Ownership of IP is a Key Strategy of Innovative Firms, According to WIPO

Ownership of intellectual property (IP) rights has become central to the strategies of innovating firms worldwide, according to The Changing Face of Innovation, a new report from the World Intellectual Property Organization (WIPO). Researchers contend that rapidly growing global investments in innovation and the globalization of economic activities are key drivers of this trend. Between 1980 and 2009, global patents rose from 800,000 applications to 1.8 million. During this time, international royalty and licensing fee revenue increased from $2.8 billion in 1970 to $27 billion in 1990, and to approximately $180 billion in 2009 outpacing global gross domestic product (GDP). These results have led to the emergence of new market intermediates (e.g., IP clearinghouses and brokerages). The researchers also contend that this trend will move IP policy to the forefront of innovation policy.

Evidence indicates that knowledge markets enable firms to specialize, allowing them to be more innovative and efficient at the same time, according to the report. However, globalization of the knowledge market also places a greater emphasis on innovative firms to decide which knowledge to control and safeguard from domestic and international competitors and which to share for the purpose of increasing the general knowledge base. Rapid innovation in select sectors (e.g., telecommunications, software and audiovisual technology) has led to significant increases in the number of patent applications of complex technologies — technologies consisting of many separately patentable inventions where patent ownership is often widespread.

To keep up with this growing trend, well-functioning patent institutions have become a cornerstone of successful innovation systems. They must perform several tasks including ensuring the quality of patents granted and providing balanced dispute resolution. However, they are facing increasing pressure due to the significant number of applications they receive each year. This has lead to a significant number of national patent offices facing severe backlogs. In 2010, the number of unprocessed applications worldwide stood at 5.2 million.

The report highlights several different national policies to harness public research for innovation, including polices to incentivize patenting and commercialization of products by university and public research organizations (PROs). These programs have seen significant results over the past several decades. University and PRO filings under the WIPO's Patent Cooperation Treaty (PCT) have grown from almost zero in the 1980s to more than 15,000 in 2010 with most of the growth coming from advanced economies (e.g., Germany, France, Japan and the U.S.). The report concludes that policy reforms aimed at promoting patent-based university technology transfer have multifaceted effects on research institutions, firms, the science system and national economies.

Highlights from the rest of the report's finding include:

• Global R&D expenditures almost doubled in real terms from 1993 to 2009; Clear evidence that innovation is increasingly international with increases in the share of peer-reviewed articles with international co-authorship and a rising share of patents from international collaborators;
• Evidence to support the idea that innovation has become more collaborative and open; and,
• Evidence showing that society usually benefits from research collaboration due to enahanced efficiency and effectiveness of the innovation process.

WIPO also released its World Intellectual Property Indicators 2011, a report that contains detailed statistical information on national and international IP filing data. IP filings worldwide rebounded strongly in 2010 after a considerable decline in 2009, according to the report. During that period, the recovery in IP filings was stronger than the overall economic recovery. While global GDP grew by 5.1 percent, patent filings grew by 7.2 percent in 2010. Data shows that China and the U.S. accounted for nearly four-fifths of worldwide growth in patent filings. After two years of near zero growth, the U.S. patent office saw 7.5 percent growth in 2010 and received the largest total number of applications worldwide (490,226). Mirroring wider economic trends, the patent office of China (391,177 filings) overtook the office of Japan (344,598 filings) to become the second largest recipient of patent applications.

The report also analyzes the numbers of filings by resident applicants. During this time, Chinese residents overtook Japanese residents by 2,985 applications to become the most active patent filers in 2010. Residents of Japan (172,945 applications) and the U.S. (178,355 applications) filed the largest number of patent applications outside their own country. Residents of Canada, Israel, the Netherlands and Switzerland filed more than 80 percent of their total applications abroad.