Is Australia a technologically innovative country?

The latest annual report released by the European Patent Office (EPO) confirms Australian industries and research institutions remain engaged in protecting innovation abroad.

The report indicates the number of patents applications filed with EPO in 2018 has increased by approx. 14% to 978 compared to 841 applications in 2017.

How does Australia fare on the World Stage?

The number of patent applications filed by Australian nationals, including corporations, academic & research institutions and individuals, in foreign countries can be used as a rough barometer to measure the relative importance certain countries / regions have, as a source of economic returns for local investment in R&D in Australia. The absolute numbers of patent filings count, yet the size of the markets the various countries / regions represent, and from which IP rents can be extracted, is more important. Statisticians (and Economists) also use the ratio of patent applications filed per capita of country population to create league tables of technology innovation in the various countries. These tables can be created using patent filing numbers of nationals in their country of origin, but equally in foreign countries.

The Australian population in 2018 was estimated at between 24.8 and 25.0 mid 2018 by the Australian Bureau of Statistics. As reported in the Australian Intellectual Property Report 2018 of IPAU, 2503 Australian patent applications were filed by Australian residents (vs 26,403 applications filed by foreign nationals, of which the USA makes up about ½). This equates roughly to a ratio of 0.1 local patent applications per 1000 residents (or 104 applications per million population), patent filings by AU nationals being roughly 1/10 of foreign nationals.

A leagues table of some important trading partners of Australia, using some of the above criteria, reveals that Australia is the most substantial net importer of IP (patents) within the peer group, with the lowest score of national (standard) patent applications per million population.

NB: figures for patent filings in 2018 have not yet been released by IP Australia (IPAU) nor the World Intellectual Property Organisation (WIPO), figures are based on 2017 data.

*EPO filing only; national patent applications filed solely in member states not counted.

** EU census data

*** US Census Bureau data 2018

Note: Japan, S Korea and China have a 2nd tier patent (utility) model system. In JP 4577 applications were filed by nationals in 2017, whereas S Korea had 6451. Note large number of filings by nationals in PR China: 1.68 million. If one accounts for these IP applications too, the IP filing activity by nationals in PR China more than doubles!  Note however that subsidies by the Government and local authorities for IP filings significantly distort the filing activity

How does Australia fare when it comes to exporting locally created IP (and by proxy: technology)?

WIPO’s World Intellectual Property Indicators 2018 (report) indicates that Australians filed 7515 patent applications with the top 20 IP offices (excluding AU). This figure is about three times the number of patent applications filed at home. Compare that with PR China, where 1.245 million patent applications were filed by locals at IPO China, yet only 0.05 million applications were filed in the top 20 IPOs. The relativity is telling.

In 2017, the following number of patent applications were filed by Australians with the IP offices in the following mayor economies and other countries:

Can this simple data reveal some trends and missed opportunities?

841 applications were filed by Australians at EPO (i.e. about 1/3 the number filed in AU) vs 3773 filed at the US PTO (i.e. about 1.5 times the number filed at EPO) and 562 at IPONZ  (i.e. about 1/5 the number filed in AU).

Despite the close economic ties, New Zealand (NZ) is only a small market of around 4.6 million people with a 2017 GDP of US$ 205.9 billion (Australia has a GDP of US$ 1.323 trillion; World Bank figures quoted; these may differ from international Monetary Fund figures).

I suspect that the relatively substantial number of patent applications flowing into NZ (compared to other, bigger economies) is merely reflection of the close economic ties and perhaps the relatively low costs of obtaining patent protection in NZ. Yet, the size of the market from which economic returns may be had for AU-patented technology is comparatively small.

Further, the US currently represents a bigger export market for AU technology than Europe. Yet, the total population of EU member states is 1.55 times larger than that of the USA. Despite the EU block’s 2017 GDP of US$17.282 trillion being around 11% lower than that of the USA (at US$19.391 trillion as per World Bank figures), I suggest that the EU economic block should warrant AU enterprises looking more closely to Europe as a potential source of revenue for locally created technology. Increasing the number of patent applications filed at the EPO (which also covers the UK) can provide such an opportunity.

From an EPO (European Patent Office) perspective, Australia’s patent filing numbers (842) rank it 8th, behind Israel (1,456 applications) yet ahead of innovation hub Singapore (523 applications), but well behind South Korea (7,296), PR China (9,401), Japan (22,615) and USA (43,612).  Applying the above mentioned ratio of applications per capita per million inhabitants criteria, Australia’s rate of 41.7 EP applications puts it in the middle of the league of countries seeking protection for their technologies in Europe. Australia’s brothers across the Tasman are one step ahead in the rankings at 23rd.  The world’s patent filings and exports powerhouse, PR China, whose nationals filed 1.381 million applications worldwide in 2017 according to WIPO figures, comes in at 38th (ratio: 6.8) in Europe.

Looking at the best non-European countries in class: Israel is ranked 10th (ratio 172.8) behind 9th ranked Japan (ratio 179.2). Switzerland, which is not an EU member country yet through its membership in the European Free Trade Association (EFTA) enjoys most if not all the benefits less the problems which EU membership brings, tops the league with a ratio of 955.9 (i.e. about 1 patent application per 1050 inhabitants!) with the 2nd ranked Netherlands and 3rd ranked Denmark managing around 416 and 411 applications per million residents, respectively.

Of course, the EU remains the most important market place for technology developed within European countries, so that the top of the league figures should come as no surprise. 11 of the top rankings are European countries, Japan, Israel, South Korea and USA making up the balance in the top 15.

Applying a reciprocal model, i.e. using the number of patent applications per capita of nationals of Switzerland, Netherlands, Denmark, Israel and Japan filed in Australia, enables a fairer comparison on innovation export activity, and a different league emerges:

In closing, this brief excursion into the world of statistics, I invite all our innovators and innovative industry players to ponder.

Where do you rank and does your patenting activity fit the average or are you outshining your Australian peers?