26 January 2022

Australian Patent Filings Up in 2021, Aided by Innovation Patent’s Demise

2021-2022This article was updated on 11 February 2022 to correct errors in some of the filing numbers.  I have also published a brief explanation and summary of the most significant changes.

The number of standard patent applications filed in Australia exceeded 30,000 for the first time in 2021, increasing by more than 10% over the previous year, and following on from two successive years of decline.  Growth came through both direct national filings and PCT national phase entry (NPE) filings.  Standard application filings by Australian residents experienced particularly strong growth, increasing by 26% over 2020 numbers, while applications by foreign residents grew by just over 9%.

At first blush this looks like good news for Australian applicants, and thus for innovation in Australia.  But the headline figures conceal a distorting influence on filing behaviour in 2021, namely the phasing out of the innovation patent system.  It was entirely predictable that thousands of new innovation patent applications would be filed in the weeks leading up to the final deadline of 25 August 2021.  What might have been less obvious is that the beginning-of-the-end of the innovation patent system would also lead to a spike in filings of new standard patent applications.  Australian residents, in particular, filed more than six times as many direct standard applications in August 2021 as compared with a ‘normal’ month, accounting for a significant proportion of the overall growth in resident filings for the year.  All of these applications with a filing date on or before 25 August 2021 are able to provide a basis for future divisional innovation patent filings, for as long as they remain pending, and up to the final expiry date of the innovation patent system on 25 August 2029.

The down side of this boost in Australian resident filings, assuming that they indeed represent applications brought forward to beat the innovation patent deadline, is that we should expect to see a corresponding decline in the coming 12 months, just as we did following introduction of the Raising the Bar patent reforms in 2013.

Provisional filings suffered a further decline – the largest since 2013 – of nearly 12%.  No doubt this can also be attributed at least partly to the phase out of the innovation patent system, with some applicants electing to file an innovation or standard application directly, prior to 26 August 2021, rather than file a provisional application as a basis for a future priority claim.  The 2013 drop in provisional filings was similarly influenced by a desire to get a standard patent application into the system, and request examination, prior to commencement of the Raising the Bar patent law reforms.  But even accounting for these disruptions, provisional filings have been in a general decline for many years, and 2021 looks to be a continuation of that trend.  Provisional applications are filed almost exclusively by Australian residents, so this is not a good sign for the state of innovation and IP protection in Australia.

In a surprising turn of events, the growth in standard filings by Chinese applicants did not continue in 2021.  Following a number of consecutive years of significant growth, I had previously predicted that 2021 could be the year in which filings by Chinese applicants surpassed those of Australian residents.  But the jump in Australian filings combined with flat filings from China to defeat that expectation.  (For now.)

Australians have therefore remained the second largest users of their own patent system, with US residents once again being overwhelmingly the top filers.  Standard applications from the US increased by 11.5% in 2021, following a 1.6% decline in 2020.  Of the other members of the top five countries of origin – China, Japan, and Germany – only Japan experienced a decline in 2021.

But enough with the summary – let’s look at some charts and tables!

Standard Patent Applications

‘Standard’ patent applications in Australia are the ‘regular’ form of application available in almost every country (corresponding with US ‘utility patents’), subject to full substantive examination prior to grant, and having a maximum term of 20 years.

In 2021, a total of 32,393 standard patent applications were filed – a new record, and the first time filings have exceeded 30,000.  This represents a increase of 10.6%, following on from two years of decline (0.6% in 2019 and 1.6% in 2020).  The increase was reflected uniformly in both the number of direct filings and the number of PCT NPE filings.

Australian standard patent applications, 2011-2021

While proponents of IP rights will be pleased to see a return to growth in filings, it remains to be seen whether this becomes a sustained trend.  As we shall see, filings of all types of patent applications were affected by the phase-out of the innovation patent system, so 2021 could yet prove to be an anomaly.

Countries of Origin

Standard patent application filings from both resident and non-resident applicants increased in 2021.  The chart below compares annual filings since 2011 by Australian residents against applicants from the rest of the world (RoW).  Take note of the different axes for the two traces – Australian residents account for just under 10% of all filings across the years (9.3% in 2021).

Standard patent applications, Australian residents vs rest of the world

The top 10 countries of origin remained the same as in 2020, although France and South Korea swapped places at eighth and ninth positions.  Only two of the leading 10 countries reduced their numbers of Australian filings – by just over 7% in the cases of both Japan and South Korea.  Filings from sixth-placed UK increased by 10%, almost displacing Germany from the top five in view of that country’s smaller (2.6%) growth in applications.  Tenth-placed Canada, which had the largest percentage fall in filings in 2020, more than recovered with the largest percentage gain in 2021.  Switzerland also more than made up for a 2020 decline with 20.7% growth in 2021.

Country 2021 Filings YOY Growth
United States 14557 11.5
Australia 3024 26.2
China 2362 0.2
Japan 1545 -7.5
Germany 1389 2.6
UK 1375 9.8
Switzerland 1246 20.7
France 793 6.4
South Korea 762 -7.2
Canada 728 30.0

The number of filings from China has been growing for over a decade, with percentage gains in double figures for each of the past five years.  This provided every reason to believe that 2021 would be the year in which Chinese applicants surpassed domestic residents as the second largest users of the Australian patent system.  The surprise of the year, therefore, was a jump in filings by Australian residents along with no growth in filings from China that prevented this seemingly inevitable outcome.  In the chart below, it almost looks as if rising Chinese filings collided with falling Australian filings, causing both to rebound according to some law of conservation of filing momentum!

Standard patent applications, Australia vs China residents 2011-2021

Direct ‘Original’ vs Divisional Filings

Of the direct applications, the number of ‘original’ filings (i.e. those not based on any earlier Australian standard patent application) increased by 20.2%.  There is evidence, however, that this surprising growth following on from a similar-sized decline in 2020 was strongly influenced by Australian resident applicants’ response to the phase-out of the innovation patent system.  Divisional applications rose by 5.6%, following three years of successive declines.

Direct national filings by type, 2011-2021

Innovation Patents

I have previously reported in some detail on the final rush on innovation patent filings prior to the phase-out deadline of 25 August 2021.  For completeness, the chart below shows total filings, and a breakdown by origin, each year since 2011.  As is well known, Chinese applicants became aware early on of the opportunity to secure certificates of patent grant without substantive examination.  Indian applicants caught on (or, perhaps, were offered some new incentive) only during the final couple of years of innovation patent availability.  Australian applicants exhibited a slowly declining interest in their own second tier patent system for at least a decade, before somewhat half-heartedly (compared to Chinese and Indian applicants) grasping at the final opportunity to directly file new innovation patent applications.  Filings from other jurisdictions collectively failed to show any response to the demise of the system.

Innovation patent filings, 2011-2021

Provisional Applications

Following a decline of 2% in 2020, provisional filing numbers fell more dramatically, by 11.7%, in 2021.  A long-term downward trend in Australian provisional patent applications is of concern, because they are almost all filed by applicants resident in Australia, and are the most common ‘entry point’ to the patent system for these applicants.  Falling filing numbers may therefore reflect either a decline in potentially patentable innovation in Australia, or declining awareness, interest and/or appreciation of the value of patent protection (or, quite possibly, all of the above).  A total of 4,292 provisional applications was filed in 2021, of which 3,093 were assisted by a registered patent attorney or firm, while 1,199 were either self-filed (i.e. by an applicant or inventor) or filed by another non-registered agent.

Provisional applications, 2011-2021

In qualified good news for patent attorneys – and anyone else who cares about the quality and value of applications filed – the proportion of applications prepared and filed with the assistance of an attorney remained high, at 72%.  It has stayed above 70% since 2018 (the highest was 73.8% in 2019) after sitting at little more than 60% a decade ago (the lowest over the past 10 years was 61.7% in 2012).  In 2021, attorney-filed applications fell by 10.5%, while non-attorney-filed applications fell by 14.7%.

This does not necessarily mean, however, that new filings by Australian applicants (or work for their attorneys) declined overall.  The total number of new direct-filed applications of all types (standard, innovation and provisional) by Australian residents was 7,460 in 2021, which was an increase of 8.6% over the 2020 total of 6,868.  As we shall see next, the demise of the innovation patent system is the likely cause of this anomalous result.

Innovation Patent Impact on Australians’ Filing Behaviour

The chart below shows a month-by-month breakdown of 2021 filings by Australian resident applicants.  A large spike in innovation patent filings prior to the phase-out of the system in August is no surprise.  Perhaps less obvious, however, is why there should be corresponding increases in both direct ‘original’ standard and provisional applications at the same time.

Monthly patent applications by Australian residents, 2021

Under the legislated mechanism for phasing out the innovation patent system, it is no longer possible to obtain an innovation patent from a new, ‘original’, application.  It remains possible, however, to obtain an innovation patent by division or conversion based on an earlier application with a filing date prior to 26 August 2021.  So, anybody who filed a new standard application before this date retains the option to file for an innovation patent – in principle up until the final expiry of the system on 25 August 2029.  This surely explains the August peak in direct ‘original’ standard applications – well-advised Australian applicants bringing forward new applications to secure a filing date that keeps the innovation patent option open.  Some foreign applicants also appeared to be aware of this, however the number of non-resident filings was only about 50% above than the monthly average, whereas Australians filed 540% more applications in August 2021 than the average (of 70) applications across the other 11 months of the year!

A likely result of applications being brought forward into 2021 is a corresponding slump in applications over the subsequent 12 months.  This is exactly what we saw in 2013/14, on a larger scale, in response to commencement of the Raising the Bar law reforms.  The boost in Australian resident applications in 2021 thus seems unlikely to be sustained into 2022.

An explanation for the (more modest) peak in provisional filings requires a little more speculation.  It is a ‘feature’ of the Australian patent system that a domestic standard patent application (that does not proceed via the PCT) cannot claim priority from an earlier standard or innovation patent application, but only from a provisional application.  An applicant looking to beat the deadline for a new innovation patent, but wanting to keep all options open for a future standard patent application might therefore elect to file both an innovation patent application and a standard patent application.  This strikes me as a plausible explanation for the August peak in provisional filings.  It appears, however, as though these may mostly have been applications already in preparation that were hurried along, resulting in a corresponding slump across September and October.  Certainly – as we have seen – there was a net decline in provisional filings in 2021, suggesting that many applicants elected to file an innovation and/or standard patent application instead of, rather than in addition to, a provisional application.

Conclusion – an Anomalous Year

Australian patent filings in 2021, of all types, were clearly affected by the phase-out of the innovation patent system.  While the disruption was not as great as in 2013, ahead of the commencement of the Raising the Bar law reforms, it was nonetheless significant.  Total standard application filings grew after two consecutive years of decline, and exceeded 30,000 for the first time.  The growth was proportional across both direct national filings and PCT national phase filings.  The increase in national phase filings in 2021 suggests that non-resident applicants may be looking to Australia in greater numbers following a few years of modest (at best) growth.  The last time direct filings grew significantly was in 2016, when the growth was driven by divisional applications.  In 2021, however, a majority of the growth in direct filings was in ‘original’ applications.

Of course innovation patent filings hit an all-time high of over 7,600 applications.  That was to be expected, as was the fact that a majority of these filings came from China and India.  Australian residents also grasped at their last opportunity to file for new innovation patents in significant numbers.

But Australian applicants in particular, and applicants from other countries to a lesser degree, also took the opportunity to file standard patent applications ahead of the final innovation patent deadline, thereby reserving the option to file divisional innovation patent applications in the future.  Provisional filings fell significantly, but it is likely that many of these were replaced by standard or innovation patent applications.

And still hidden (due to non-publication) is any impact on international (PCT) filings by Australian applicants in 2021.  Any PCT application filed prior to 26 August 2021 can also provide a basis for a future divisional innovation patent filing, so this is yet another strategy that some applicants may have adopted.

I believe that we will come to recognise 2021 as an anomalous year for Australian patent filings, although this will only be confirmed once the effects flow through the system over the next couple of years.


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