Joff Wild

The National Science Foundation in the US has published its Science and Engineering Indicators 2010. This is a substantial piece of work that " focuses on the trend in the United States and many other parts of the world toward the development of more knowledge-intensive economies, in which research, its commercial exploitation, and other intellectual work play a growing role". Basically, if you are looking to work out how the IP landscape may develop over the coming years in terms of who wil be doing what and where, this is something you will want to consult.

It is far too long a piece of work to summarise succinctly in a few lines, so let me just draw attention to a some things that I found of particular interest, both of which can be found in the publication's Overview chapter. Essentially, while the authors of the report recognise that R&D activity is now much more widespread and that Asia has seen a remarkable rise in activity over recent years, the real high value work still seems to be concentrated in the developed world - the US, the EU and Japan in particular. This is what it says about patents:

Patents on inventions for which protection is sought in the United States, the EU, and Japan require substantial resources for obtaining and maintaining them. This suggests that their owners consider them to be valuable. These patents are herein treated as an indicator of the distribution of high-value patenting around the world.

Just over 30% of high-value patents had US inventors in 2006, down somewhat from 34% in 1997. The EU’s share declined somewhat more, to 29% in 2006, followed closely by Japan. The Asia-9’s increasing share largely reflects patents with Korean inventors. As with US patents, Chinese inventors appeared on only 1% of these high-value patents.

My maths tells me that, if you accept that the NSF is right to talk of high value patents in this way (and to an extent at least I think you can), then around 90% of them are still coming from the US, the EU and Japan. That may be slightly down on previous decades, but not by much. And it says to me that while overall patent volumes in China and other countries may be growing significantly, we are yet to see a real shift in who produces the really big-hitting stuff. Of course, that could change - but there are at least some reasons why it may not for a while. But it also shows just how important the patent system is to country's such as the US; something that makes recent decisions taken by Congress all the more inexplicable.

Moving onto what the publication calls "knowledge and technology intensive firms", which account for around 30% of the entire world's economic output, we are told the following:

The United States, with $3.3 trillion in 2007, produced the largest value-added output of these industries, which include business services, financial services, and communications.

The United States was followed by the EU with $2.9 trillion. World shares in these industries fluctuated for the United States and the EU, but by 2007 had settled near their 1995 levels. Increased production by China and the Asia-9 expanded their value-added output of commercial KI services, but at about half a trillion dollars each, their world market shares remained just below 5%. Flat output growth in Japan caused its market share to decline by more than half, to 8%.

That sounds like good news for the US and Europe, worrying for Japan, and mildly encouraging for Asia, although a lot more work needs to be done. And for Americans inclined to beat themselves up about their country's future, here's something else to consider:

US trade in commercial knowledge-intensive services ... has produced a consistent and growing surplus ... The trade balance widened from $21 billion in 1997 to nearly $50 billion in 2007, as exports grew faster than imports. Likewise, US trade in intangible assets - payments for the use of others’ property rights in the production of goods, trademarks, use of computer software, books, records, franchise fees, and the like - exhibited a similar trend of growing surpluses, which reached nearly $60 billion in 2007.

Of course, none of this means there is room for complacency, and there are likely to be stiff challenges ahead. But if what the NSF says is right, we are a long way off seeing the eclipse of US leadership in IP. Perhaps the biggest danger the country faces are problems created internally - such as the problems at the USPTO, immigration controls that could restrict access to the world's best brains, punitive financial reporting requirements for start-up companies, restrictions on access to capital and so on. But if these can be faced and successfully tackled it could well be another American century is on the cards; at least when it comes to intangibles.