UK plc's ailing research industry and why exploitation may be just the tonic

July 28, 2000

When British Telecom announced in June that it held a US patent on the hyperlinking technology that lies at the heart of the web, it created a big stir. Here was a UK company set to earn huge licensing fees from US internet service providers as a result of a UK invention made before the commercial development of the net.

Whether the BT patent is enforceable has yet to be established. It would, however, be wrong to conclude that the incident demonstrates that UK plc is an avid exploiter of the patent system.

Leaving aside the fact that BT rediscovered its hyperlink patent accidentally 11 years after it had been granted, even the most cursory of patent counts underlines the extent to which the UK is falling behind its main competitors in the patenting arena.

The table (right) shows the number of patent applications made over the past ten years by the major developed economies. Although the figures are distorted by the Japanese approach to patenting, which tends to produce several patents for each invention, the chart shows how the UK's use of the patent system has fallen compared with its competitors.

"One can see clearly that while patenting activity is generally increasingI the UK has been underperforming relative to the other countries," says Peter McKay, managing director of Derwent Information, the patent information company that produced the chart.

Should we be worried? David Morgan, a patent and trademark attorney at London-based solicitors Field Fisher Waterhouse, believes we should. "Patent filings show how much is being spent on research and development, and, in general, high R&D spending leads to high economic growth as a result of productivity gains. And it is these productivity gains that create wealth."

Further analysis suggests that the situation may be worse than the raw patent data imply. Using patent applications made to the World Intellectual Property Organisation under the Patent Cooperation Treaty, the graph (right) plots relative national performance over the past ten years. The results suggest that the UK has experienced a dramatic decline in patenting.

Using 1990 figures as a base of 100, the graph shows how Japan's share of all PCT filings increased between 1990 and 1998 from 8.9 per cent to 9.1 per cent, giving it a score of 102 - a score that leaps to 110 a year later. By contrast, the UK's score has nearly halved over the past decade.

"Moreover," McKay says, "while the UK remains ahead of the French in terms of share of the PCT market - with 6.5 per cent of 1998 filings against France's 5.0 per cent - this gap had narrowed fast since 1990, when the UK share stood at 11.1 per cent, and France at 4.9 per cent."

But is there a connection between patenting and economic health?

Yes, according to Cyril Pierre-Beausse, an intellectual property lawyer at the Luxembourg-based Intellectual Property Helpdesk, which was created by the European Commission to promote wider use of intellectual property within the European Union. "We have done some analysis in this area, and the results suggest that there is a general correlation between the number of patent applications a country makes, its gross domestic product and its economic growth."

However, while one might argue that the figures could reflect the economic problems experienced by Germany and Japan and their recoveries, one is left with the puzzle that the UK economy has been performing better than most of its European neighbours in recent years. Would this not lead to a rise in UK patenting?

The problem, points out Norman Price, industrial adviser to the Department of Trade and Industry's Future and Innovation Unit and co-author of the R&D scoreboard of UK corporate research, published by the DTI, is that there is always a time lag between R&D activity, patenting and economic performance.

"It can be six or seven years before the benefits of R&D come through," he says. "So it's not possible to see a direct correlation on a year-by-year basis. It could also be that the UK's recent economic success has been at the price of taking profits today rather than investing in R&D for tomorrow."

But Pierre-Beausse cites another possibility, and a potentially positive explanation. He says that these figures could reflect the UK's successful migration to new industrial sectors. While a country such as Germany is still heavily involved in "old economy" industries such as engineering and car manufacturing, which have a history of patenting, the UK is now more focused on "new economy" industries, which may not show up in the patent system.

"The problem with patent data is that they are just one indicator of innovation," he explains. "The UK may be innovating in fields that are not protected by patents. Software has generally been excluded from patentability in Europe, so most software companies still rely on copyright. And there are no formal registration procedures for copyright."

Morgan, however, remains sceptical. "The statistics show that the number of UK patent applications is declining," he insists, "which means that R&D spending is declining. This in turn means that British productivity cannot increase."

Price agrees: "While patents are only one form of innovation, and there are also issues about the difference between quantity and quality when it comes to patents, no one can afford to be complacent about a fall in activity."

PATENT APPLICATIONS

Japan UK US Germany France

1989 187,652 13,414 82,206 31,537 11,815

1990 196,365 12,728 87,445 30,528 11,447

1991 191,529 11,836 90,213 31,919 11,809

1992 193,621 10,416 95,899 32,994 11,486

1993 197,760 10,298 100,151 33,807 11,624

1994 295,296 10,339 105,973 34,736 11,651

1995 313,603 10,869 114,003 37,013 11,560

1996 315,790 11,336 109,077 49,023 12,181

1997 322,521 11,312 104,187 56,298 12,752

1998* 171,256 7,776 51,010 41,976 7,583

*lower figures due to time delay before patent publication Source: Derwent Information

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