Jack Ellis

This morning I listened in on a press conference held to announce the release of the European Patent Office’s annual report for 2011. EPO president Benoît Battistelli stated that there were a record 244,437 filings at the office last year, an increase of 3.7% from 2010; grants rose by 6.9%. In total, 62% of applications came from outside of EPO member states, with Asian economies leading the way – Japan, China and South Korea accounted for 32% of EPO applications, up 4% from 2010. The US and EPO member states saw their share of applications drop by 2% and 1% respectively.

Looking at company activity, Siemens filed the most applications and was granted the most patents. The company’s president and CEO Peter Löscher was presented with a top patent applicant award to recognise the company’s status as Europe’s ‘leading innovator’. “Patents are key drivers for innovation, economic success and employment,” said Battistelli. “Siemens is a clear example of the close relationship between innovation and economic success.” Löscher said that innovation was crucial to Europe’s continuing economic recovery and patenting had a central role to play: “[To] generate… innovations, we will have to protect intellectual property. Investments [in R&D] would not be profitable for companies without intellectual property protection – which means that patent protection is essential for successful innovation.”

What Battistelli and Löscher say is true – patents, used and managed in the right way, can be a key driver for success. However, we need to be careful not to measure how innovative a company is by the number of patent applications it makes and is granted. Those figures are ultimately just a measure of that company’s ability and willingness to file patents. They can’t tell us whether any of those patents – if they are granted - are actually going to make any sort of economic impact.

Battistelli claimed that the EPO was foremost among patent granting authorities around the world in terms of scrutiny. In support of this, he said: “[A]s a sign of our quality, orientation and priorities, only four applications in 10 become a patent. The granting rate is around 40%.” (The figures released in the EPO’s report actually indicate that 47% of applications were granted in 2011 – up from 43% in 2010*). 

Last year’s IAM/Thomson Reuters benchmarking survey shows that there is a level of agreement with the EPO president about the quality of the patents the office grants. However, patentees have reason to be worried if, as Battistelli seemed to say during his speech, the EPO somehow equates quality with grant rate. If that really is the case, there is a danger that the EPO could end up, consciously or sub-consciously, setting itself up to ensure the number of grants remains low, whatever the standard of applications it receives. Furthermore, EPO grant rates are in the same ball park as those at the USPTO. Therefore, by the same logic, there cannot be much, if any, difference in quality between the two offices. How many would agree with that proposition? 

From a UK perspective, meanwhile, things look decidedly gloomy. Of the 62,115* patents granted by the EPO in 2011, just 1,948 went to British companies. UK applications to the EPO dropped by 9.4% between 2010 and 2011, "caused by a decline in a number of significant areas of technology such as Pharmaceuticals, Computer Technology and also Transport”, according to an EPO press release also published today. Only one British company features in the top 50 ranking for companies with the most applications – Unilever, in 49th place*.

Patents are not a measure of innovation, but they do protect it. These depressing figures are another indication that UK companies are falling behind their counterparts in other leading economies, as well as the BRICs. In his budget speech on Wednesday, the UK’s chancellor George Osborne confirmed the creation of a new patent box regime. This may incentivise more British firms to seek patent protection. They certainly need to.

It’s not just in Europe that British companies are failing the patent test. In China, they submitted just 1,876 applications during the whole of 2011 – far fewer than their counterparts in Switzerland, France and the Netherlands, let alone the US, Japan, Korea and Germany; while the overall percentage of US patents granted to UK entities in 2011 was 2%, only slightly higher than the figure for China and a number of European countries with much lower populations.

Overall, ignorance of the strategic value and importance of IP among UK businesses speaks of a lack of long-term vision at the senior management level in this country, as well as a failure by IP professionals to challenge this. If the Brits are innovating, they need to be getting patent protection in place. Sadly, the truth may well be that the Brits are not innovating enough. 

* Please note that there are some discrepancies between the figures from today’s EPO press release and the EPO’s 2011 Annual Report.