An IP activity survey carried out by the Japan Patent Office (JPO) recently indicates the extent to which patent owners in the country are streamlining their portfolios. While it appears that the current focus is on a more selective approach to filing, the presence of large numbers of existing “unutilized” patent assets suggests that Japan could present a plethora of purchase opportunities in the not-too-distant future.
According to an overview (available here, in Japanese) of the JPO’s findings, domestic patent applications in Japan have steadily decreased annually since 2005. That year, Japanese entities filed 367,960 applications. Fast forward a decade and annual applications had dropped to 258,836 – though the JPO is predicting a small rebound to 261,395 during 2016.
The industry sector with the most substantial drop over the past two years is industrial machinery and equipment manufacturing, which saw patent applications fall 4.9% from 27,101 in 2014 to 25,515 in 2015 and a projected 24,507 this year. Other significant decreases were seen in electronics manufacturing (-2.8% between 2014 and 2016), iron and steel (-2.6%), pharmaceuticals (-0.5%) and public research, including universities (-0.5%). The highest rise in patent applications over the same period took place in the ICT sector (+8.3%).
As IAM has reported previously, Japanese in-house IP departments have come under increasing pressure – from both external and internal forces – to create additional value from the massive patent portfolios in their possession. In many cases, budgets are staying flat or are getting smaller, meaning that IP teams have to do more with less. One obvious place where savings can be made is by applying for fewer patents, and ensuring that the ones that are filed are of a high quality. But while the JPO report’s filings data indeed suggests such rationalisation is taking place, it would also appear to indicate that there is still a lot to be done with regards to extant patent assets.
The survey suggests that just 48.9% of Japanese-issued patents held by the organisations in its survey sample are currently being “utilised” – in other words, that they underpin current product and service offerings, are being licensed to third parties in return for royalty payments, or are part of cross-licensing deals with other companies. When it comes to foreign-issued patents owned by Japanese entities, the utilisation rate is even lower, at 46%. It should be pointed out, however, that the JPO survey considers the 35.3% of patents maintained for defensive purposes as unutilised, and they are counted as such in the data. It could of course be argued that patents intended to deter lawsuits, or held only on the off chance that they could be deployed in a countersuit, do in fact play a role in their owner’s business activities, albeit in a different sense to those which directly or indirectly contribute to revenue generation.
Looking more closely at utilisation, 13.5% of Japanese patent assets are being licensed, with 10.6% playing a part in cross-licensing arrangements and 5.3% being licensed out in return for fees.
The industries with the highest rates of patent portfolio utilisation are machinery and equipment manufacturing (67%) and electronics (59.1%). The one with the lowest, perhaps unsurprisingly, is public research (19.6%), followed by ICT (34.1% - which is noteworthy seeing as this is also the sector with the largest growth in applications).
The JPO report estimates that those in its survey sample made almost ¥15.23 billion ($192.5 million) from selling patents last year, while paying out ¥12.63 billion ($118 million) to acquire them from third parties. Businesses in the electronics industry made the most from selling patents last year (¥9.3 billion), followed by chemical engineering (¥2.7 billion). Companies in the ICT sector by far spent the most on acquiring patents (¥8.78 billion), followed by those in industrial machinery and equipment (¥1.34 billion) and electronics (¥930 million). With so many assets lying dormant in their portfolios, it would not be too much of a surprise to see Japanese companies become progressively active sellers in the foreseeable future.
Reporting by Jack Ellis