Patents

Chapter 1 Patents

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

Without patent rights, innovators may be unable to recoup investments made to develop new technologies and bring them to market. Patents provide their owners with temporary rights to exclude others from exploiting their inventions1. In return, patent owners must disclose new technical knowledge in their inventions.

Therefore, patents are a valuable source of information about inventive capacity and the rate of invention in different technological fields.

Standard patent applications and grants

In 2022, standard patent applications in Australia neared the 2021 record level: overall applications fell by just 0.5%, from 32,409 in 2021 to 32,264 in 2022 (see Figure 1.1). In Australia, 92.3% of standard patent applications are filed from abroad, that is, by entities outside Australia. In 2022, non-resident applications increased by 1.2% on the 2021 level to 29,770. Applications from residents fell by 16.8% to 2,494.

The continued strength in patent applications reflects the resilience of global innovation investments during the first two years of the COVID-19 crisis. The pandemic created a massive demand for innovations (e.g., in healthcare and ecommerce) to help mitigate its impacts. Fiscal support cushioned the demand shock from periodic lockdowns. Many companies maintained or resumed their innovation investments, given the continued availability of financing. Across major jurisdictions, patent filings were negatively impacted, but the impact was shallow and short-lived2.  International patent filings grew by 3.6% in 2021 and a further 0.3% in 20223. 

Figure 1.1 Standard patent applications in Australia by filing route, 2013 to 2022

A patent is enforceable in Australia only after it has been granted. Overall, grants of standard patents fell by 4.4%, to 16,407, in 2022. Grants fell for both residents (−2.6% to 1,064) and non-residents (−4.5% to 15,343).

International patenting in Australia

Effective patent laws encourage businesses to transfer technology into a country and encourage inward foreign direct investment (FDI)4. For example, a recent study found that patents significantly contributed to Australia’s economic expansion between 1947 and 2010. A primary mechanism was the causal effect of patents on inward FDI5. This study used over 150 years of data on patenting activity in Australia, taken from Australia’s open data product, IPGOD.

Taking IP global: the Patent Cooperation Treaty (PCT) 

The PCT system 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.

Use of the PCT

Most (73.4%) standard patent applications in Australia are filed internationally through the PCT. In particular, this is the preferred route for applications by non-residents. In 2022, 23,685 PCT applications were lodged in Australia, up 1.3% from their 2021 level. PCT applicants are given 31 months to file an Australian ‘national phase’ for their application from its ‘priority date’. The priority date is that used to identify prior art relevant to assessing the invention’s novelty and non-obviousness. As such, application growth in 2022 largely reflects inventive activity that occurred in 2020 or earlier.

Countries of origin

United States (US) applicants are named on 45.7% of standard patent applications filed in Australia (see Figure 1.2). A country’s count of applications includes applications filed by residents of that country with co-applicants from other countries. For example, of the 14,735 applications filed by US applicants in 2022, 452 were filed with partners from outside the US. Applications from the US increased by 1.0% in 2022, lifting the year’s overall filing volume.

Figure 1.2 Leading countries of origin for standard patent applications, 2022

China is Australia’s second major source of technology imports protected by patents. In China, corporate R&D investment was maintained through the initial COVID-19 shock: national R&D spending grew 10.3% in 2020, slightly below China’s previous 5-year growth trend. The country saw steady growth in its worldwide patent applications, even in 20206. A substantial 5.9% rise in China’s worldwide filings followed in 2021. These applications contributed strongly to global patent growth that year7.

In Australia, patent applications from China grew at an average annual rate of 28.9% between 2015 and 2020. However, this growth run essentially halted in 2021. Chinese-origin patents declined by 8.2% in 2022. The reduction in China’s filings most likely reflects non-market factors. In recent decades, China’s government provided direct financial subsidies, tax breaks and other social benefits to encourage patenting. Amid a larger shift in China’s IP policy, on 27 January 2021, the government announced the phase-out of all government funding for patent applications, including patents filed abroad.

Looking more broadly at countries with lower overall application volumes (though still focusing on the top quartile of countries), hot spots for growth in patent applications in Australia include the Republic of Korea and Singapore. Applications from the Republic of Korea have increased 1.6 times above their 2013 level, including a 17.1% increase in 2022, to 902. The past decade has seen applications from Singapore rise to 1.4 times their level from 2013. However, they fell 28.1% in 2022, to 210.

Domestic patenting in Australia

Economic characteristics of patent-holding businesses

Domestic patenting is relatively concentrated in Australia. Around 3,100 businesses with active operations in Australia hold a domestic patent annually. Patent-owning businesses skew larger than the average business: the median patent-owning business employs more than 10 times the number of workers as the median business without patents (see Figure 1.3). Still, in 2022, small and medium enterprise (SMEs) accounted for 69.6% of all standard patent applications filed from within Australia and 94.4% of their applications were filed by single parties.

Patent-holding businesses account for around 10% of Australia’s GDP and 7% of Australia’s total workforce. Labour productivity in Australia is around 30% higher in the median patent-holding business than in the median business without patents.

These aggregates are based on data which covers only entities that hold an Australian Business Number (ABN) so excludes the contributions of individual applicants. In 2022, 55.6% of resident applications were filed by individuals rather than organisations.

Figure 1.3 Economic characteristics of Australian patent-holding businesses, annual averages, 2010-11 to 2019-20

Environmental and policy factors

Resident applications fell by 16.8% in 2022. However, this follows a 24.8% growth in resident filings in 2021 (see Figure 1.4). A key driver of that growth was a change to the Australian patent law – the phase-out of the ‘second-tier’ innovation patent. Applicants who filed for new standard patents before 25 August 2021, the final date to file an innovation patent in Australia, retained the option to obtain an innovation patent by converting or dividing their standard patent application. As a result, this policy change likely encouraged applicants to bring forward standard patent applications in 2021. The fall in resident applications in 2022 comprises a correction from the marked growth in 2021. Data over coming years will show whether resident applications have reverted to the negative growth trend observed over 2018 to 2020.

Figure 1.4 Annual change in standard patent applications in Australia by residency, 2013 to 2022

Amidst tightening economic and financial conditions, a key question is how an economic downturn may affect innovation and patenting in Australia. Chapter 6 of this report previews new research by economists from the RBA on this topic. Using Australian microdata they examine the impact on innovation of contractionary monetary policy shocks as a way of exploring the effect of changing economic conditions.

States and territories

New South Wales (NSW), followed by Victoria and Queensland, are the leading sources of standard patent applications in Australia (see Figure 1.5). Application volumes fell across all states and territories in 2022, including an 18% decline in NSW, Victoria and Queensland.

The Australian Capital Territory (ACT) was the most patent-intensive state or territory in 2022, with 2.8 applications for every 1,000 businesses in the territory. The ACT was twice as patent-intensive as Western Australia. It followed the ACT with 1.4 applications for every 1,000 businesses (Figure 1.5).

Figure 1.5 Patent applications by Australian states and territories, 2022

Technology fields

Patents are assigned to technology fields, so provide a useful indicator of the rate of inventive activity across fields8. Internationally, in 2020 and 2021, urgent needs created by the COVID-19 pandemic led to elevated patenting related to digital and health technologies9. In 2022, these trends continued at the international level. Digital communication and computer technology saw the fastest rate of growth in PCT applications filed worldwide, ahead of growth for health-related technologies10.

Technological trajectories in patenting

In Australia, healthcare dominates other fields for the volume of standard patent applications received each year (see Figure 1.6). Applications for pharmaceutical patents have been on a growth trajectory since 2016. However, their climb accelerated the first two years of the COVID-19 crisis, with 18.5% growth in 2020 then a further 27.0% in 2021. That growth was sustained in 2022, when pharmaceutical patent filings increased by 12.2%. Medical technology and Biotechnology also increased their share of overall filings. 

Figure 1.6 Leading technology fields for volume of standard patent applications, relative growth in applications and relative decline in 2022

Evidence is more mixed for digital technology. In 2021, Computer technology became the fifth top field for new patent filings, ahead of Civil engineering. International evidence suggests that COVID-19 aggravated a decline in patenting within more traditional technology fields11. In the same year, applications for Audiovisual technology increased by 83.7%. 

Significant corrections from this growth occurred in 2022.

  • Standard patent applications for Computer technologies declined by 4.4%.
  •  Applications for Audiovisual technology fell by 26.2%.
  • The largest relative decline was in applications for Digital communications; these fell by 26.6% from their peak level in 2021 (see Figure 1.6).

At the same time, major technology companies, IBM and Australian ‘unicorn’ start-up Canva, entered the ranks of lead patent filers. Trade mark and design applications have increased in technology sectors and financial services, where digital technology has created scope for new products, payment systems and platforms.

Examination request rates across fields

Examination request rates provide further insight into trends across technology fields. 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. A longer wait period can benefit applicants, for example by allowing them time to find a commercialisation partner. This may also, however, create market uncertainty and curtail follow-on innovation12.

In Australia, applicants must request examination within 5 years of an application’s filing date or the application will lapse. For around a quarter of original applications filed in Australia via the PCT, applicants make voluntary and more timely examination requests within one month of the application entering Australian national phase (quarterly average, 2021 data). The rate is higher in information technology fields such as Semiconductors (51%), Digital communication (51%), Audiovisual technology (44%) and Computer technology (39%). This likely reflects the pace of technological progress and catch-up in these fields. It may also reflect the value of experimentation in complex technology markets, where revealing IP can help broadcast common problems13.

As the global economy moved to a virtual model in response to COVID-19, demand for innovation in digital technology accelerated. The rate at which applicants voluntarily requested more timely examination (within one month) for original applications rose within information technology fields (Figure 1.7).

  • In Digital communications, the rate increased from 34% for applications filed between 2017 and 2019 to 44% for applications filed between 2020 and 2022.
  • In Computer technologies, the rate increased from 39% for applications filed between 2017 and 2019 to 44% for applications filed between 2020 and 2022.

In contrast, the overall rate at which PCT applicants voluntarily requested more timely examination remained largely stable from the pre-pandemic period to the end of 2022 (Figure 1.7).

In the computer technology field, the rate at which applicants voluntarily request more timely examination has declined in 2022, from a peak of 47% in the January quarter to 39% in the December quarter. Increased conservatism by investors has led to valuation contraction in many major technology companies. Many companies have adapted to worsening market conditions by closing down marginal projects and cutting jobs, and fewer start-ups are going public14.

Figure 1.7 Rate at which PCT applicants request voluntary examination (within one month of national phase entry date), quarterly averages over 2013 to 2021, based on application dates 

Leading applicants

In recent years, patenting in Australia has been dominated by major global information technology and media device providers. These include Chinese telecommunication giants Huawei Technologies and Guangdong OPPO Mobile Telecommunications, and South Korean technology powerhouse, LG Electronics.

In 2022, LG Electronics was the leading filer of standard patents in Australia, with 282 applications. Huawei came in at third place, with 182 applications, while also leading globally for international patent filings15.

Two surprises include the exit of Guangdong Oppo Mobile Telecommunications from the list of lead filers and the entry of IBM Corporation, which ranked second with 189 applications (see Figure 1.8). In the US, IBM led in patent acquisition for 29 years, from 1993 to 2021. In a recent editorial, the company’s Senior Vice President and Director of Research, Dario Gil, explained that IBM’s innovation strategy has shifted16. He notes that advances in complex technologies (e.g., AI and quantum computing) rely on open innovation, open source and knowledge sharing to create new markets. The company has sought to embed these principles while maintaining a proactive IP strategy that appears to involve an increase in patenting activity outside the US market17. IBM first filed patents in Australia in 1939 but has remained relatively inactive in Australia’s patent system over several decades. The company’s previous highest ranking was 6th in 1965. Since the turn of the millennium, IBM has ranked in Australia’s top 100 patent filers only 6 times before, and in the top 50 only once before, ranked 40th in 2021.

Figure 1.8 Top domestic and international applicants for standard patents in Australia, 2022

Among domestic applicants, gaming technology producer Aristocrat Technologies led with 69 applications (two fewer than 2021). The Commonwealth Scientific and Industrial Research Organisation (CSIRO) followed with 51 applications (one fewer than 2021). Monash University filed 24 applications. A new entrant to the list was NSW-based inventor Thanh Tri Lam, with 24 applications related to renewable energy technology18.

New to the list of top resident filers was Australian start-up ‘unicorn’ Canva, with 23 applications. Canva is an online design software company founded in Perth in 2013. By September 2021, Canva had become one of the world’s most valuable start-ups, valued at around $40 billion. Even as investment in the technology sector has slowed, Canva has continued to develop new technology, launching a new visual worksuite in 202219.

ResMed, an Australian-born leader in respiratory and sleep technology, was fifth in the list of top domestic filers in 2022, with 23 applications, after entering the list in 2021.

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 succeed in converting applications into grants and examination request rates vary across technology fields. 

Provisional applications

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

Filing a provisional patent gives applicants 12 months to decide whether to file a complete patent application while establishing a priority date. A key benefit of obtaining provisional patent protection is that applicants can disclose, make, use and sell their invention while maintaining the option to seek continued protection.

The number of provisional applications filed in Australia fell in 2022 by 6% on the 2021 level to 4,037. Most provisional patent applicants are filed by Australian residents. The decline in provisional applications was driven by a 6.8% fall in applications by residents to 3,755. Applications from non-residents increased by 5.6% to 282.

The number of provisional patent applications filed annually has increased steadily over the past decade. However, provisional patent activity has decreased relative to the number of standard patent applications by residents. On average, 1.8 provisional patents were filed for every standard application by residents in 2013. That rate fell to 1.6 by 2022. It has been observed that while the number of provisional applications has declined, those that are filed tend to be of higher quality on average than those that were filed in the past: they are more likely to be filed with professional assistance and provide bases for further patenting activity20.

Australian filings overseas

Patents play a central role in international trade. For firms looking to export, securing foreign patent protection provides legal security by giving patent holders the right to exclude others from exploiting their invention in markets where the patent can be enforced.

Patents are associated with a significant export premium – according to one recent study, the value of exports increases by an estimated 6%21.Patenting also tends to precede exporting, since inventions disclosed to the public when offered for sale cannot be patented. As a result, patent filings are a useful indicator of export expansion22.

In 2021, the number of patents filed overseas by Australians increased by 2.4%, to 9,328, based on the latest available data from the World Intellectual Property Organization (WIPO). The leading destination markets for Australian patents are the US, European Patent Office (EPO), China, New Zealand and Canada (see Figure 1.9).

The destination markets for Australian patents abroad have remained relatively stable since at least 2005. In 2021, applications to the EPO grew by 6.3%, and those to New Zealand grew by 13.1%. In contrast, applications to the US were stable at the 2020 level.

Australians can seek patent protection in other countries by filing through the PCT or with IP offices in destination markets. In the five years to 2021, Australian PCT filings abroad have grown by an average of 3.1% per annum. This includes 2.8% growth from 2020 to 2021. Australians increasingly prefer the PCT route when taking their ideas global. The PCT share of Australian filings abroad has increased to 72.8%, up by around six percentage points since 2013.

Figure 1.9 Leading destinations for Australian patent filings abroad, 2021

  1. The maximum term of a patent is 20 years, though pharmaceutical substances that experience a delay in market approval can receive an extension, providing up to 25 years of protection.

  2. Fink, C., Toole, A. A. & Veugelers, R. (2022). Resilience and ingenuity: Global innovation responses to Covid-19(eBook). Centre for Economic Policy Research (CEPR) Press. 

  3. World Intellectual Property Organization (2023). International intellectual property filings in 2022; World Intellectual Property Organization (2022). WIPO IP facts and figures 2022. 

  4. Lee, J. Y. & Mansfield, E. (1996). The Review of Economics and Statistics;  Intellectual property protection and U.S. foreign direct investment.78(2), 181–186.

  5. Fleming, G., Liu, F., Merrett, D. & Ville, S. (2022). Patents, foreign direct investment and economic growth in Australia, 1860–2010 (Discussion Paper 2022-08). Centre for Economic History, The Australian National University. 

  6. Fink, C., Toole, A. A. & Veugelers, R. (2022). Resilience and ingenuity: Global innovation responses to Covid-19(eBook). Centre for Economic Policy Research (CEPR) Press. 

  7. WIPO IP facts and figures 2022. World Intellectual Property Organization (2022)

  8. 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.

  9. Fink, C., Toole, A. A. & Veugelers, R. (2022). Resilience and ingenuity: Global innovation responses to Covid-19 (eBook). Centre for Economic Policy Research (CEPR) Press. .

  10. World Intellectual Property Organization (2023). International intellectual property filings in 2022; World Intellectual Property Organization (2022). WIPO IP facts and figures (2022).

  11. Fink, C., Toole, A. A. & Veugelers, R. (2022). Resilience and ingenuity: Global innovation responses to Covid-19(eBook). Centre for Economic Policy Research (CEPR) Press.

  12. de Rassenfosse, G., & Zaby, A. K. (2016). The economics of patent backlog. 

  13. Bremner, R. P. & Eisenhardt, K. M. (2021). Organizing form, experimentation, and performance: Innovation in the nascent civilian drone industry. Organization Science, 33(4), 1251–1699.

  14. Waters, R. (2022, 11 November). Big tech job cull may be the start of things to come. Inside Business: Financial Times. 

  15. International intellectual property filings in 2022. World Intellectual Property Organization (2023).

  17. For more analysis, see Summerfield, M. (2023). Korea’s LG tops Australian patent filing table, while IBM surprises in second place. Patentology.

  18. Most (21) of these applications were divisional applications, dividing out the subject-matter contained in other patent applications.

  19. Silberling, A. (2022, 14 September). Canva moves beyond graphic design to launch a visual worksuite. TechCrunch.

  21. de Rassenfosse, G., Grazzi, M., Moschella, D. & Pellegrino, G. (2022). International patent protection and trade: Transaction-level evidence. European Economic Review, 147, Article 104160.

  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.

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