Are UK companies making best use of the patent system?

UK companies are lagging behind their counterparts in Europe, the United States, Japan and South Korea when it comes to filing domestic and foreign patent applications, according to recent research published by the UK Intellectual Property Office (UKIPO).

“Building the Evidence Base on the Performance of the UK Patent System” reviews the UK patent system with regard to:

• how companies patent in the United Kingdom;
• who patents in the United Kingdom; and
• how the UK system compares to other countries.

In 2014 the United Kingdom was the sixth-largest national jurisdiction in terms of the number of patent applications filed, in a world ranking led by China and the United States. Adjusting these figures for gross domestic product (GDP) and population puts the United Kingdom fourth and second in the world, respectively. However, the vast majority of UK patent applications are filed by foreign applicants. In 2012 only 7% of patent applications covering the United Kingdom (ie, National UK patent applications and European patent applications) were filed by domestic applicants, compared to:

• 34% in Germany;
• 48% in the United States; and
• 76% in South Korea.

It appears that UK companies are not making up for this shortfall abroad either, with UK applicants accounting for negligible percentages of the total number of patent applications filed in the United States, Germany and France.

The report offered the following explanations for these statistics:

• The number of foreign applicants for UK patent applications is high because companies patent where a consumer market for their product is found. The UK’s large population, high GDP and high consumer spending make it an attractive consumer market.
• The number of domestic applicants for UK patents is low because the UK economy is heavily weighted towards knowledge-intensive business services. Developments in this sector are often perceived not to be suited to patenting due to limits on the patenting of software and business methods in Europe and the United Kingdom.
• UK manufacturers often operate a service-based model where they differentiate from their competitors on the service offered rather than the technical product itself.
• Cultural attitudes to patenting may also play a part, with UK companies being less likely to patent around an idea – preferring instead to be more selective in their patenting strategies.

Lower levels of patenting among UK companies does not necessarily indicate lower levels of innovation. The sector make-up of the UK economy and the propensity to innovate in areas not suited to patenting are facts of life. With this in mind, is there anything that can be done to address the apparent lack of interest shown by UK companies in filing patent applications to cover their innovations?

Unquestionably, the reasons for not patenting provided by the companies participating in the study, particularly small and medium-sized enterprises, should be addressed. The majority of these reasons stemmed from a lack of understanding of the patent system and included an inability to predict costs upfront and a lack of understanding of the benefits of patenting.

The following are just a few ways in which this situation could be improved:

• A better understanding of what constitutes patentable subject matter, especially in the knowledge-intensive business services sector, would help companies identify areas of their business where patents could be valuable.
• Engineers and inventors could be educated in intellectual property – a practice perceived as normal in Germany.
• Improved awareness of combined search and examination and the Green Channel as methods of reducing UKIPO processing times and enhancing the predictability of timeframes for patent prosecution could facilitate business decisions about whether to patent an innovation.
• Presenting the use of patents in terms of a business plan may help companies appreciate their value in the sphere of their organisation.
• A wider awareness of the benefits of the Patent Box (a reduction in corporation tax available on the profits from patented inventions in the UK) may help to boost the number of patent applications filed.

The study also highlighted additional initiatives such as IP Equip, the IP Health Check and the IP finance toolkit, which can help companies, particularly small and medium-sized enterprises to better understanding how patenting their innovations can enhance their business.

Some of the factors behind UK companies’ reluctance to file patent applications are inalterable, such as the UK economy’s sector make-up and the areas in which UK companies tend to innovate. However, thought should be given to enhancing companies’ understanding of the patent system and of what constitutes patentable subject matter. This can be achieved through improved dialogue with patent attorneys at all stages of the innovative process to determine where patent applications may be filed and what benefit can be derived from them. Improving understanding in this way can only benefit business decisions, even if the ultimate conclusion is not to file a patent application.