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

Research undertaken by:

Economics, Research, and Evidence team Intellectual Property Office.

Crown copyright 2017

Intellectual Property Office is an operating name of the Patent Offi ce 2017/04

ISBN: 978-1-910790-29-8 Building the Evidence Base on the Performance of the UK Patent System. Published by The Intellectual Property Office August 2017

1 2 3 4 5 6 7 8 9 10

Crown Copyright 2017

You may re-use this information (excluding logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov. uk/doc/open-government-licence/

or email: psi@nationalarchives.gsi.gov.uk Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

Any enquiries regarding this publication should be sent to:

The Intellectual Property Office Concept House Cardiff Road Newport NP10 8QQ

Tel: 0300 300 2000 Fax: 01633 817 777

e-mail: information@ipo.gov.uk

This publication is available from our website at www.gov.uk/ipo

www.gov.uk/ipohttp:http://www.nationalarchives.gov

Acknowledgements

We are grateful to the numerous individuals who have assisted in the development of this report. In particular we would like to thank those who participated in the interviews and surveys, and the members of the IPO Research Expert Advisory Group for their comments on the report. All errors remain the responsibility of the authors.

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

Contents Executive Summary .........................................................................1

Introduction......................................................................................4 A note on the link between patents and innovation...............................................................5

A note on the United Kingdoms vote to leave the European Union .......................................6

Methodology ....................................................................................7 Stakeholder input .................................................................................................................7

Data analysis........................................................................................................................8

Chapter 1: Patent numbers in the UK and comparison countries ....10 1.1 Global trends in patent numbers ................................................................................10

1.2 Number of patent applications by patent office .......................................................... 11

1.3 Coverage in national jurisdictions through European Patents ...................................... 13

1.4 Interpreting patent counts .......................................................................................... 15

Chapter 2: International patenting strategies and effects on the UK 16 2.1 Countries patenting domestically and abroad .............................................................16

2.2 Foreign and domestic applicants in the UK jurisdiction...............................................19

2.3 Patenting strategies of international companies ..........................................................21

2.4 Adjusting for the size of the economy .........................................................................21

Chapter 3: The UK patent system and legal environment ...............23 3.1 Cost...........................................................................................................................23

3.2 Patent Box .................................................................................................................25

3.3 Quality of services......................................................................................................26

3.4 Timing........................................................................................................................26

3.5 Legal services and enforcement ................................................................................29

Chapter 4: UK companies and patenting .......................................32 4.1 Patenting propensity of UK companies ......................................................................32

4.2 Patenting in the UK by company size .........................................................................35

4.3 Sectors ......................................................................................................................37

4.4 Technology ................................................................................................................ 41

4.5 R&D investment .........................................................................................................44

4.6 Level of innovation .....................................................................................................47

4.7 Cultural differences ....................................................................................................48

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

Conclusions ...................................................................................53 References.........................................................................................................................56

Annex 1: List of stakeholder interviews ......................................................................60

Annex 2: Linking FAME business data to companies patent data ............................61

Annex 3: Patent Systems in Selected Jurisdictions ...................................................63

Annex 4: Key features of individual patent systems ...................................................66

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

Executive Summary 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. The Government has an ambition to be the most innovative country in the world. As such, there is a need for a better understanding of the performance of the UK patent system.

This report set outs a multi-faceted review of the UK patent system, considering how companies patent in the UK, who patents in the UK, and how the UK system compares to other countries. The report brings together evidence from a range of sources including stakeholder interviews, analysis of data, and existing academic literature in order to improve our understanding of the current UK patent system.

Stakeholder interviews and existing evidence on the operation of the UK patent system are positive overall. The number of patents covering the UK is high; however UK firms appear underrepresented in patent applications, with a lower proportion of domestic applicants than other countries. More work is required in understanding the reasons and wider implications of this.

Patent numbers in the UK

Global patent applications have increased sharply since the early 1990s, rising on average 5% between 1995 and 2006.

When European Patents (EPs) (patents granted through the European Patent Office) are included in UK patent counts, the UK was 6th in the world in terms of the number of patent applications in 2014, behind Germany (4th) and ahead of France (7th). Applications to the EPO have increased on average 7.7% between 1995 and 2006. Applications to the UK IPO excluding applications through the EPO have not grown as much as would be expected, declining on average 0.5% per year in the same time period, with the UK IPO 12th in the world in terms of number of patent applications. There was a similar trend in applications for France, although applications for Germany increased.

While an effective patent system is important, patent application numbers should not be taken as an indicator of innovation or the quality of the patent system. They do not show the number of inventions, levels of innovation or the benefits from innovation. Other aspects of the patent system should be looked at to better understand how the UK patent system is working.

Who patents in the UK?

93% of patents covering the UK (including EPs) are from foreign applicants (based on applicants listed address). This appears to be driven by both a low propensity for UK firms to patent, and the high number of foreign owned patents covering the UK.

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

Why do foreign firms patent in the UK?

International companies patenting decisions are driven primarily by where they are economically active; where they (and their competitors) sell, develop and manufacture their products. The differences between patent systems is of relatively minor importance compared with other factors in deciding where to patent. This came out in the interviews with international companies, and was supported by numbers of applications matching closely with relative level of GDP for most countries.

The UK is an attractive consumer market and this leads to high numbers of patent applications as firms protect their intellectual property in this important market.

Adjusting patent counts by GDP puts the UK fourth in the world in patent applications per GDP, and adjusting by population puts the UK at 2nd in the number of patent applications per million population.