Chapter 2: Patents
IP Report 2020
Patents provide owners with the exclusive rights to prevent others from commercially exploiting their inventions for a limited time. Standard patents protect inventions that are novel, useful and constitute an ‘inventive step’ beyond what is obvious given the normal progress of technology. Discoveries of laws of nature, physical phenomena (e.g. human bodies) or abstract ideas are not eligible for patent protection.
In Australia, standard patent protection lasts for up to 20 years (or 25 years for pharmaceutical inventions). In exchange for protection, an invention must be disclosed to the public in full. This ensures public access to new technologies so that follow-on innovation can occur, avoiding wasteful duplication of research effort. Patents granted by IP Australia can be searched at AusPat, the Australian patent database.(4)End note 4. For more information, see https://www.ipaustralia.gov.au/ patents/understanding-patents/searchingpatents.
Standard patent applications:
In 2019, a total of 29 758 applications for standard patents were filed, a 0.7 per cent decrease from their level in 2018 (Figure 1). The fall can be largely attributed to a decrease in divisional applications—patent applications which contain subject matter from previously filed applications. For direct filings, divisional applications fell 2.9 per cent in 2019, while original applications fell 1.2 per cent. Over the past decade (from 2010 to 2019), standard patent applications in Australia have grown at an average annual rate of 2.5 per cent.
Standard patent applications may be filed in Australia directly with IP Australia or simultaneously in multiple countries via the Patent Cooperation Treaty (PCT).(5)End note 5. The PCT is an international treaty which makes it possible to seek patent protection for an invention simultaneously in multiple countries using a single international application. After a patent application advances through the PCT procedure, it enters the ‘national phase’ in which its granting in Australia will be processed by IP Australia. Around 70 per cent of applications in Australia are processed under the PCT, reflecting the popularity of the PCT system among firms that operate internationally and file patents in Australia. In 2019, the number of PCT applications did not change from 2018, while direct applications were down 2.3 per cent to 8 850.
Figure 1: Standard patent applications, total and by filing route, 2010-19
Inventions submitted for patent protection are examined to determine whether they are novel, industrially useful and not obvious before a patent can be granted. In 2019, 17 010 standard patents were examined and granted in Australia, a decrease of less than 0.3 per cent from 2018.
Resident and non-resident filings:
Most standard patent applications in Australia are filed by non-residents. In 2019, non-residents filed 91 per cent of the total applications in Australia (a total of 27 121), consistent with the record level set in 2018. Resident applications fell by 4.3 per cent in 2019 (from 2 756 to 2 637), but most (87 per cent) of the fall in resident applications is attributable to a decrease in divisional applications. As was the case for applications, the number of patent grants to residents fell (from 905 in 2018 to 829 in 2019). At the same time, patent grants to non-residents remained stable. The non-resident share of grants was 95 per cent, which is the same level as in 2018.
Countries of origin:
The top five countries of origin for standard patent applications in 2019 were the United States (13 125 applications), Australia (2 637), China (1 832), Japan (1 573) and Germany (1 311) (Figure 2). The US remains the major source for non-resident applications, accounting for 48 per cent, a stable share over the past two decades.
Figure 2: Top 5 patent filings in Australia by country of origin, 2018-2019
While applications from other top-ranked countries decreased in 2019, those from China increased by 46 per cent from their level in 2018. This increase in applications from China continues a growth trend that has accelerated in recent years (Figure 3). China’s share of non-resident applications in Australia grew to seven per cent in 2019, outranking Germany and Japan for the first time.
Figure 3: Standard patent applications from China, 2000-19
Among the top five applicants for original patents filed for in Australia (Figure 4), three are based in China and four manufacture mobile communication equipment such as smartphones. Smartphones are composed of multiple components and technologies often cross-licensed by companies with large patent portfolios.
The top-ranked applicant in 2019 was Oppo (with 313 original patents), China’s leading smartphone brand. The second-ranked applicant (with 221 original patents) was Qualcomm, the US-based semi-conductor company that owns and licenses advanced 3G mobile technology and is now introducing a range of products for 5G connectivity. Third-ranked (with 218 original patents) was LG Electronics, a multinational electronics company headquartered in Seoul operating in diverse consumer electronics markets.
Like Oppo, Huawei—the fourth-ranked applicant (with 170 original patents)—is headquartered in China’s Guangdong region, a key global technology hub. Huawei was the world’s second largest smartphone manufacturer in 2018, after Samsung Electronics. The fifth ranked applicant (with 156 original patents) in 2019 was Alibaba Group, a Chinese e-retailer. Since 2015, Alibaba’s sales and profits have exceeded the combined sales and profits of the major US retailers Walmart, Amazon and eBay.(6)End note 6.Tong, F. May 5 2016. Alibaba’s annual web sales easily surpass U.S. e-retail sales. Digitalcommerce360. Viewed 18 February 2019, https://www.digitalcommerce360.com/2016/05/05/ alibabas-annual-web-sales-easily-surpass-us-e-retail-sales/.
As in previous years, Aristocrat Technologies was the top-ranked Australian applicant, filing 96 original patents in the areas of computer technology and control. Australia’s national science agency, the Commonwealth Scientific and Industrial Research Organisation (CSIRO), was second with 47 original patents in areas including measurement, basic materials chemistry and biotechnology. The third, fourth and fifth ranked Australian applicants were public institutions filing in a diverse range of technology areas. The University of Sydney was third with 19 original patents. New South Innovations—the commercialisation arm of the University of New South Wales—was fourth with 17 original patents; and The University of Queensland was fifth with 14 original patents.
Patents protect technologies and are assigned into technology classes. We analyse application trends across classes using a scheme maintained by the World Intellectual Property Organization (WIPO).(7)End note 7. The WIPO technology concordance groups various International Patent Classification (IPC) classes and subclasses into 35 technology fields. For details, see https://www.wipo.int/ipstats/en/.
As in previous years, Medical technology was the leading class with 3 665 applications in Australia (Figure 4). For share of applications, Medical technology was followed by Pharmaceuticals (2 695), Biotechnology (2 655), Organic fine chemistry (1 822) and Civil engineering (1 690). Applications in Medical technology remained stable when compared to 2018, while those in Pharmaceuticals grew by 6.5 per cent. Applications in the other three top classes fell by between one and four per cent.
Computer technology and Digital communication ranked as the sixth and seventh most filed classes for standard patent applications. Digital communication recorded high growth in 2019—the highest among the seven top-ranked classes. This class has overtaken all others for growth in applications above their levels in 2000.
Figure 4: Top 5 patent applicants and technology classes, 2019
Note: Patent application numbers refer to original applications and exclude divisional applications.
Source: IP Australia (2020 forthcoming), Intellectual Property Government Open Data (IPGOD) 2020, data.gov.au.
States and territories:
The largest share (39 per cent) of resident applications was filed from New South Wales (NSW). Applicants from NSW contributed 1 017 applications in 2019 (Figure 5). NSW ranked second to Australian Capital Territory (ACT) for patent intensity (or number of patents per 1 000 persons). In the ACT, for every 1 000 persons in the territory, 0.18 patents were filed. In NSW, that ratio was 0.13. Queensland ranked third for total patent applications behind NSW and Victoria, and registered higher growth than these states. Applications from Queensland were up nine per cent from 2018.
Figure 5: Patent applications, states and territories, 2018-19
Source: Calculations of per capita figures from: Australian Bureau of Statistics. Australian Demographic Statistics, March 2019.
https://www.abs.gov.au/ausstats/abs@.nsf/lookup/3101.0Media%20Release1Mar%202019Retrieved 27 January 2020.
Patents in the digital economy
As a special theme to this year’s IP Report, we trace the development of Australia’s digital economy, as reflected in the IP data. The digital economy encompasses the vast range of social and economic activities that are enabled by information and communication technologies (ICT).(8)End note 8. DIIS. 2017. The Digital Economy: Opening up the Conversation, Department of Industry, Innovation and Science. In turn, historic trends in ICT-related patents illustrate how Australia’s digital economy has been shaped by economic shocks in our global context.
The first two decades of the millennium (2000-19) saw first a significant decline then a recovery in the number of ICT-related standard patent applications filed in Australia (Figure 6).(9)End note 9. Trends in ICT-related patents are analysed by identifying patent applications in technology classes related to ICT, following the method set out by Inaba and Squicciarini (2017). Technology classes are defined as in the International Patent Classification (IPC). See Inaba, T., and Squicciarini M. 2017. ICT: A new taxonomy based on the international patent classification. OCED Science, Technology and Industry Working Papers, 2017/01.
An initial sharp decline in ICT-related patents, between 2000 and 2003, coincided with the dot-com crash of 2000, when many internet-related companies failed or lost most of the value of their shares. This followed a period of frenzied stock speculation, or tech market bubble, which boosted prices for internet-related companies despite many having shown little prospect of earning a profit.
This suggests that, notwithstanding the rapid growth in technology of the past two decades which has interconnected global markets, Australian industry was at that time already strongly intertwined with the international digital economy.
By 2009, ICT-related patent applications in Australia had declined by 37 per cent from their peak level in 2000 (when 2 325 were filed). In the same ten-year period, from 2000 to 2009, the general population of patent applications in Australia increased by ten per cent on 2000 levels, so the decline in ICT-related patents cannot be attributed to changes in general demand for patents alone. In the past ten years, ICT-related patent applications have recovered moderately, from their decade low of 1 433 in 2011 to 1 925 in 2018, and now represent 6.8 per cent of standard patents filed for in Australia.
It was not until 2016 that ICT-related applications recovered to near their level before the crash, following consistent growth from 2012.
Figure 6: ICT-related standard patent applications in Australia, 2000-18
Source: IP Australia (2019), Intellectual Property Government Open Data (IPGOD) 2019, data.gov.au
Before inventors apply for a patent, they may submit a provisional application. This allows inventors to claim the earliest possible priority date while giving them up to 12 months to decide whether they want to file a full patent application.(10)End note 10. The priority date is the date used to identify prior art relevant to establishing the novelty and/or non-obviousness of an invention.
In 2019, 4 957 provisional applications were filed in Australia, similar to the level in 2018. Australian residents, who are the primary users of provisional applications, filed 4 739, or 96 per cent of the total.
In Australia, two types of patents have been available: standard patents and innovation patents. The latter provide a shorter (eight year) protection term for ideas that meet a lower inventive threshold than needs to be met to attain a standard patent.
On 26 February 2020, legislation which included the phasing out of the innovation patent was enacted.(11)End note 11. The Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 received the Royal Assent on 26th February 2020. It is available at https://www.legislation.gov.au/ Details/C2020A00009. The phasing out will commence on 26 August 2021, 18 months after the Act received Royal Assent. From that date, no new innovation patents can be filed; however, existing innovation patent holders will maintain their rights.
This followed extensive industry consultation, supported by research by the Productivity Commission and IP Australia’s Office of the Chief Economist which showed that the innovation patent was not meeting its policy objective of supporting small and medium-sized enterprises (SMEs).(12)End note 12. Johnson et al. 2015. The economic impact of innovation patents. IP Australia Economic Research Paper 05. https://www.ipaustralia.gov.au/ sites/default/files/reports_publications/ economic_impact_of_innovation_patents.pdf.
The past two decades have seen a steady increase in the share of innovation patents filed by non-residents, from 8 per cent of total applications in 2000 to 47 per cent in 2019. China is now the second largest country of origin for innovation patents, accounting for 51 per cent of non-resident filings, or 409 applications in 2019. Innovation patents from China substantially decreased in 2019, down from 720 in 2018, and innovation patents overall decreased by 24 per cent (Figure 7).
Figure 7: Innovation patent applications by residents and non-residents, 2010-19
Australian filings overseas:
Australians can seek patent protection in other countries by filing applications through the PCT or directly with other IP offices. In 2018 (latest data), Australians increased their number of patents filed overseas by three per cent (Figure 8). On average, in 2018, Australian residents filed 3.2 patent applications overseas for every standard patent application that they filed in Australia.
Figure 8: Level and growth of patent applications from Australia filed overseas, 2009-18
Source: WIPO IP Statistics Data Center 2019. Retrieved 27 January 2020.
The US remains the primary destination country, receiving 40 per cent of Australians’ international filings. The European Patent Office (EPO) outpaced other major destination countries for growth in applications from Australia: these grew by 15 per cent year-to-year, and the highest growth was observed in patents classified in IT methods for management.