IP Report 2019

Designs: an opportunity for growth

Design innovation is central to competition in an increasingly diverse range of industries and a source of comparative advantage among nations.1 Within Australia, a range of initiatives have been undertaken over recent decades to encourage greater use of designs across industries. Australia is not alone in this regard.2 A new Designs Law and Practice study by IP Australia’s Office of the Chief Economist (OCE), in collaboration with researchers from the Intellectual Property Research Institute of Australia (IPRIA) at The University of Melbourne, has explored how Australia’s design economy compares to those of other countries. To better understand Australia’s position, the OCE-IPRIA study also compared the design intensity of industries within Australia and the international context.

The study reveals that Australia’s design labour force is small, after accounting for Australia’s size as an industrial economy. Australia’s design economy is productive in design IP generation (Figure 19). However, Australia lags its international peers, both in the rate at which its design labour force is growing and in its rate of increase in design registrations.

Figure 19 is a graph of design IP intensity and design labour intensity of Australia and its international peers, 2016

To study design rights use across Australian industries, designs data from IPGOD 2018 was matched with firm entries in the Australian Business Register to identify the industries in which Australian design activity is focused. Analysis was also undertaken of the Locarno product classes to which registered designs are attributed. Locarno is the scheme of product classes and subclasses used in Australia and by WIPO to classify registered designs. The analysis revealed significant variations in focus between Australian and non-Australian applicants for registered designs.

Central among our findings was that the relative extent to which a country makes use of the designs system is positively associated with the design labour intensity of its workforce. The study also found evidence that a country’s use of the designs system is positively associated with the concentration of design labour across industries. The question this raises is whether the Australian designs system is relevant to the design community at large, or only to a small segment of that community.

Australia not growing in design intensity as fast as its international peers

The OCE-IPRIA study is the first study to bring together two well-established methods for measuring design activity. Design labour intensity is assessed by measuring the number of persons employed within a country or industry in design-related occupations. The design IP intensity of a country or industry is assessed by measuring its annual number of registered designs.3 The study’s method brings the design data into context relative to those parts of an economy that make use of designers’ services in generating industrial designs.

Based on data from 2011 to 2016, Australia lagged its peers for growth in both design IP intensity and design labour intensity. Figure 20 illustrates this lag: from 2011 to 2016, Australia travelled less far than other countries along the horizontal axis (design labour intensity) and travelled backward along the vertical axis (design IP intensity). Sweden (SE) and Denmark (DK), in yellow, were among those countries identified as strengthening their design economies, based on their movement up both axes, unlike Australia, Canada and Japan (in purple) which remained largely unchanged.

Figure 20 is a graph of the design labour intensity of 12 countries from 2011 to 2016

Australian and overseas designers have a very different focus for their design rights

The OCE-IPRIA study analysed the design intensity of Australian industries. Based on 2005-16 filing data, the most design IP-intensive industry in Australia is Rigid and semi-rigid polymer product manufacturing.4Polymers have diverse applications in product markets ranging from packaging to solar panels and mobile phones but are not the focus of Australian design filers. The analysis shows that Australian residents differ markedly from non-residents in their focus when registering designs. Australians generally register designs within a restricted set of product classes, including Clothing (Locarno class 2), Furnishings (class 6) and Building units and construction elements (class 25). Non-resident applicants in Australia maintain focus in a quite different set of product classes, including Recording, telecommunication or data processing equipment (class 14).

The study identified those product classes in which there is a strong imbalance between residents’ and non-residents’ shares of total design filings (Figure 21). Non-residents dominate a large number of these product classes. This was found to be the case for registrations, certifications and renewals of registered design applications. An implication is that non-residents tend to focus on product classes characterised by longer design lifecycles than those in which Australian residents focus.

Figure 21 is a graph of product classes registered by Australian residents and non-residents

Non-residents focus on ICT but not clothing in Australia

The study also examined the design intensity of industries across countries. The analysis revealed country level differences in the degree to which resident and non-resident applicants differ in their product class focus.

In Australia, Clothing is a major focus of resident applicants only. In comparison, across Germany, Italy and the UK, Clothing has received strong attention from both resident and non-resident applicants. In Australia, Recording, telecommunication or data processing equipment is largely the province of non-resident design applicants. In Canada and the US, however, this product class receives strong attention from both residents and non-residents—in the US, the class accounted for 16 per cent of resident design patents and 24 per cent of non-resident design patents in 2016.

The US is the largest country of origin for designs registered in Australia. In part, this reflects the US’s status as a major supplier into Australia of computing and telecommunications equipment. In 2016, this product class ranked as the third-highest merchandise import into Australia.5Our analysis revealed that design IP generation by the US in computing corresponds with substantial design labour inputs. In the US, seven per cent of the US’s total design workforce in 2016 worked in the Manufacture of computing, electrical and optical equipment.6Designers represented 15 per cent of all employees in that industry.

However, there is some indication that the US’s design workforce is changing in structure. Specifically, designers appear to be exiting computer manufacturing, as design labour in online services grows apace. Between 2011 and 2016, the design labour intensity of computer manufacturing grew at a low compound annual growth rate (CAGR) of 0.4 per cent. In the same period, a 28.3 per cent CAGR was observed in the design labour intensity of Information service activities (e.g. web applications, media sites, data processing services), a rate of growth outperformed only by the Human health activities industry.7

The design rights story is changing

The Designs Law and Practice study reveals that significant changes are occurring in the structure of design workforces overseas. These changes may have implications for the types of designs likely to be registered in Australia over the coming years.

Policy questions around designs law include whether and how to protect virtual designs. These include graphical user interfaces, screen icons and other design types implemented via software on screens. The Australian Government has accepted the Advisory Council on Intellectual Property’s recommendation to reconsider the treatment of virtual or non-physical designs.8Policy work and consultation to address this issue is expected to commence in the near future. Given the US’s status as the largest source of non-resident design applications in Australia, and changes in the US’s design workforce, virtual designs could become a strong future focus in Australia for registered designs.

The Designs Law and Practice study aimed to contribute insights into IP Australia’s ongoing policy analysis and review of the designs system. The research is available as an economics working paper on the IP Australia website at www.ipaustralia.gov.au/economics.

 

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End notes

  1. Gruber, M., de Leon, N., George, G. & Thompson, P. 2015. Managing by design: From the Editors. Academy of Management Journal, 58(1); 1–7.
  2. Andersen, L., & Colley, L. (Eds). Creative Business in Australia: Learnings from the Creative Industries Innovation Centre, 2009 to 2015. Sydney, Australia: UTS ePress. See also: Cox, G. 2005. Cox Review of Creativity in Business: Building on the UK’s Strengths. London: HM Treasury.
  3. Both design measures are weighted by data on industry size to account for country or industry level differences. At the industry level, data on design employment and design rights use is divided by the total workforce of an industry (thousands). At the country level, design intensity measures are weighted using data on the size of a country’s industrial sector. In assessing design IP intensity, a country’s design registrations are divided by the Value Added (constant 2010 USD billions) of its industrial sector. In assessing design labour intensity, a country’s number of designers is divided by the  total employees (thousands) in the country’s industrial sector. The industrial sector corresponds to manufacturing, mining, construction and utilities, as defined in World Bank Open Data. See: https://data.worldbank.org/indicator/NV.IND.TOTL.ZS
  4. In analysing the design intensity of Australian industries, industries are defined as in the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006. Code 1912 in that scheme corresponds to Rigid and semi-rigid polymer product manufacturing.
  5. Department of Foreign Affairs and Trade. 2017. Composition of Trade, Australia, 2015–16. Canberra: DFAT.
  6. In the international comparison, industries are defined as in the International Standard Industry Classification (ISIC Rev 4) at the divisional (two-digit) level. Code 26 in that scheme corresponds to Manufacture of computer, electronic and optical products.
  7. In ISIC Rev 4, code 63 corresponds to Information service activities. Code 86 corresponds to Human health activities.
  8. Advisory Council on Intellectual Property. 2015. Review of the Designs System. ACIP, viewed December 2018.