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GENEVA, Feb 3 2009 (IPS) - Innovation in the global marketplace is the very heartbeat of knowledge-based economies. It encompasses both the invention of products and processes and their sale and distribution, which stimulates economic growth. It involves the creation, exchange, and evolution of new ideas and their application for the success of an organisation, the vitality of a nation’s economy, and the advancement of society as a whole. If we are to solve the current financial crisis, what is needed is more, not less, innovation.

Recognising its importance to both business and countries, governments have devised national plans to systematise the process of innovation. In this context, patent statistics are traditionally used as a measure of performance.

In its annual report, the Organisation for Economic Co-operation and Development (OECD) presents figures from the three major patent systems: the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO), and the Japan Patent Office (JPO). It has also tried to measure innovation performance across various OECD countries and provides the latest available international data on patents.

The World Intellectual Property Organisation (WIPO), which administers the Patent Cooperation Treaty (PCT), also compiles extensive patent statistics and interprets them. The WIPO World Patent Report, first published in 2006, for instance, is now an annual feature.

However, although patent statistics are one important indication of innovation performance, they are far from an accurate measure, especially in the context of the rise in patent filings in developing countries.

In its geographical ranking of innovation WIPO weighs patent statistics heavily.

From 2004 to 2005, the patent office of China recorded the highest growth rate ever for resident patent filings (42.1 percent). The World Patent Reports highlight the fact that in China, patent filings by residents increased by more than eight fold between 1995 and 2005.

But such reliance on resident patent applications can produce a distorted measure of innovation because of confusion regarding the location of an invention, the identification of the resident applicants (inventors and applicants), and double counts.

For instance, a tally of resident patents in China includes patents filed by foreigners. A patent filed by LG Electronics China Branch is counted as a Chinese domestic patent yet the same patent may also be registered in several other countries. This makes patent counts highly suspect as a basis for a geographic assessment of innovation because it combines indigenous and foreign patents, which can lead to a significant bloating of a nation’s rank as an innovator.

The fact that patents are subject to the statutory regulations of each country raises yet another problem. Although the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement has to a large extent harmonised common binding norms, continuing variations in countries’ patent processes introduce another possible distortion.

Accordingly, any cross-country comparison must take note of the differences in the design of patent systems. In the WIPO World Patent Reports, application numbers are drawn from statistics concerning the PCT, whereas grant figures are based on national statistics.

Further distortion arises from patent application counts, given variations in the rates of acceptance, reversals, invalidation by courts, and so on. Some countries are seeing a rise in patent application reversal rates, while courts in some jurisdictions are invalidating patents more frequently because of higher patentability thresholds. A rise in open source models in some countries and reduced reliance on patents or patent reforms to weed out questionable patents are additional variables.

All of these factors must to be borne in mind when interpreting composite patent statistics for the purposes of cross-country innovation performance.

Finally, not all patents reflect the same degree of invention, which varies according to the area of invention, the importance of that particular patent in the value chain, and so on.

In short, any country-by-country ranking of innovation must take into account all of the above variables, particularly in view of the importance of innovation to the global economy. (END/COPYRIGHT IPS)

(*) Xuan Li is Coordinator at the Innovation and Access to Knowledge Programme, South Centre. (li@southcentre.org)

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