Global Trends in Patenting

To foster inventiveness, nations assign property rights to inventors in the form of patents. These rights allow the inventor to exclude others from making, using, or selling the invention for a limited period of time in exchange for publicly disclosing details and licensing the use of the invention.[40] Inventors obtain patents from government-authorized agencies for inventions judged to be "new…useful…and…nonobvious."[41]

Patented inventions are of great economic importance when they result in new or improved products or processes or even entirely new industries, and, as is increasingly the case, when their licensing provides an important source of revenue. Worldwide revenues from patent licensing increased from $15 billion in 1990 to $110 billion in 2000 (Idris 2003).

This discussion focuses on patent activity at the U.S. Patent and Trademark Office (USPTO) and the European Patent Office (EPO).[42] These two patent offices are among the largest in the world in terms of volume of patents and have a significant share of applications and grants from foreign inventors.[43] The size and openness of the U.S. and EU markets offer potentially higher returns than smaller markets. Therefore, many domestic and foreign companies sell new products and services there and have a strong incentive to patent their inventions in both the United States and the EU.

These market attributes make data on patenting in the United States and Europe informative for the purpose of identifying trends in global inventiveness. Patenting indicators have several well-known drawbacks, however, including:

  • Incompleteness. Many inventions are not patented at all, in part because laws in some countries already protect industrial trade secrets.
  • Inconsistency across industries and fields. The propensity to patent and the type and intensity of R&D differ by industry and technology area. For example, pharmaceutical companies patent more heavily and engage in years of costly R&D before achieving a fundamental breakthrough, whereas computer software companies patent less heavily and achieve more rapid but generally more incremental breakthroughs.
  • Inconsistency in importance. The importance of patented inventions can vary considerably. Inventors may use other methods to protect their inventions, such as secrecy and product lead time. In addition, entities with large patent portfolios manage these carefully to control the cost of filing, maintaining, and defending their patents, including assessing the marginal benefits of potential new patents.
  • Varying motivations for patenting. Inventors may patent for reasons other than commercialization or licensing, including blocking rivals from patenting related inventions, using patents as a tactic to negotiate with competitors, and helping to prevent infringement lawsuits (Cohen, Nelson, and Walsh 2000).

This discussion of patenting trends somewhat mitigates the above limitations by: (1) presenting data from two major markets, the United States and Europe; (2) looking at trends in key technology and industry areas, information and communications technology (ICT), and biotechnology; and (3) looking at trends in triadic patents, which are inventions valuable enough to patent in the three largest world markets, i.e., the United States, Europe, and Japan. With these adjustments, patent data may serve as an approximate indicator of inventiveness over time. In addition, information about foreign inventors seeking patents in the United States and Europe may offer some insights into inventiveness in and new technological competition from foreign countries (see sidebar, "Comparison of Data Classification Systems Used"). The discussion also examines data on U.S. patents granted to U.S. inventors by type of ownership and by state.

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Applications for Patents in the United States and Europe

Trends in the number and sources of patent applications provide indicators of new sources of high-technology competition. Because the time from patent application to grant has grown rapidly in the United States and now averages 2–4 years in both the United States and Europe, data on patent filings provide a more instantaneous look at inventive trends than data on patents granted.[44] However, patent applications provide a less-definitive indicator of inventiveness compared with patent grants because some applications are rejected by the patent office or withdrawn by the inventor.

Applications for U.S. Patents

Applications filed for U.S. patents numbered more than 390,000 in 2005, a 9% increase from 2004, continuing the trend of strong growth over the past decade (figure 6-31figure.; appendix tables 6-31 and 6-32Excel.). Starting in the mid-1990s, the growth rate of USPTO applications doubled compared with the 1980s and the early 1990s (figure 6-32figure.). The acceleration of U.S. patent applications coincided with a strengthening of the patent system and extension of patent protection into new technology areas through policy changes and judicial decisions during the 1980s and 1990s (NRC 2004).

Inventors residing in the United States filed 208,000 applications in 2005, a little more than half of all U.S. patent applications filed that year.[45] Again starting in the mid-1990s, the growth rate for patent filings by U.S. inventors accelerated, but not as fast as the growth rate for filings by foreign inventors; the U.S. share dropped from 55% in 1996 to 53% in 2005 (appendix table 6-33Excel.). This may be indicative of increased globalization and increased recognition by developing countries of the potential value of intellectual property. Most USPTO patents credited to the United States are owned by corporations and granted to inventors in six states (see sidebar, "U.S. Patents Granted by State and Type of Ownership").[46]

Asia and the EU are the main sources of inventors outside of the United States filing for U.S. patent applications. Inventors residing in these two regions filed nearly 90% of applications filed by foreign inventors. Asia was the first-ranked foreign source in 2005, filing 112,000 U.S. patent applications (figure 6-31figure.; appendix tables 6-31 and 6-32Excel.). Applications from Asia increased at a faster rate than those from the United States and the EU between 1985 and 2005 (figure 6-32figure.), and Asia’s share of U.S. patent filings increased from 19% to 29% during this period (appendix table 6-33Excel.). Japan, which produced much of the increase in Asia’s share prior to the early 1990s, showed slower growth than the rest of Asia between 1996 and 2005 (table 6-20table.; appendix table 6-33). The three Asian economies of China, South Korea, and Taiwan drove the increase in Asia’s share of U.S. patent filings between 1996 and 2005:

  • China’s applications grew eightfold, and its share of U.S. patent filings quadrupled from 0.2% to 0.8%. China’s share ranking moved from 20th place in 1995 to 12th place in 2005 (appendix tables 6-37 and 6-38Excel.).
  • South Korea’s applications quadrupled, doubling its share of U.S. patent filings from 2.2% to 4.4%. South Korea’s rapid growth caused its share ranking to move from eighth in 1995 to fourth in 2005, moving past France, the UK, and Canada (appendix tables 6-37 and 6-38).
  • Taiwan’s applications more than tripled, and its share of U.S. patent filings advanced from 2.4% to 4.3%. Taiwan’s share ranking moved from seventh to fifth place, moving past the same countries overtaken by South Korea (appendix tables 6-37 and 6-38).
  • India’s applications grew more than 12-fold, but from an extremely low base, and its share of U.S. patent filings rose from 0.1% to 0.4%. India’s share ranking moved from 29th to 17th during this period (appendix tables 6-37 and 6-38).

From 1996 to 2005, USPTO applications from the EU rose at the slowest rate of the three major world economies, and the EU’s share of U.S. patent filings fell from 15% to 13% (figure 6-31figure.; appendix tables 6-31 and 6-32Excel.).[47] The share of U.S. patent applications from inventors in France, Germany, and the UK, as a group, declined from 11% to 9% during this period.

A comparison of shares of USPTO patents granted among the three major world economies, the United States, Asia, and the EU, reveals trends similar to those observed concerning their applications (appendix tables 6-39 and 6-40Excel.).

Applications for European Patents

Applications for EPO patents reached nearly 114,000 in 2004, a 1% increase from 2003 (figure 6-35figure.; appendix table 6-41 and 6-42Excel.). The growth rate of EPO applications picked up in the mid-1990s, which is similar to the trend for USPTO applications except that EPO applications began to flatten starting in 2001.

The EPO received 30,000 patent applications from U.S. inventors in 2004, making the United States the first-ranked foreign source of EPO filings (appendix table 6-42Excel.). The growth rate of U.S. applications to the EPO picked up in the mid-1990s but leveled off starting in 2001, paralleling the growth trend of EPO applications by all countries (appendix table 6-41Excel. and 6-42).[48] Comparing U.S. applications to the EPO with those filed by inventors from the EU and Asia, the U.S. number grew at the slowest rate between 1996 and 2004, resulting in a decline of the U.S. share of filings at the EPO from 31% to 26% during this period (figure 6-35figure.).

As expected, EU inventors have the largest share at the EPO with 44% of total applications in 2004 (figure 6-35figure.; appendix table 6-33Excel.). The EU’s EPO share remained flat between the mid-1990s and 2004, although the shares of some EU countries changed. The combined EPO share of France and the UK fell from 13% to 11% between 1996 and 2004, offset by small gains by Germany, the Netherlands, Spain, and several other countries.

Asia’s EPO applications grew faster than those from the EU or the United States, and Asia’s share of total patent filings at the EPO rose from 19% in 1996 to 22% in 2004 (figure 6-35figure.; appendix table 6-33Excel.). During this same period, the share gap between the United States and Asia narrowed from 12 percentage points to 4. The same Asian economies that led Asia’s patent filings at the USPTO, which were China, South Korea, and Taiwan, drove the rise in Asia’s share of EPO patent applications.

A comparison of shares of EPO patents granted among the three major world economies, the United States, Asia, and the EU, reveals trends similar to those observed in their applications (appendix tables 6-43 and 6-44Excel.). Gains in EPO patents granted to China, India, South Korea, and Taiwan, however, have been lower than gains in EPO applications.

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Patents Granted for Information and Communications Technology and Biotechnology

When inventions result in new or improved products or processes, patent owners can reap economic benefits that, in turn, typically spill over to users and consumers. Inventions that lead to the creation of entire new industries, however, have a more profound impact on national and global economies. Two examples of the latter are ICT and biotechnology patents.

ICT patents have helped to create new industries and products such as home computers, cellular phones, and wireless devices. ICT technology has revolutionized and improved productivity in non-ICT industries and services, such as the health, finance, and retail sectors.

Biotechnology research and patents have led to entirely new industries that closely collaborate with and rely on basic research from the academic, government, and nonprofit sectors. Biotechnology patents have led to fundamental breakthroughs such as mapping the human genome and creating new diagnostic and therapeutic products. This section examines recent trends in ICT and biotechnology patenting in the United States and Europe and identifies countries that are the source for most of the ICT and biotechnology patenting in these two major markets.[49]

ICT Patenting

The numbers of ICT patents granted by the USPTO and EPO have increased rapidly over the past decade and a half (table 6-21table.; appendix tables 6-45 and 6-46Excel.). Between 1993 and 2006, the number of ICT patents granted by USPTO tripled, and the ICT share of all USPTO patents almost doubled from 26% to 49% (table 6-22table.; figure 6-36figure.). ICT patents granted by the EPO grew less dramatically. Even so, they almost doubled, and the ICT share of EPO patents rose from 24% in 1993 to 28% in 1996, then flattened out before increasing to 29% in 2006.

The United States has the largest share of ICT patents granted by the USPTO (figure 6-36figure.; appendix tables 6-45 and 6-46Excel.). The U.S. activity index in USPTO ICT patents (the U.S. share of USPTO ICT patents compared with its share of all USPTO patents) is an indicator of U.S. patenting intensity in ICT compared with other technology areas. The U.S. activity index is around 1.0, which indicates that U.S.-resident inventors show about the same propensity to patent in ICT as in other technology areas (table 6-21table.; appendix table 6-47Excel.). In Europe, the United States is ranked third in share of EPO ICT patents granted. The U.S. inventor activity index at the EPO (1.13 in 2006), however, unlike its activity index at the USPTO, indicates that U.S. inventors have a higher propensity to patent ICT compared with other technologies.

Asia is ranked second in ICT at both patent offices among the three major economic areas (table 6-21table.; appendix tables 6-45 and 6-46Excel.). Asia’s inventors also patent more intensively in ICT compared with other technology areas, according to its activity indexes (table 6-21; appendix table 6-47Excel.). A decline in its index for ICT over the past decade, however, indicates that Asia may be expanding its patenting activity to other technology areas. Japan has the largest share of world ICT patents of any Asian economy, although its share has fallen as South Korea and Taiwan have increased their patenting of ICT. ICT patents issued by the United States and the EPO to China and by the United States to India have sharply increased recently, although from very low levels.

The EU has a significantly lower presence in ICT patents compared with the United States and Asia (figure 6-36figure.; appendix tables 6-45 and 6-46Excel.). The EU’s activity index (0.76 in the USPTO and 0.80 in the EPO) indicates that the EU patents less intensively in ICT compared with other technology areas in both patent offices (appendix table 6-47Excel.). Five EU countries, however, do patent more intensively in ICT compared with the rest of the EU. In the USPTO and EPO, Finland and Ireland emphasize ICT compared with other technology areas, and the UK patents at about the same level of intensity in ICT as for other technology areas. Sweden and the Netherlands patent with the EPO more intensively in ICT than for other technology areas.

Biotechnology Patents

The number of biotechnology patents granted by the USPTO accelerated rapidly in the mid-1990s, almost doubling its share of all patents granted between 1993 and 2000 (figure 6-37figure.; table 6-22table.; appendix tables 6-48 and 6-49Excel.). [50] The growth trend stopped and turned negative starting in 2001, however, and the biotechnology share of USPTO patents declined from 4% to 3% from 1998 to 2006. Biotechnology patents issued by the EPO, on the other hand, grew in volume between 2001 and 2006.[51] In 2004, the biotechnology share of all patents granted by the EPO surpassed that granted by the USPTO.

U.S. resident inventors have the largest share of biotechnology patents granted by the USPTO and EPO (table 6-23table.; appendix tables 6-48 and 6-49Excel.). The U.S. activity index in biotechnology patenting indicates that inventors residing in the United States patent more intensively in biotechnology compared with other technology areas within both patent offices. Asia has the smallest share of biotechnology patents from both patent offices compared with those of the United States and the EU. Asia’s activity index in biotechnology patents also shows less emphasis on biotechnology than is evident within the United States and the EU.

The EU, on the other hand, ranks second to the United States in its share of biotechnology patents from both patent offices, although its activity index in EPO biotechnology patents indicates less-intensive patenting in biotechnology compared with other technology areas. The EU’s activity index in USPTO, however, indicates a higher level of intensity in biotechnology compared with other technology areas (table 6-23table.).

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Patenting of Valuable Inventions: Triadic Patent Families

One limitation of using patent counts as an indicator of national inventive activity is that such counts cannot differentiate between minor inventions and highly important inventions. A database has been developed that helps to address this problem by counting only those inventions for which patent protection is sought in the world’s three largest markets: the United States, the EU, and Japan. These inventions are called triadic patent families.[52] The high cost of filing for patents from three separate patent offices and the need to manage patent costs in competitive industries make triadic patent families a more accurate measure of inventions deemed economically valuable than simple patent counts.

The number of triadic family patents was estimated to be almost 54,000 in 2003 (the last year for which data are available), a 3% increase compared with 2002 (figure 6-38figure.; appendix tables 6-50 and 6-51Excel.). Since 2001, growth in triadic patent families has flattened compared with most of the previous decade. The same three sources that file the majority of U.S. and European patents (the United States, the EU, and Asia) account for the majority (more than 90%) of triadic patent families.[53] The United States has been the leading source of filings (37% of estimated world share) since 1989, when it surpassed the EU. Between 1996 and 2003, the gap between the U.S. share and the EU’s share widened from less than 1 to 7 percentage points as the U.S. world share edged up and the EU’s world share declined.

Asia’s share (estimated at 28% in 2003) has stayed relatively constant since the early 1990s (figure 6-38figure.; appendix tables 6-50 and 6-51Excel.). China, India, South Korea, and Taiwan, which are the same Asian countries that have increased their share in USPTO patents, also gained world share in triadic patent families, although on a more limited basis. Japan continues to have by far the dominant share of Asian countries, accounting for more than 90% of triadic patent families credited to Asia.

If triadic patents are normalized for either the size of the economy or for population, the rankings of the three regions (the United States, the EU, and Asia) do not change (table 6-24table.). The differences are considerably larger, however, when normalized by population. Four European countries (Finland, Switzerland, Germany, and Sweden) and Japan have a higher per capita and size-of-economy triadic patent family output than the United States.

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Notes

[40] Rather than granting property rights to the inventor as is the practice in the United States and many other countries, some countries grant property rights to the applicant, which may be a corporation or other organization.

[41] U.S. patent law states that any person who "invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent." The law defines "nonobvious" as "sufficiently different from what has been used or described before [so] that it may be said to be nonobvious to a person having ordinary skill in the area of technology related to the invention." These terms are part of the criteria in U.S. patent law. For more information, see USPTO, "What is a patent?" at http://www.uspto.gov/web/offices/pac/doc/general/
index.html#patent, accessed 28 June 2007.

[42] Although the USPTO grants several types of patents, this discussion is limited to utility patents, commonly known as patents for inventions. They include any new, useful, or improved-on method, process, machine, device, manufactured item, or chemical compound.

[43] The Japan Patent Office (JPO) is also a major patent office but has much smaller share of foreign patents compared with the USPTO and EPO.

[44] USPTO reports that average time to process an application (pendancy) was 31.1 months for utility, plant, and reissue patent applications in FY 2006, compared with 18.3 months in FY 2003. Applications for utility patents account for the overwhelming majority of these requests. The EPO reports that the average pendancy was 45.3 months in 2005.

[45] Unless otherwise noted, USPTO patents are assigned to countries on the basis of the residence of the first-named inventor.

[46] U.S. patenting data on type of ownership and by state is available only for U.S. patents granted.

[47] Some of the decline in U.S. patenting by inventors from the EU and other leading industrialized nations may be because of movement toward European unification, which has encouraged wider patenting within Europe.

[48] EPO patents are assigned to countries on a fractional-count basis. For patents with inventors from different countries, each country receives credit on basis of proportion of its participating inventors.

[49] The data source for EPO and USPTO patents is the OECD. USPTO data drawn from the OECD database are not directly comparable with data reported by the USPTO because of methodological differences and consequent OECD adjustments.

[50] A seminal court decision opening the floodgate for biotechnology-related patents is the 1980 Supreme Court decision Diamond v. Chakrabarty, which ruled that genetically engineered living organisms can be patented.

[51] The EU issued a directive that harmonized the laws of member states on biotechnology patenting, which may explain the lag and subsequent growth of EU biotechnology patents compared with the United States.

[52] The database is housed at the OECD and produced as a collaborative project among the OECD, the National Science Foundation, the EU, the World Intellectual Property Organization, the USPTO, the JPO, and the EPO. Until March 2001, only patents granted in the United States were published in the database. Technically, the dataset counts those inventions for which patent protection is sought in Europe and Japan and obtained in the United States.

[53] Triadic patent families with coinventors residing in different countries are assigned to their respective countries on a fractional count basis. Patents are listed by priority year, which is the year of the first patent filing. Data for 1998–2003 are estimated by the OECD.

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