Building the Evidence Base on the Performance of the UK Patent System

Intellectual Property Office

Crown Copyright
Reproduced courtesy of the IPO

Jane Lambert

Building the Evidence Base on the Performance of the UK Patent System is a report written by the Economics, Research, and Evidence team of the Intellectual Property Office. It was published on 23 Aug 2017.

The title of the report appears to refer to the first recommendation of Prof. Hargreaves's review of Intellectual property and growth (see Digital Opportunity May 2011):

"Evidence. Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights."

It consists of 76 pages including covers and is divided into the following chapters:

• Executive summary, Introduction and Methodology
• Chapter 1: Patent numbers in the UK and comparison countries
• Chapter 2: International patenting strategies and effects on the UK
• Chapter 3: The UK patent system and legal environment 
• Chapter 4: UK companies and patenting
• Conclusions.

This is a report that has to be read in its entirety. The executive summary bears little relationship to the report's content.

The report leads with the statement that "the Government has an ambition to be the most innovative country in the world" which is great. It observes that "the patent system is an important part of the innovation ecosystem, playing a vital role in enabling innovators to realise the returns from their research and development" which is true, and that "there is a need for a better understanding of the performance of the UK patent system". However, it downplays the fact that "UK companies patent less than companies in comparator countries" and gives no indication as to how we get from where we are now to where we have to be. That is what the report should have told us. In fact, it was padded out with statistics such as the number of patents granted for the UK by the IPO and EPO when compared to population and GDP.

For me, the most depressing statistic was the table in figure 7 on page 17 which shows that only 7% of applications for British patents or European patents (UK) were made by British corporations or citizens in 2012. By contrast, Americans, Germans and Japanese applied for 24%, 16% and 15% respectively and the French were only 800 application short of us in our own territory.  The figures were even more depressing when you look at the number of applications from the UK for foreign patents in 2014:

• 4,200 applications from the UK for German patents compared to 60,000 from the Federal Republic itself, 35,000 from the USA, 23,500 from Japan, 9.200 from France and 6,600 for South Korea;
• 4,200 applications from the UK for French patents compared to 32,600 from the USA, 23,500 from Germany, 22,300 from France, 21,600 from Japan and 5,400 from South Korea;
• 6,900 applications from the UK for US patents compared to 172,200 from the USA, 60,600 from Japan, 20,300 from South Korea, 18,900 from Germany, 10,500 from China and 7,500 from France; and
• 800 applications from the UK for South Korean patents compared to 124,000 from South Korea, 15,100 from Japan, 3,000 from Germany, 2,000 from France and 1,100 from China,

If the number of patents awarded to British applicants is compared to the size of our population, our performance is even worse.  The table in figure 9 on page 19 shows that 3,254 patents were awarded for every million South Koreans in 2014 compared to 2,092 per million Japanese, 913 per million Germans, 894 per million Americans, 587 per million Chinese, 397 per million French and a measly 309 per million Brits.

Why does the UK perform so badly?  The authors of the report do not answer that question directly but they leave plenty of clues. One is the cost of enforcement.  On page 23 the report notes:

"Legal services in the UK are considered expensive compared to other jurisdictions, however the quality of legal services and the enforcement environment are rated among the best, for example in quality indexes."

That is great for the foreigners who hold 93% of all British and European patents (UK) but not much comfort for the businesses in the UK that cannot even begin to contemplate the cost of bringing infringement or defending revocation proceedings. The relationship between the cost of enforcement and patenting was hinted at on page 30:

"The majority of stakeholders abroad said that UK legal costs in terms of application and enforcement could discourage companies from patenting there."

However, that was downplayed by platitudes about the quality of our judges and legal representatives. Chapter 4 analyses patenting behaviour of British companies and finds, unsurprisingly, that small and medium enterprises apply for fewer patents than big companies. On page 36 the report attempts to explain why:

"The concerns of small companies and the cost of patenting centre around three areas: 

Predictability of costs: It is hard to predict how much the patenting process will cost upfront, and this could escalate through the process e.g. depending on the number of objections. This is particularly difficult for small companies on limited budgets. 

Misunderstanding about the role of patent attorneys: There is a lack of understanding about the role of patent attorneys, why they are needed and how to get the best out of the relationship. This was reported not only by small business advisors but also from some large companies and patent attorneys themselves. 

Lack of understanding of the benefits of patenting: Almost all the small business advisors and inventors emphasised the need to present the use of patents to companies in terms of a business plan. This should include commercialisation of the product and how to bring it to market. This will help to prevent small companies from patenting when they do not need to and when they do not know how to bring a product to market, which is cited as a common problem. It also balances the perception of patenting as a large upfront cost with the benefits it can generate in the long run. "

The report also noted that although small companies are aware of the concept of patenting, levels of understanding vary. Examples of misconceptions include that the government will enforce their patents, and that an application receipt or technical drawing is a patent.  There was disagreement as to whether it is within the job description of engineers and inventors to be educated in IP (as is generally perceived to be the case in Germany) and how to go about this, or if IP considerations are best placed in other job roles.

The authors appeared to acknowledge a link between patenting and investment in R & D or at least they noted that British business scores badly in both departments.  They concluded at page 53:

"SMEs face more barriers to patenting than larger firms, primarily in their awareness and understanding of the process and the costs of legal advice."

There is a lot of interesting information in this report, particularly in Annexes 3 and 4 on "Patent Systems and Selected Jurisdictions" and "Key features of individual patent systems" but I can't see how it could be useful as a basis for policy making. If the government's objective really is to make the UK the most innovative country in the world, it should look at what countries that do better than us in R & D investment and new product development do right and design legal frameworks and institutions that might generate similar results here.

Should anyone wish to discuss this article or our patent law in general, he or she should call me on +44 (0)20 7404 5252 during office hours or send me a message on my contact form.