WHERE SHOULD WE FILE IN 2020? RECENT TRENDS IN FOREIGN PATENT FILINGS

Foreign patent filings are expensive. Tech startups are always operating on a budget, so if you’re a tech startup operator, you may have to make difficult decisions about whether and where to foreign file. 

So, where in the world should a tech startup consider filing patent applications? A good way to get insight into that question is to look at the trends: Where are other people in your industry filing? 

Let’s take a look at recent trends in foreign patent filings.

DO WORLDWIDE PATENTS EXIST?

We hear this question from time to time, since it would be cost prohibitive to cover the entire world with patents in individual countries. Unfortunately, there is no “worldwide patent.” If you’re considering foreign patent protection, you have to decide which countries you want to file in.

It’s worth noting that you can file an international patent application (under the Patent Cooperation Treaty). However, an international application can only mature into a patent after you nationalize the application in individual countries. In other words, an international patent application does not mature into a right for a worldwide patent.

For important patent applications, most tech companies will choose anywhere from two to six jurisdictions for foreign filing (and sometimes more). The exact countries they choose will vary based on the company’s industry as well as their specific business plans and strategy.

OVERALL WORLDWIDE PATENT FILING TRENDS

According to the 2018 World Intellectual Property Organization IP Facts and Figures report, there are 13.7 million patents in force worldwide. Here’s a breakdown of the top countries with patents in force:

• United States: 2.98 million
• China: 2.09 million
• Japan: 2.01 million
• United Kingdom: 1.24 million
• Republic of Korea: 970,000

Applicants around the world filed almost 3.17 million patent applications in 2017, a figure that grew by an estimated 5.8% compared to 2016.

Of those applications, 85% were filed in the top five IP offices: China, the United States, Japan, Republic of Korea and the European Patent Office (EPO) . An estimated 1.4 million patents were granted, which represents an increase of 3.9% from 2016. 

GROWTH IN WORLDWIDE PATENT FILINGS

The number of worldwide patent filings has grown year-over-year for 17 consecutive years. 

China recorded the fastest growth between 2010 and 2017, with 20.5% average annual growth. Nevertheless, China reported only modest growth — 3.9% — in 2017.

The Republic of Korea reported an average annual growth of 6.1%, the United States reported 5.8% annual growth and Japan reported 5.1% annual growth. However, the United Kingdom remained essentially flat (+0.1%).

In 2017, the following areas showed strong growth in the number of patent filings from the previous year:

• Republic of Korea: 10.8%
• Across Europe: 10.1% 
• United States: 5.2%

With respect to developing countries, India saw a 3.4% growth in filings in 2017. India also granted 50.2% more patents in 2017 than in 2016, with grants increasing from 8,248 in 2016 to 12,387 in 2017 (non-resident grants accounted for 85% of the total increase).

KEY OFFICES WHERE APPLICATIONS WERE FILED

According to the 2018 World Intellectual Property Organization IP Facts and Figures statistics,  China received more patent applications filings than any other jurisdiction in 2018.  A breakdown of the percentage of applications filed at each of the five largest patent offices is shown in the chart below.

• China: 46.4% (~1.54 million applications)
• United States: 18.0% (~597,000 applications)
• Japan: 9.4% (~314,000 applications)
• Republic of Korea: 6.3% (~210,000 applications)
• European Patent Office: 5.2% (~174,000 applications)
• Other countries: 14.7%

For patent application filings, Europe is treated as a single patent office because patent applications are typically filed with the European Patent Office (EPO). However, European patent applications must also be validated in individual countries within Europe to become effective, as there’s still not a unitary patent right available for all of Europe. 

It’s also worth noting that patent offices in Asia received 66.8% (2.2 million applications) of all patent applications worldwide in 2018, and that China accounted for nearly two-thirds of all Asia applications. In contrast, the combined total of Europe and North America was below the 1 million mark.

KEY CONTRIBUTORS OF PATENT APPLICATIONS

Keep in mind that the data above represent patent applications filed in each country, and those patent filings come from all over the world (domestic and foreign filers). So where are all these patent applications coming from? 

According to the 2018 World Intellectual Property Organization World Intellectual Property Indicators, the top five largest sources of patent applications in 2018 were:

• China
• Germany
• Japan
• Korea
• United States

Twelve of the top contributors are in Europe. Denmark and Belgium saw the fastest growth in applications, increasing filing activity by 9.6% and 6.1%, respectively. Their combined total (518,480 equivalent applications) is slightly lower than that from United States-based applicants.

TRENDS IN TECHNOLOGY FIELDS WITHIN KEY COUNTRIES

According to the 2018 World Intellectual Property Organization IP Facts and Figures statistics these are the top three technology fields for the patent applications filed in the top five countries in 2018

• China: digital communication, computer technology, electrical machinery, apparatus and energy
• Germany: electrical machinery, apparatus and energy, transport, mechanical elements
• Japan: electrical machinery, apparatus and energy, transport, computer technology
• Republic of Korea: digital communication, electrical machinery, apparatus and energy, computer technology
• United States: computer technology, medical technology, digital communication

This gives a snapshot of which technology industries are filing the most patents in each country. To find more about your industry, dig into the full WIPO report. 

FURTHER INSIGHTS AND ADVICE

The recent filing statistics outlined above provide a good starting point to inform your analysis of where you should consider filing. Here are a few additional insights to consider when deciding where to file.

CONSIDER IMPORTANT JURISDICTIONS FOR PATENT FILINGS

The most popular jurisdictions for patent filings (as indicated by the data above) should, by default, be on your initial list of important jurisdictions to consider for your company’s patent filings: 

• United States
• China
• Japan
• Korea
• Europe 

These jurisdictions are important because they cover the largest economies in the world. If you have patent rights covering these five jurisdictions, then you’ve covered a significant portion of the world’s economy.

If you only have patents in one country, then a competitor might be able to avoid your patent by structuring their operations geographically. This actually happens all the time. For example, a company might manufacture a product outside the United States in order to avoid a US patent covering a method of manufacture. 

But you can reduce your exposure to jurisdictional gamesmanship by creating a checkerboard of patent rights that makes it impractical for competitors to avoid the geographic scope of your patents. It’s hard for anyone to do business in any sector of technology without shipping a product to or through one of the five regions listed above. That’s why these five jurisdictions consistently receive the largest number of filings. 

LOOK AT KEY TECH COMPANIES

It can also be helpful to look at the largest tech companies in your industry and figure out where they file their patent applications. 

For example, if you’re in the telecom industry, you might consider looking at the two Shenzhen, China–based telecoms companies — Huawei Technologies and ZTE Corporation. According to the 2018 World Intellectual Property Organization IP Facts and Figures report, Huawei Technologies and ZTE Corporation occupied the top two spots for patent applications in 2017, with 4,024 and 2,965 published applications respectively.

As another example, if you’re in the oil and gas industry, you might consider analyzing the patent filing trends of Halliburton, Schlumberger and other industry leaders, as they are known to invest significant resources in global patent filings. 

Knowing where these large tech companies are filing might help you with your startup’s patent strategy. Specific information regarding where such companies are filing their patents can be found by searching databases like Espacenet and The Lens. 

CONSIDER THE STRENGTH OF ENFORCEMENT IN EACH JURISDICTION

Another consideration is the strength of enforcement in each jurisdiction that you’re considering. 

Generally, the United States, Japan and Europe are viewed as providing the strongest IP enforcement mechanisms in the world, remaining part of the top five key regions where patents are being filed. 

It is widely believed that patent rights in these countries provide the most leverage and overall value. While some have questioned whether patent rights in the United States might have grown weaker in recent years, the US still remains one of the key jurisdictions for startups considering foreign filing. 

Conventional wisdom also says that China does not provide strong IP enforcement mechanisms, with foreign companies experiencing strict limits on discovery, low damages awards and even political issues possibly influencing outcomes of cases. 

However, it appears that China’s IP enforcement has seen improvement in recent years, which may partially explain the recent double-digit growth in patent applications filed in China. In recent years, IP enforcement in China has generally been perceived as strong enough to justify the incremental cost of patent filings there. The number of tech companies and consumers in China is too large to ignore when considering China as part of a global patent strategy. 

CONSIDER YOUR EXIT STRATEGY

If you’re a startup, one of your possible exit strategies will likely be acquisition by a big tech company. Therefore, you want to make sure that your patent portfolio covers the jurisdictions that are important to them, so that you will be an attractive acquisition target. 

Large tech companies typically have sophisticated legal teams that put significant thought into where their technology should be protected, and you can use public information to figure out what answer they came up with. 

The rule of thumb is to file in the countries where you or your competitors will “exploit” — manufacture, distribute, sell or use — the technology. 

After all, you want your patent properties to give you a competitive advantage. Because patent applications are territorial, you need to have a patent in each country where you want to leverage the patent.

DOES YOUR PATENT FIRM HAVE EXPERIENCE IN FOREIGN FILINGS?

Tech companies filing patent applications in foreign jurisdictions need to hire patent professionals with relevant experience and connections. 

The team at Henry Patent Law Firm has extensive experience managing global patent portfolios, and we have strong relationships with foreign associates in all the top patent jurisdictions. 

Contact us today to find out how we can help!