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CHAPTER 6 - IP RIGHTS IN THE DIGITAL ECONOMY

The arrival of desktop computers in the 1980s, the Internet in the ’90s and smartphones in the 2000s laid the foundation of today’s digital economy. Since the advent of smartphones, however, the digitisation of economic activity has accelerated. Unsurprisingly, IP rights go hand in hand with the technologies that enable the digital economy.

Over the past decade or so, information and communication technologies (ICT) such as artificial intelligence (AI), blockchain, quantum computing, big data analytics and the Internet of Things (IoT) have been commercialised to transform societies in the way we work, interact, produce and consume. The impact of these technologies is set to grow exponentially over the coming decades, as these are general purpose technologies with valuable uses in all sectors of the economy.(26)End note 26. Harris, R. G. The internet as a GPT: Factor market implications. In Elhanan Helpman (ed.). 1998. General Purpose Technologies and Economic Growth. The MIT Press, Cambridge. Cumulatively, digital technologies have the potential to boost productivity growth and living standards.(27)End note 27. Corrado et al. (2014) demonstrate that accumulating intangible capital positively impacts productivity growth for countries and is complementary in this regard to ICT investment. See Corrado, C., Haskel, J., and Jona-Lasinio, C. 2014. Knowledge spillovers, ICT and productivity growth. IZA Discussion Papers, 8274, Institute for the Study of Labor (IZA), Bonn.

Yet ten years ago many advanced ICT-related inventions barely existed commercially. From fax machines and floppy disks, we have moved to talking AI assistants and self-driving cars, as the digital economy has transformed the practice of innovation. In the twentieth century, innovation was dominated by the US, Germany and Japan. Digital technologies have enabled the rapid globalisation of innovation in the 21st century, as reflected in the changing global distribution of patent filings.(28)End note 28. Lerner, J., and Stern, S. 2012. Introduction. In Josh Lerner and Scott Stern (eds). The Rate and Direction of Inventive Activity Revisited. University of Chicago Press, 2012, p. 21.

IP rights have been important in providing an incentive for innovators to pursue costly research and development in order to capitalise on the enormous potential commercial value of ICT. Successful commercialisation of ICT can generate value for consumers and for businesses.(29)End note 29. Comino, S., and Manenti, F. M. 2015. Intellectual property and innovation in information and communication technology (ICT). JRC Science and Policy Report. European Union, Luxembourg.


The link between ICT and productivity growth is complex

The Organisation for Economic Cooperation and Development (OECD) defines the digital economy as goods and services related to ICT. Measuring the digital economy and its impact throughout the economy is less straightforward.(30)End note 30. Ahmad, N. and Schreyer, P. 2016. Measuring GDP in a Digitalised Economy, OECD Statistics Working Papers, 2016/07, http://dx.doi.org/10.1787/5jlwqd81d09r-en, accessed 12 February 2020. For details about how the Australian Bureau of Statistics is measuring the digital economy, see https://www.abs.gov.au/ websitedbs/D3310114.nsf/home/ ABS+Chief+Economist+-+Full+Paper+of+Measuring+ Digital+Activities+in+the+Australian+Economy, accessed 12 February 2020. Macroeconomic evidence indicates that the link between ICT-adoption and productivity growth is complex. For businesses, competitive advantage from ICT-adoption usually depends on investing in complementary assets such as skills and organisational capital.(31)End note 31. Corrado, C., Haskel, J., and Jona-Lasinio, C. 2014. Knowledge spillovers, ICT and productivity growth. IZA Discussion Papers, 8274, Institute for the Study of Labor (IZA), Bonn.

The digital economy also has certain intrinsic features that may be economically contradictory. Digital technologies allow knowledge to be relayed – and information to be copied – at almost no cost. This should encourage the dissemination of knowledge and spur innovation. But digital technologies can also increase transaction costs and complexity. Costless copying that infringes IP rights can reduce incentives to creators. Networked digital platforms can undermine the effective workings of competitive markets and have been seen to produce negative external social costs.(32)End note 32. George J. Stigler Center for the Study of the Economy and the State. 2019. Draft report of The University of Chicago Booth School of Business Committee for the Study of Digital Platforms Market Structure and Antitrust, 15 May. https://research.chicagobooth.edu /-/media/research/stigler/pdfs/ market-structure---report-as-of-15-may-2019.pdf?la =en&hash=B2F11FB118904F2AD701B78FA 24F08CFF1C0F58F. Accessed 14 February 2020. In the Australian context, see: https://www.accc.gov.au/speech/ data-revolution-consumer-welfare-and-growth-in-the- digitaleconomy, accessed 12 February 2020.


Australia ranks middle of the road for ICT-intensity in IP

The OECD looked at how countries compare for the ICT-intensity of their residents’ patent filings at the world’s five largest patent offices known as the IP5(33)End note 33. The IP5 comprises The United States Patents and Trademarks Office (USPTO), the European Patent Office (EPO), the Japan Patent Office (JPO), the Korean Intellectual Property Office (KIPO) and the National Intellectual Property Administration (CNIPA, formerly SIPO) in China. between 2013 and 2016. It measured each country’s average number of ICT-related patents as a share of total patent families filed by the country’s residents. Out of 35 leading countries, Australia ranked 16th for ICT-intensity in patents. In 2014-17, Australia’s average ICT-related trade mark portfolio at three large IP offices – the EUIPO, JPO and USPTO – ranked 13th out of 30 countries and its average design portfolio ranked 15th out of 22 countries.(34)End note 34. For details, see OECD, Measuring the Digital Transformation: A Roadmap for the Future. 2019., p. 149. https://doi.org/10.1787/9789264311992-en, accessed 28 February 2020.


The US is the biggest filer of ICT-related patents in Australia – but the Republic of Korea is the most intensive filer

The analysis in this report employs the OECD’s methodology(35)End note 35. Inaba, T. and Squicciarini, M. 2017. ICT: A new taxonomy based on the international patent classification, OECD Science, Technology and Industry Working Paper 2017/01. https://www.oecd-ilibrary.org/docserver/ ab16c396-en.pdf?expires=1581493544&id= id&accname=guest&checksum= 3D6009AFB9DE89568417D0D8C655F7BC, accessed 12 February 2020. to analyse applications in ICT-related patents, trade marks and designs at IP Australia by the top 10 countries of origin.

The US is the dominant source of ICT-related patents in Australia, filing a total of 3 595 applications during 2015-18 (Table 1). In Australia, ICT-related patenting by Australian residents totalled 527 over the four-year period 2015-18, the same number as in 2005-08. In contrast, China’s ICT-related patents in Australia increased by a factor of nine, to 581 in this period.


Table 1: Top 10 economies filing ICT-related patents at IP Australia: number and percentage of countries’ total applications to IP Australia, 2005-08 and 2015-18

table 1

Source: IP Australia (2019), Intellectual Property Government Open Data (IPGOD) 2019, data.gov.au.

Note: The number of countries in the table exceeds 10 due to entry and exit from the ranking.


Table 1 also ranks each country for its ICT-intensity in patents – the percentage of its total patent filings that are ICT-related – providing values for the periods 2005-08 and 2015-18. These measures of ICT-intensity in patents indicate how significant ICT innovation is to a country’s overall patenting in the Australian market.

The country with the highest intensity in ICT-related patents filed at IP Australia during 2015-18 was the Republic of Korea, with 22 per cent. The Republic of Korea, along with China, is a global leader in ICT-related patenting. However, its patent intensity in Australia, which fell from 29 per cent a decade earlier, is well below the 56 per cent share of ICT in its IP5 patent portfolio.(36)End note 36. OECD, Measuring the Digital Transformation: A Roadmap for the Future. 2019., https://doi.org/10.1787/9789264311992-en, accessed 28 February 2020.

Intensity analysis offers a qualification to changes in a country’s count of ICT-related patent applications. For example, despite the US’s numerical dominance and China’s extraordinary growth in applications, ICT-related patents represent less than 10 per cent of both countries’ total filings in Australia. As one might expect, it appears the world’s two largest economies have diversified technology portfolios in the Australian market.

Australians recorded the fourth highest number of total filings in the home market during 2015-18. Australia’s intensity in ICT-related patents at four per cent of its total filings, ranks us 17th of the 52 countries which filed ICT-related patents in Australia, suggesting patented innovation in ICT is not a strength of Australian industry relative to its international competitors.


Australia dominates ICT-related trade marks but has a low filing intensity

Australian applicants are by far the largest source for ICT-related trade marks in the domestic market, filing a total of 38 744 such marks over 2015-18, more than three times as many as the next highest ranked country source, the US, and ten times as many as China (Table 2).

In 2015-18, 20 per cent of Australia’s total trade mark applications were ICTrelated, ranking it 25th of 114 countries. Australia’s intensity was lower not just against larger economies of Europe and Asia, but also against smaller economies such as New Zealand, Switzerland and the Netherlands. The Cayman Islands filed 290 ICT-related trade mark applications in 2015-18, giving it the highest intensity in Australia with 63 per cent.(37)End note 37. Data show that the leading trade mark applicants from the Cayman Islands are Chinese companies such as Alibaba, Tencent and LE Holdings filing in Nice classes such as Technological and electrical apparatus (Class 9) and Education, training and entertainment (Class 41). The second highest ranked country by intensity was Finland (48 per cent), followed by Norway (42 per cent).

Trade marks are indicators of entrepreneurial activity and of businesses’ drive to take advantage of market opportunities, so it is not surprising that the ratio of ICT-related trade mark applications to total applications is significantly higher across all the countries studied than for patent filings, which are indicators of technological innovation.

One in five Australian trade marks is ICT-related, a significantly higher ratio than for ICT-related patents. It is noticeable however that businesses in the ten top ranked countries are targeting ICT-related goods and services with more than 30 per cent of their trade mark filings in Australia.


Table 2: Top 10 economies filing ICT-related trade marks at IP Australia: number and percentage of countries’ total applications to IP Australia, 2005-08 and 2015-18

table 2

Source: IP Australia (2019), Intellectual Property Government Open Data (IPGOD) 2019, data.gov.au.

Note: The number of countries in the table exceeds 10 due to entry and exit from the ranking.


ICT-related design rights in Australia: Finland’s extraordinary fall from the apex in 10 years

The US is by far the biggest source of ICT-related design right applications in Australia. The US’s total of 1 239 between 2015-18 is four times greater than that of Australia itself, which filed the second most applications with 299 (Table 3).

While Australia’s total applications increased by 50 per cent in the decade following 2005-08, the US’s applications trebled and China’s grew exponentially from 2 to 200, making it the sixth largest source of ICT-related design applications. Conversely, Finland’s applications fell steeply from 284 over 2005-08 to five in 2015-18. This dramatic fall was attributable to the declining business performance of Nokia.(38)End note 38. IP Australia (2019), Intellectual Property Government Open Data (IPGOD) 2019, data.gov.au.

The reliance on the fortunes of Nokia when looking at Finnish applications is highlighted by the fall in its ICT-intensity in design rights – the percentage of ICT-related design applications to total applications fell from 82 per cent in 2005-08 to six per cent a decade later. Singapore’s intensity in ICT-related design applications also fell, from 48 per cent to 17 per cent.


Table 3: Top 10 economies filing ICT-related designs at IP Australia: number and percentage of countries’ total applications to IP Australia, 2005-08 and 2015-18

table 3

Source: IP Australia (2019), Intellectual Property Government Open Data (IPGOD) 2019, data.gov.au.

Note: The number of countries in the table exceeds 10 due to entry and exit from the ranking.


The strongest growth in the percentage of ICT-related design applications to total applications was recorded by Hong Kong, whose intensity increased from three per cent in 2005-08 to 15 per cent in 2015-18, while China’s intensity rose from six per cent to 16 per cent in this period. Of countries which filed more than 10 ICT-related designs during 2015-18, Belgium, with 39 applications during this period, had the highest intensity at 35 per cent. The Republic of Korea ranked second, but its percentage fell from 27 per cent to 20 per cent over the decade. Australia’s ratio increased from two per cent to three per cent.


Conclusion

On the evidence of its intensity in ICT-related applications for patents, trade marks and designs, Australia’s performance in the intellectual property of the digital economy is middling, both in its domestic market and in the largest international markets. This conclusion is based on analysis of aggregate applications in the domestic market and the OECD results for the international side. It is possible that Australia has strengths in niches of the digital economy that a more granular analysis might reveal.(39)End note 39. For example, Australia is active in blockchain technology, ranking sixth globally in patent applications. IP Australia, Blockchain Innovation: A Patent Analytics Report. 2018. https://www. ipaustralia.gov.au/tools-resources/ publications-reports/patent-analytics-report-blockchain-innovation, accessed 28 February 2020. Overall, however, the digital economy does not appear to be a focus of resident applicants for industrial IP rights; their priorities appear to lie in other sectors of the economy.


IP Australia: leading the way in digital technology for IP

IP Australia is set to become the first fully digital service delivery agency in the Australian Government, with 99.8 per cent of customer transactions now being conducted digitally – an increase of over 85 percentage points since 2012.

We are transforming our customer-facing services by building modern platforms and services which will open our transactional systems using application programming interfaces (APIs). This approach furthers our commitment to building modern, easy to use, efficient digital platforms and transactional services aligned with customer expectations. Many APIs supporting our transactional services have already been delivered for new applications for Trade Mark business-to-business customers along with renewals for all IP rights, generating over 4 000 transactions when this report went to press.

The move to being fully digital has also supported IP Australia in researching, developing and implementing machine learning (ML) and artificial intelligence (AI) technologies. Our initiatives span all IP rights, with a focus on providing information tools for trade mark innovators, including small and medium-sized enterprises (SMEs) as well as internal tools that enhance traditional examination practices in our patent and trade mark groups. These initiatives include Alex, our virtual website assistant, Trade Mark Assist and Australian Trade Mark Search, a goods and services classification assistant, Australian Designs Search and a Patents automated preliminary search tool. Our newest venture, IPGAIN (Intellectual Property Global Artificial Intelligence Network) is a marketplace that provides global access to pioneering AI and ML tools for solving unique challenges faced in the IP community.

Alex has had over 140 000 conversations and resolved more than 80 per cent of first customer contacts, while Trade Mark Assist has helped educate customers before filing reducing common issues and ultimately increasing the likelihood of acceptance. Our internally delivered tools are generating quality enhancements and efficiency gains, from supporting staff in performing administrative tasks which leverage the power of AI and machine learning to assisting with more complex decision making.

IP Australia has created a unique international trade mark dataset, TM-Link, to make possible for the first time analysis of trade marks across different international IP offices, giving unique insights into international branding trends and export behaviour. And a recent initiative, the IP Data Platform, signals a new tool for collaboration on data, enabling users to access open data products, conduct research and analysis, and share insights with the broader research and policy community.