2 billion, but there are many others including REA Group (ASX:REA), the owners of Realestate.com, which is now worth A$14.9 billion, and Afterpay (ASX:APT), an IT/Fintech startup worth A$22.6 billion. Among the unlisted companies, the design software company Canva has been valued at A$8.7 billion, which would place it in the ASX top 50 if it was listed in Australia. Meanwhile the data above shows that Australian IT companies are capable of filing highly cited patents.

But Aren’t we COVID-Proofing the Economy?

Certainly, from a public policy point of view, ensuring our medical product and resource sectors are strong makes great sense for Australia.

But the same applies to IT. IT is more than a wealth generator, and as we go through dramatic workplace and business/commerce changes forced by the impact of COVID-19, we have become more dependent on IT than ever before, suggesting that Australia should be as strong as possible in this area.

There is also a direct impact on public health.  While the primary response to the public health crisis caused by COVID-19 is quite rightly a medical response, information technology is critical as well.  The recent second-wave outbreak in Victoria was partially due to the paper based contact tracing ability of this state being overwhelmed when numbers started to grow quickly – one of the responses of the state has been to purchase sophisticated software to better manage this.  But there are many other areas of the new ‘COVID-normal’ world where better IT will lead to better public outcomes.

Implication for Public Policy

While the Australian Federal Government may have good reasons for choosing its preferred list of technologies, there is a risk when you ‘pick winners’ that you are also choosing losers.  And of the long list of technologies that didn’t make the short list, perhaps the most inexplicable is our IT sector.  The Australian IT sector has certainly proven in many ways, including the strength of its leading patent filers, that it well and truly deserves ongoing recognition and support from the Government.

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About the Author

Mike Lloyd is an experienced IP analyst and IP manager. He analyses IP data from a variety of sources to help patent owners, innovators, startups and patent attorneys to understand more about their IP, and the IP of competing companies and products.  Mike has over 15 years of experience in this field, with the majority of the time working for a leading Australian IP firm, and with global multinationals as clients.

Mike is also involved in Ambercite, which has developed and globally commercialised innovative patent searching software.  Ambercite was developed to complement conventional searching software. Mike is also the Australasian agent for the patent searching software Patseer.

Tags: Guest article, Manufacturing, Patent analytics, Public policy