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Latha Jishnu: Recession and the global patent effect

Latha Jishnu  |  New Delhi 

What happens when the apex patents organisation brings an economist, sorry, a chief economist, on board? You get a report that links the impact of the economic crisis to patent filings and seeks to explain a complex pattern through a fixed prism. You also get a report with a snappier title even if its conclusions are not entirely convincing.

A little over a week ago, WIPO, the UN intellectual property agency released the World Intellectual Property Indicators 2009 — earlier it was just called the annual patent report — which showed that the global recession has resulted in meltdown in intellectual property (IP) activity in the developed markets. Patent filings with a total of 1.85 million patents increased 3.7 per cent in 2007 compared with a 5.2 per cent rise in 2006 while trademarks increased at just 1.6 per cent to 3.3 million trademarks.

The report is based on complete figures for 2007, but owing to the time-consuming process of gathering information from WIPO member-states, the report relies on preliminary data to provide a snapshot of IP trends during 2008. So there are only estimates for the past year but these indicate clearly that the scramble to register IP has slowed down rather markedly.

What does the trend mean? According to WIPO Director General Francis Gurry, it showed a direct correlation between patent applications and economic cycles. Releasing the report in Geneva, Gurry said that “in economic crises, there is an interference in the value cycle,” and as a consequence, investment in innovation declines as profits plummet which means that fewer patent applications are filed. On hand at the unveiling of the data was WIPO’s chief economist Carsten Fink, the first such to be appointed to the organisation.

The sharp decline notwithstanding, the report also documents an increased level of unprocessed (pending) patent applications, reaching 4.2 million applications in 2007. Could it mean that patent offices worldwide were simply unable to cope with the rising tide of IP applications as reports over the past couple of years have been highlighting, specially in the US where the patents office is facing a crisis? The report does not appear to consider this point although Gurry described the global backlog of unprocessed patent applications as ‘shocking’.

But coming back to World Intellectual Property Indicators 2009, the report says the impact of the economic crisis which was felt the hardest in 2008 has been different across the world. Although PCT applications for the first six months of 2009 are down 14 per cent from the US, those from China have shot up 19 per cent. As a whole, the number of patents filed globally this year is expected to decline 5 per cent this year, according to WIPO estimates.

What explains China’s robust record? Gurry’s explanation is that China’s economy has not taken the kind of knock that the US has. Add to this, he says, the growing awareness in Chinese universities and enterprises of the international patent system. Could it be the case that China is rapidly overtaking catching up with the leaders in technological innovation and creativity?

International patent applications from China soared nearly 12 per cent in 2008 to touch 6,089, helping it to improve its ranking by one place to become the sixth largest even though the US maintained its top position with 53,521 applications, or 32.7 per cent of the world’s total, despite a 1 per cent decline over the previous year. Coming next is Japan with 28,774 filings, or 17.5 per cent of the total, followed by Germany, Republic of Korea and France.

As with China on patents, there was good news from a clutch of developing economies on trademarks. From 2003 to 2007, Turkey, the Russian Federation, Mexico, Indonesia and China all showed an increase of over 10 per cent in annual filing rates. So it was not a picture of unalloyed gloom.

However, the gist of the report is that 2007 was a bad year for patent filings, but in 2008 approximately 163,600 international patent applications were filed worldwide, representing a 2.3 per cent increase over 2007. If 2008 was annus horribilis in terms of the global meltdown, how does one explain the uptrend? Fink throws no light on the puzzle. At the press briefing on the report he is quotes as saying “As far as the picture in 2008 is concerned, this was the year where the crisis really hit, but we still saw healthy growth in the demand for patent filings around the world.” That is as enigmatic a pronouncement as one would expect from economists.

Perhaps, the clue to this lies in looking at the overall picture. Gurry notes that 760,000 patents and 2.2 million trademarks were issued in 2007, whereas early figures for 2008 indicate “that growth rates in the numbers of applications for new IP rights (were) tending towards zero, or declining”.

Did anyone mention India? No, and that’s why the picture is really bleak for us.

First Published: Wed, September 30 2009. 00:10 IST