Chapter 3: Patents

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Despite persistent inflation and tightening financial conditions in 2023, standard patent filings by Australian residents grew by 2.4%. Overall patent filings fell by 2.4%, driven by a reduction in US filings, with US firms highly sensitive to rates shocks in their patenting activity. Australia saw growth in patent filings within less research-intensive consumer products. Sustained growth in patent filings is also observed in fields where Australia is a key destination market (e.g., clean energy technologies) and for which there is intense international competition (e.g., semiconductors). 

The 2024 IP Report shows that patents are an important feature in how Australian R&D intensive firms bring innovations to the market.

Over the past two decades, the number of Australian SMEs that hold patents has increased at 5 times the rate of SMEs more broadly in the economy, a pattern not observed for large firms.

Australian innovators increased their domestic patent filings, despite challenging economic conditions in 2023. For standard patents, filings by residents increased by 2.4% on their level in 2022.

Patents have continued to grow in important enabling technologies. Across technology fields, semiconductors is the field seeing the strongest growth in its share of total patent filings by both Chinese and Australian residents.

New analysis by IP Australia shows that Australia is a key destination market for clean energy technology. Across 19 major economies, Australia is the second fastest growing destination for patents related to clean energy generation and storage.

What is a patent

A patent is a temporary legal right that allows the patent owner to exclude others from commercially exploiting an invention. Standard patents are granted for inventions that are new, useful and involve an inventive step beyond the normal progress of science and technology.

Without patent rights, innovators may be unable to recoup investments in innovation and tend to underinvest. By excluding imitators, patents enhance the returns to research and development (R&D) investment. In return for patent rights, innovators must disclose new technical knowledge in their inventions, allowing them to be reworked by others.

Standard patent applications and grants

In 2023, a total of 31,515 standard patent applications were filed in Australia, down by 2.4% from their level in 2022. In Australia, the COVID-19 shock saw an increase in the volume of patent filings in Australia to record levels in 2021 and 2022 (see Figure 1.1). The latest figures are consistent with applications now following a similar rate of annual change to that observed pre-pandemic.

The overall 2.4% decrease in applications in 2023 is wholly attributed to a 2.8% reduction in filings by non-residents (entities outside Australia), which account for 91.9% of all applications filed in Australia. Applications by Australian residents increased by 2.4%.

The global economy continues to confront the challenges of persistent inflation, rising interest rates and weak trade growth.1 Economic downturns and rates shocks can reduce aggregate demand and the profitability of innovations.2 Such conditions have a significant effect on patenting by firms in the United States, research shows. US filings in Australia fell by 5.9% in 2023. However, such conditions tend to have a limited effect on patenting by Australian firms.3

Figure 3.1 Standard patent applications and grants in Australia, 2012 to 2023

A patent is enforceable in Australia only after it has been examined and granted. Inventions are examined to determine whether they are novel, industrially useful and not obvious before a patent can be granted. In Australia, applicants must request examination within 5 years of an application’s filing date or the application will lapse.4 In 2023, grants of standard patents in Australia fell by 5.1%, to 15,573. Patent grants fell both for residents (–6.0%, to 1,000) and non-residents (–5.0%, to 14,573).

Patent grants in Australia saw a significant spike over the period 2015 to 2017, as shown in Figure 3.1. The spike in grants followed an increase in applications and a large spike in examination requests in 2013. That year, IP Australia received 1.8 times the number of examination requests as received on average over the past 5 years. Applicants were motivated by Australia’s Raising the Bar legislative reforms. The new law applied to applications for which examination was requested after April 12 2013, spurring many applicants to bring their examination requests forward.

In addition, the spike in grants followed a temporary fall in requests for IP Australia to conduct international type searches – reports that help applicants review the novelty of their patent claims – which affect IP Australia’s examination capacity.

Technology fields

Technology trends in patenting

Patents are assigned to technology classes, so provide a useful indicator of the rate of inventive activity across technology fields.5 Consistent with tighter economic and financial conditions in 2023, Australia saw a decline in patenting within research-intensive fields including the life sciences (Figure 3.2), while patenting grew strongly for consumer goods that are less research-intensive.

Figure 3.2 Top five technology fields for volume of standard patent filings in 2023, and high-volume fields with the greatest relative growth and decline in 20236

In Australia, the life sciences dominate other fields for the number of standard patent applications received each year (see Figure 3.2). In 2023, standard patent filings fell across the major life science fields – by 11.6% in pharmaceuticals, by 6.7% in medical technology and by 9.8% in biotechnology. The results reflect an overall decline in performance for global pharmaceuticals and medicine manufacturing. Global industry revenues declined by 2.2% in 2022 with global imports and exports down by 1.9% on 2021 levels.7

Among ‘high-volume’ fields, the strongest growth was in ‘other consumer goods’ (+18.5%, to 744 in total). This category includes personal and household items like clothing, jewellery, non-electric cables, musical instruments and decorative arts. These products usually involve specific technologies that can be customised and improved for different users and purposes. They generally require less scientific research compared to science-based fields.8

Despite challenging economic conditions, significant patent growth was observed in fields that are the focus of strategic competition between countries (e.g. semiconductors – see the next section). Strong growth was also observed in electrical machinery and apparatus (+17.7%, to 1,275). This field includes electric machines and basic electric elements, as well as equipment for generating, converting and distributing electric power.

In the September quarter of 2023, renewable energy supplied 38.9% of average electricity demand across Australia’s national electricity market – a higher share than recorded in any previous September quarter – reports the Australian Energy Market Operator (AEMO).9 Analysis by IP Australia has found that among 19 major economies, Australia is the second fastest destination for growth in patents related to clean energy generation and storage.10

International patenting in Australia

Filing routes into Australia

Effective patent laws can encourage businesses to transfer technology into a country and increase inward foreign direct investment (FDI).11 The preferred route for non-residents to file patent applications into Australia is through the Patent Cooperation Treaty (PCT). 

Taking IP global: the PCT system

The Patent Cooperation Treaty (PCT) provides an alternative route to filing applications in Australia. An applicant can file a single ‘international’ patent application through the PCT instead of filing several national or regional applications. The approach provides applicants more time to assess the value of an invention and its most profitable markets while they build their patent strategy. PCT applicants are given 31 months to file an Australian ‘national phase’ for their application from its ‘priority date’. The priority date is the date used to identify prior art relevant to assessing the invention’s novelty and non-obviousness.

A total of 22,929 PCT applications were filed in Australia in 2023, down 3.3% on their level in 2022. The decline in PCT filings underpins the 2.8% fall in non-resident filings in the same year. In contrast, applications filed directly with IP Australia – a route favoured by residents – were stable at their 2022 level, with 8,586 in total (Figure 3.3)

For applicants who file in Australia through the PCT system, on average there is an 18-month interval between their application’s earliest international filing date and when they file the application in Australia (it enters Australian ‘national phase’). As such, trends in PCT applications in 2023 largely reflect changes to innovation activity from 2022 and earlier.

Figure 3.3 Standard patent applications in Australia by filing route, 2014 to 2023

Locations of origin

The lead origins for standard patent applications in Australia are the United States and China, followed by Japan, the United Kingdom and Germany (Figure 3.4).12

Applications from the US fell by 5.9% in 2023 (to 13,872). A likely contributing factor was the US’s rapid increase in interest rates over 2022 and 2023. In response to an inflation surge, the US Federal Reserve raised the US’s benchmark funds rate 18-fold, from 0.25% to 4.5%, between March and December 2022. Federal Reserve officials agreed to hold the funds rate steady between 5.25% and 5.5% in December 2023. A recent study estimates that, on average, a 100-basis point increase to the federal funds rate reduces patenting in US firms by up to 9% in the following 2 to 4 years. The effect is pronounced for the most impactful and disruptive technologies.13 US filings are concentrated in pharmaceuticals (16.7% of US-origin filings), medical technology (15.8%), biotechnology (12.2%) and computer technology (6.6%) in Australia.

Figure 3.4 Leading locations of origin for standard patent applications in 2023, and high-volume locations with the greatest relative growth or decline in 202314

Despite challenging economic conditions, applications to China have grown to a record level, increasing 13.1% on their level in 2022, to 2,459 in total. China-origin filings have returned to growth after several years of stalled growth through the pandemic period.15 Between 2015 and 2020, applications from China rose at an average annual rate of 25.3%. The rise coincided with a dramatic increase in entrepreneurial activity within China. Just 7% of global venture capital investment was located outside the US in 2012. By 2019, China was the site for 38% of global investment.16

Over recent years, among technology fields, semiconductors is the field that has seen the strongest growth in its share of standard patent filings by Chinese and Australian applicants. Semiconductors – or microchips – are essential to all electronic devices. Advanced new chips are developed to power new technologies. Given their strategic importance, the development of domestic chip production has been a major focus of industrial policy and competition between the United States, China and European Union.17

Semiconductor filings from China have increased in Australia since 2015, when China initiated its Made in China 2025 strategic plan to upgrade its technological manufacturing. Since 2019, China has led the US as the leading source of semiconductor patents in Australia. 

BluGlass Limited: from licensing to commercialisation

We work with companies all around the world who are at the very leading edge of next generation technology development.

There's only a handful of gallium nitride laser diode manufacturers in the world, of which BluGlass is one of those few, and aspiring, of course, to grow market share in that entire area.

And if you think of a digital world, this is really all about controlling and manipulating electrons, whether it's for doing calculations on computers or you're trying to convert power from one place to another. And so semiconductors give you that platform to build these devices to do that sort of manipulation.

Semiconductors power the universe. They are involved from everything from supermarkets to Star Wars.

They enable the technology that we interact with on a day to day basis to think and function.

We decided that we could actually be competitive by changing our business model to becoming a vertical integrated manufacturer of lasers. As a semiconductor manufacturing company, IP rights are critical to having any freedom to operate in those manufacturing jurisdictions. This is a very litigious space and you have to have freedom to operate in order to apply your products in those markets. IP for BluGlass is absolutely a fundamental pillar to our ability to commercialise and take this innovation developed here in Australia and international markets.

So in reviewing the IP report, the thing that struck me again was that reassurance and the SME particularly that's the world that that we come from a BluGlass of how important and how competitive or more competitive companies can be. With that through our time in the industry, we have helped create a supporting ecosystem and we're now seeing really exciting semiconductor companies attracted to the benefits of being here in Australia in particular. It's really exciting to see what's going on in the photonics and quantum and semiconductor space in this country. The IP Australia report is a really encouraging sign of how this is growing.

So in our industry in particular it is understood that the patents are critical and I think that really is sort of a lesson of you know for certain SME's depending on the technology you're in of where that patenting strategy can come into play. I would also say that the partnering strategy for various companies and this is a lesson that we learned is that we learned over years that we really did have to become vertically integrated. We had a business model that was relying on outsource partners and while those partners were excellent technology wise, the commercial incentives weren't perfectly aligned. Obviously when you vertically integrate, you get that control over every aspect of the technology, of the cost, but also of the IP. It really gives us a lot of rich opportunity for new IP going forward.

BluGlass Limited has developed a breakthrough semiconductor technology called remote plasma chemical vapour deposition (PPCVD). The technology allows for the sustainable production of high efficiency devices, with applications in artificial intelligence, quantum computing and biotechnology.

The company was formed in 2006 to spin out 10 years of research from Macquarie University and has since built a portfolio of 96 patents internationally.18 While the company’s entrepreneurial strategy was initially focused on licensing its technology, the company has built capability over time and reoriented to compete directly with other equipment manufacturers.

In October 2023, BluGlass was named the only Australian member of a regional innovation hub established by the US Department of Defence. The hub is funded under the US’s $442.3 billion Chips and Science Act aimed at building capability in domestic chip production.

Domestic patenting in Australia

Standard patent applications by residents increased by 2.4% in 2023, to 2,556 in total (Figure 3.5). This follows several years of volatility in resident applications, due largely to a policy change to the patent system (see the Australian IP Report 2023 for more details).

Between May 2022 and December 2023, the Reserve Bank of Australia raised Australia’s cash rate 14 times, from less than 1.0% to 4.25%. Domestic patenting in Australia, however, has not significantly declined. This is consistent with research showing that monetary policy shocks and macroeconomic conditions tend to have a limited effect on domestic patenting by Australian firms.18

Figure 3.5 Standard patent applications in Australia by residency, 2014 to 2023

Most domestic patents by Australian applicants are filed for inventions in Civil engineering (12.9% of Australian-origin applications), Medical technology (8.1%), Transport (6.8%) and Computer technology (6.7%).

In 2023, around 2,208 employing small and medium enterprise (SMEs) held an enforceable patent. This equates to 0.22% of employing SMEs in operation in Australia by the end of the 2023 financial year.19 The SME share of resident filings has steadily increased over the past decade, from 57.9% in 2014 to 62.9% in 2023, and private inventors (individuals) account for an additional 22.1%.

States and territories

Among Australian states and territories, New South Wales (NSW) is the leading source for resident standard patent applications in Australia, followed by Victoria and Queensland. However, the Australian Capital Territory (ACT) was the most patent-intensive in 2023, with 5.23 applications per thousand businesses in the territory. In 2023, application volumes increased in New South Wales (+13.5% on their level in 2022), Queensland (+9.0%) and Tasmania (+35.0%) but fell in all other states and territories (Figure 3.6).

Figure 3.6 Patent applications by Australian states and territories, 2023

Source: IP Australia; ABS. Counts of Australian Businesses, including Entries and Exits, August 2023. Retrieved 14 March 2023.

Leading applicants

Figure 3.7 lists Australia’s leading applicants for standard patent applications, separately focusing on resident and non-resident filers.

Patent filing activity in Australia is dominated by major global information and communications technology producers.

  • In 2023, LG Electronics, a multinational electronics company headquartered in South Korea, retained its place as the lead filer for standard patents in Australia. The company filed 196 applications, down from 282 applications in 2022.
  • Huawei Technologies, a major Chinese smartphone and telecommunications company, was second in 2023, with 180 applications, down slightly from its 183 filings in 2022.

Ranked third to fifth were: US medical technology producer Becton Dickson and Company (151 applications); construction, engineering and mining equipment manufacturer Caterpillar Inc. (139 applications); and Swiss food and beverage multinational Nestlé (135 applications).

Figure 3.7 Top domestic and international applicants for standard patents in Australia, 2023

Australia’s lead resident applicants focus across a broad range of technology fields including games and furniture, computer technology, biotechnology, medical technology, materials metallurgy, food chemistry and measurement.

In 2023, gaming technology producer Aristocrat Technologies retained its position as the top domestic patent filer with 73 applications. Second ranked was the Commonwealth Scientific and Industrial Research Organisation (CSIRO) with 54 applications.

After entering the ranks of top domestic filers in 2022, Australian design software company Canva improved its place from 4th to 3rd in 2023 with 48 applications. Canva was founded in Perth in 2013. Within a decade the company’s valuation peaked at $54.5 billion in 2021, making it one of the world’s most valuable start-ups.20 With a current focus on launching artificial intelligence-based products, many of the company’s patent filings in 2023 relate to systems and methods for automatically generating designs, processing designs, animating design elements, and managing prompt-based image editing.

The above rankings are based on the number of standard patent applications filed by applicants (including original and divisional applications). Applicants vary in the rate at which they convert patent applications into grants and the timing with which they progress applications.

Provisional applications

A provisional application is one of several options available to businesses to establish a position in the patent system in Australia and key export markets.

Taking the first step: provisional patents

Filing a provisional patent gives applicants 12 months to decide whether to file a complete patent application. Provisional applications are not subject to substantive examination and offer no enforceable protection. However, they establish the priority date that will be used to identify prior art relevant to assessing the complete patent application, should an applicant decide to file one. Obtaining a provisional patent is not prerequisite to filing for a complete patent. A key benefit though is that applicants can disclose, make, use and sell their invention while maintaining the option to seek complete protection.

In 2023, the number of provisional filings totalled 4,244, up 5.2% from their level in 2022. Applications by residents increased by 4.0% (to 3,903) while those by non-residents increased by 20.9% (to 341). Residents account for 92.0% of all provisional applications.

As a proportion of standard patent filings, provisional filings have declined steadily over the past decade. On average, 7 standard patent applications were filed for every provisional application in 2023, compared to 5 standard patents for each provisional in 2014. The decline in provisional filings is mostly driven by a reduction in filings by individual applicants. Filings by large organisations and SMEs have remained relatively stable over the past decade.

The likelihood of applicants converting provisional applications into complete applications has increased over the last decade. This trend holds both for applicants in general and for key users of the provisional patent system (e.g., CSIRO). It may reflect an increasingly efficient ability of applicants to triage new discoveries for patent protection.21

Australian filings overseas

In international trade, patents are associated with a significant export premium. According to one recent study, patenting in a destination market increases the value of exports by 6%.22 Given their role in trade, patents often comprise part of larger patent “families,” sets of patents in various countries relating to a single invention. Over 90% of patents granted in Australia have at least one family member granted in another jurisdiction.23

The leading destination markets for Australian patents are the US, the European Patent Office (EPO), China, New Zealand and Japan (see Figure 3.8). In 2022, Australian patent filings abroad fell by 3.1% in 2022 below their level from 2021, to 9,045, based on the latest available data from the World Intellectual Property Organization (WIPO). However, Australian filings increased in the US (+0.4%, to 3,481) and in Japan (+13.5%, to 572), while they fell at the EPO (–2.1%, to 1,004).

Australians can seek patent protection in other countries by filing through the PCT or at IP offices in target markets. Australians increasingly prefer the PCT route when taking their ideas global. The share of Australian filings abroad filed via the PCT increased from 66.9% in 2013 to 72.7% in 2021, a stable share as of 2022.

Figure 3.8 Leading destinations for Australian patent filings abroad, 2022

Source: WIPO IP Statistics Database

  1. OCED (2023). OECD Economic Outlook, Volume 2023 Issue 2.OECD Economic Outlook, Volume 2023 Issue 2 | OECD Economic Outlook | OECD iLibrary (oecd-ilibrary.org)
  2. Ma, Y. & Zimmerman, K. (2023). Monetary policy and innovation. NBER Working Paper 31698.
  3. Majeed, O., Hambur, J. & Breunig, R. (2023). Do monetary policy shocks and economic conditions impact innovation? Working Paper. Nolan, G., Hambur, J. & Vermeulen, P. (2023). Does monetary policy affect non-mining business investment in Australia? Evidence from BLADE. Reserve Bank of Australia Research Discussion Paper, RDP, 2023-09.
  4. Under Australian legislation, a patent is examined only once the applicant has requested examination. The request can be voluntary or result from the Commissioner of Patents directing an applicant to request examination.
  5. Application trends across classes are analysed using a scheme maintained by the World Intellectual Property Organization (WIPO). The WIPO technology concordance groups various International Patent Classification classes and subclasses into 35 technology fields. For details, see https://www.wipo.int/ipstats/en/.
  6. High volume fields are defined as classes in the top quartile for total number of applications received in 2023.
  7. IBISWorld. (2023). Global Pharmaceutical and Medicine Manufacturing, Industry Report. 
  8. Merges, R. P. & Nelson, R. R. (1990). On the complex economics of patent scope. Columbia Law Review, 90(4), 836-916.
  9. AEMO. (2023, October). Quarterly Energy Dynamics Q3 2023. https://aemo.com.au/-/media/files/major-publications/qed/2023/qed-q3-2023-report.pdf?la=en.
  10. The analysis, by IP Australia’s Patent Analytics Hub, used global patent data provided by PATSTAT, covering patent families filed between 2017 and 2021. The key growth metric used was defined as the annual growth in patent families filed within a jurisdiction (in percentage terms), relative to the average growth across key comparator countries, given by the gradient of the line of best fit of the total patent family data.
  11. Lee, J. Y. & Mansfield, E. (1996). Intellectual property protection and U.S. foreign direct investment. The Review of Economics and Statistics, 78(2), 181–186.
  12. A country’s count of applications includes single party applications originating from that country and multi-party applications with at least one co-applicant from that country. Where an application names multiple applicants from a given country of origin, that application is counted only once toward that country.
  13. Ma, Y. & Zimmerman, K. (2023). Monetary policy and innovation. NBER Working Paper 31698.
  14. High volume locations are defined as those above the mean for total number of applications received in 2023.
  15. The rapid growth in Chinese patent filings in Australia moderated in 2021 and 2022, as China’s government phased out financial subsidies, tax breaks and other social benefits designed to encourage patenting.
  16. Lerner, J., Liu, J., Moscona, J., Yang, D. Y. (2023). Appropriate entrepreneurship? The rise of China and the developing world. NBER Working Paper 32193.
  17. Edwards, J. (2023, 28 May). Chips, subsidies, security, and great power competition. Lowy Institute. Chips, subsidies, security, and great power competition | Lowy Institute.
  18. Majeed, O., Hambur, J. & Breunig, R. (2023). Do monetary policy shocks and economic conditions impact innovation? Working Paper. Nolan, G., Hambur, J. & Vermeulen, P. (2023). Does monetary policy affect non-mining business investment in Australia? Evidence from BLADE. Reserve Bank of Australia Research Discussion Paper, RDP, 2023-09. 
  19. ABS. Counts of Australian Businesses, including Entries and Exits, August 2023. Retrieved 14 March 2023.
  20. Nugent, A. (2023). Running out of ideas or getting better at picking winners: what does the decline in provisional patent applications mean? IP Australia Working Paper.
  21. Nugent, A. (forthcoming). Running out of ideas or getting better at picking winners? Trends in provisional patent applications in Australia. IP Australia Analytical Note.
  22. de Rassenfosse, G., Grazzi, M., Moschella, D. & Pellegrino, G. (2022). International patent protection and trade: Transaction-level evidence. European Economic Review, 147, Article 104160.
  23. Higham, K., Richardson, E.  and de Rassenfosse, G. (2024). Patent pendency and applicant innovation outcomes. Working Paper.
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