Abstract
The objective of this paper is to assess to what extent the cost of patenting affects the demand for patents. The empirical analysis, which focuses on the patent systems of the USA, Japan, and Europe in 2003, leads to the following methodological and empirical conclusions: (1) for a proper international comparison, the size of the market and the average number of claims included in a patent must be accounted for; (2) when the cost per claim per capita (the 3C-index) is considered, a negative linear relationship appears between the cost of patenting and the number of claims that are filed; (3) after the grant of a patent by the EPO, the translation, validation and transaction costs induced by an effective protection in several European countries witness a highly fragmented and very expensive European market for intellectual property; (4) for a patent designating 13 European countries, the 3C-index is about ten (two) times higher than in the US (Japanese) system (for process and translation costs up to the grant); (5) The European market being more than twice as large as the US market in terms of inhabitants, the 3C-index suggests that there would be a clear justification for higher nominal examination fees at the EPO, that would ensure the pursuit of a rigorous granting process.
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Notes
The questionnaire can be downloaded on http://europa.eu.int/comm/internal_market/indprop/index_en.htm.
Cf. Patent World (February 2006, Issue 179, p. 7) the declaration by Professor Alain Pompidou, then President of the EPO, who urged action to be taken on the London Protocol, the EPLA (European Patent Litigation Agreement, designed to improve the enforcement of European patents, enhance legal certainty and promote the uniform application and interpretation of European patent law) and the Community Patent: “The Protocol must be ratified by eight countries, of which England, France and Germany must be three, before it can come into force. If it comes into force it would mean that the claims of a patent would only be translated into English, French or German.”
See the Financial Times, 16th of January 2006, ‘One final effort to create a low-cost EU patent’.
European Patent Office website (http://www.epo.org).
For the year 2003 (EPO annual report, 2003).
USPTO website (http://www.uspto.gov).
USPTO, 2003 Performance and Accountability Report.
JPO Annual Report, 2004.
IPCC Report (The Industrial Property Cooperation Center), 2002, Tokyo.
About 15,000 and 13,000 patent applications were filed in the early 2000s at the French patent office (INPI) and at the UK patent office (UKPTO), respectively. In France, about 80% of these national applications were filed by domestic residents, whereas in the UK 46% were filed by domestic residents. A substantial share of these domestic priority filings are subsequently applied at the EPO (source: OECD 2005).
Even if one takes into account the direct filings by Japanese firms at national patent offices in Europe the difference with the number of Japanese filings at the USPTO stays similar. Only about 1,000 and 570 patents were filed by Japanese assignees at the INPI and UKPTO, respectively. These figures cannot be added due to a large potential number of double counts (i.e., simultaneous applications by Japanese residents at the two patent offices).
After the search report and the publication of the patent, the assignee must request a substantive examination of the patent and designate the EPC member countries in which the patent will be validated and put in force if granted. After the grant of the patent the assignee can effectively validate its patent only in these (or part of) countries that were designated at the examination stage. In other words, the numbers presented in Table 2 should be considered as upper bounds. van Pottelsberghe de la Potterie and van Zeebroeck (2008) show that once granted by the EPO patents are effectively validated in five countries on average.
Indeed, if the three markets had similar size, wealth and patent systems, we would expect similar numbers of patent filings.
Dernis et al. (2001) show that a patent applied by a Japanese assignee at the EPO is composed of four to seven Japanese priority applications. In order words, several Japanese patents are merged to create a single application at the EPO.
One reason for the high cost of obtaining patents through the EPO is the reservation made by most EPC member states under Article 65 requiring the proprietor to translate the description of a European Patent into their official national language in order to validate the European Patent on their territory.
A significant number of written communications may take place between the patent attorney and the patent office, substantially delaying the granting process. As the cost of translations and validations are relatively high, applicants increasingly adopt strategies to delay the granting process (Stevnsborg and van Pottelsberghe de la Potterie, 2007).
See Dernis et al. (2001), van Zeebroeck et al. (2006b) and Grupp and Schmoch (1999) for a more in-depth description of the filing routes and the impact of the Patent Cooperation Treaty (PCT) on the measurement of technological performances with patent data. The Patent Cooperation Treaty consists in filing a patent at the World Intellectual Property Office (WIPO); it can be used before the effective filing in any foreign patent office and allows applicants to wait for the international phase up to 31 months after the priority date, instead of 12 months that prevail under the Paris Convention.
In 2003, the European Commission estimated for 6 languages a cost of 10,200 €. Our cost estimate for translations include the intermediation of attorneys, and therefore is higher than the pure translation costs provided in the survey performed by Roland Berger (2005).
Renewal fees are calculated for the fourth to the tenth year since patent is delivered after 49 months on average. Fees are also required for the search and examination processes which take place during the first 3 years.
Agreement on the application of Article 65 of the EPC (http://www.ige.ch/E/jurinfo/pdf/epc65_e.pdf).
As illustrated by Lazaridis and van Pottelsberghe de la Potterie (2007), the number of claims may substantially delay the examination process. On average, from a base line of about 11 claims, two additional claims induce an additional communication from the EPO to the applicant, which in turn leads to a procedural duration of one additional year regarding the outcome of the granting process, and hence the high costs of validation in the case of a grant decision. Harhoff and Wagner (2006) also show that the most important patents, or those that are more frequently cited by subsequent patent filings, are examined faster.
Interview of G. Minnoye, one of the EPO’s vice-presidents, by Didier François in July 2004.
The 18 h include the time spent to read the application and the submitted prior art, to find and read additional prior art, to compare the prior art to the application, to write an action and answer to the replies (with some iterations), to implement interviews and make sure that the granted diagrams and claims are in form of allowance.
In Japan, the pre-grant opposition system was replaced by the post-grant opposition system in 1996. In 2004 the post-grant opposition system was merged into the system “appeal trial for invalidation”. Before 1996 the opposition period was 3 months from the date of publication of the examined application (pre-grant opposition system). From January 1996 onwards, opposition was possible within 6 months of the publication date of the granted patent (post-grant opposition system). In January 2004, opposition was abolished and invalidation became the only means of challenging the granted patent. (http://www.epo.org/patents/patent-information/east-asian/helpdesk/japan/faq.html).
See Quillen and Webster (2001) and Quillen et al. (2002). There are three types of continuing patent applications available in the USA pursuant to the patent statutes: continuations, continuations in part (CIPs), and divisionals. Continuation and CIP applications are unique to the USA, and permit patent assignees to refile their patent applications and hence restart the examination process with a newly filed patent application claiming the benefit of an earlier filing date. A continuation application is a second application for the same invention claimed in a prior copending nonprovisional application that claims the benefit of the filing date of the prior application. The prior application is normally abandoned after the second application is filed (cf. Quillen and Webster 2001, p. 4).
Regarding the grant rate of the EPO, it varies significantly according to the country of applicant (cf. Guellec and van Pottelsberghe de la Potterie 2000). For instance, the patents applied by US applicants have a much lower grant rate at the EPO than the patents applied by Japanese applicants, suggesting that countries have different propensities to file patent applications for their inventions at the EPO.
See Quillen and Webster (2001).
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Acknowledgement
Earlier versions of this paper have been presented at the AEA Conference “Innovations and Intellectual Property”, 20–21 of October, 2005, in Paris; at the CESPRI seminar of the Bocconi University (22nd of February, 2006); at the Bocconi conference “Intellectual Property: a key tool for European competitiveness” (23rd of February, 2005). We would like to thank all the participants and more particularly, Gaétan de Rassenfosse, Wolfram Förster, Alfonso Gambardella, Dominique Guellec, Karin Hoisl, Laurent Manderieux, Fabio Montobbio, Marc Nicolas, Bettina Reichl, Henri Serbat, Nicolas van Zeebroeck and three anonymous referees for their constructive remarks.
Disclaimer
This paper was partly written when Bruno van Pottelsberghe was Chief Economist of the European Patent Office. The views expressed in this article are purely those of the authors and may not in any circumstances be regarded as stating an official position of the EPO or of the ULB.
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Appendix
Appendix
Patent costs per claim in the three patent offices, in Euro. The x-axis shows the cumulative cost structure. The y-axis shows the cost per claim, expressed in EURO. EPO3 is composed of Germany, France and the UK; EPO13 is composed of the countries that are designated for protection by more than 60% of the patent applications: Germany, Great Britain, France, Italy, Spain, The Netherlands, Sweden, Switzerland, Belgium, Austria, Denmark, Finland and Ireland. Source: cf. Tables 2 and 3 and Table 7 in the appendix, own calculation
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van Pottelsberghe de la Potterie, B., François, D. The Cost Factor in Patent Systems. J Ind Compet Trade 9, 329–355 (2009). https://doi.org/10.1007/s10842-008-0033-2
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DOI: https://doi.org/10.1007/s10842-008-0033-2