Patent statistics can be used to prove any thesis

CE Financial Observer talks with Prof. Aurelia Nowicka from the Adam Mickiewicz University in Poznań and Alicja Adamczak, PhD, the President of the Polish Patent Office.
Patent statistics can be used to prove any thesis

(gr3m, CC BY-NC-ND)

CE Financial Observer: The number of patents and patent applications is commonly regarded as one of the most adequate measures of innovation. Do these figures really reflect the innovativeness of a country?

Aurelia Nowicka: I use these figures myself. Yet, although the comparison of patents granted to entities from Poland and Germany reveals an enormous discrepancy, I see these figures exclusively as a confirmation of the differences in the innovation level of both countries, not as a proof in itself. In 2014 the European Patent Office granted 108 patents to Polish entities and over 13,000 to German ones. Such an immense disproportion does prove something, but a comparison of the figures leads only to a very vague conclusion that if an economy is innovative, there are a lot of patent applications and patents, and if it is not very innovative, there are few. Generally speaking, it is not legitimate to attach crucial importance to the number of patents.

Alicja Adamczak: I’d point out one more aspect. According to the data of the World Intellectual Property Organization (WIPO), Poland ranks the 17th among 188 member states in the number of submissions of innovations and utility models, and the 15th in the number of exclusive rights granted. So it might seem that we are performing excellently. But, when expressed in relation to the population, this result is no longer satisfying. Statistical data can be used to justify a great variety of theses.

I think we should add that in many cases the significance of a single patent can be many times greater than tens or even hundreds of others. 

AN: The quality of patents is a completely different issue. It is not the patent itself, in other words, not the exclusivity obtained in the form of a document that counts, but what happens to it afterwards. It’s possible to obtain a patent and hang it on the wall, put it away in a drawer, or implement it in the economy, generating huge effects.

AA: It is also a matter of the type of solution and the scale of possible commercialisation. There may be outstanding patents with a unique, limited application, whereas sometimes the application may be broad. The quality of patents is certainly of great importance when it comes to deciding about their commercialisation and the scale of implementation. It’s also worth noting that single patents setting certain standards to which entire industries conform could be of enormous value.

Can some states encourage patent acquisition in order to improve their own position in innovation rankings?

AA: I wouldn’t say that this reflects state policies, but some entities try to hold the biggest patent portfolios they can because they believe that this ensures them greater prestige and, if the company was taken over or sold, its valuation could be higher, even though the patents as such have no significant value or even no value at all. Accumulating a great number of patents can also play a role in patent wars. If two companies dispute in court over patent infringement in a mobile phone, for example (and a single device can contain hundreds, if not thousands, of patents), then the number of patents might determine the conditions of settlement between the litigating parties.

AN: Collecting as many patents as possible can also result from companies’ desire to block the competition. In an extreme case, if someone obtained a patent for, say, the wheel, they could effectively block the development of competitors. A patent becomes a competitive scarecrow. It spurs, for example, lawsuits being filed against competitors or at least sending lawsuit notices to other companies. The trend towards obtaining as many patents as possible is clearly visible. Inevitably, many of them are just “paper” patents. I suppose that some of them might be obtained by research centres submitting applications just to succeed in all kinds of rankings.

The number of applications to the European Patent Office filed by Polish entities — over 47 last year — was considerably higher than in 2013. How can we interpret that? Can we assume on this basis that Poland is becoming an increasingly innovative country?

AN: It depends on the type of inventions and fields these applications concern. If these inventions are likely to be implemented, then the increase, observed for several years now, should inspire optimism, but if these applications are merely the result of the fact that funds for acquiring a European patent are available at the moment, then the only effect of the phenomenon will be indirect subsidizing of the European Patent Office. Let me add that the above-mentioned 47 European patent applications made by Polish entities in 2014 should be compared with the data on entities with the largest number of such applications in the same year: for example, Samsung made 2,541, Philips — 2,317, Siemens — 2,133, and Nokia — 1,040 applications.

What is your opinion of the applications filed with the European Patent Office?

AA: On many occasions I’ve participated in the meetings of the Patent Plus Program commission at the National Research and Development Centre, which considered applications for the co-funding of patent applications. Every one of them was properly substantiated, but in order to assess the market perspectives of these inventions thoroughly, it would have been necessary to employ a group of top experts to do the task. A lot of the applications included letters of intent from companies, suggesting that there were possibilities of implementing these solutions.

How are we supposed to interpret the data on patent applications filed with the Polish office in 2013 and 2014? In contrast, these were fewer than in the previous years.

AA: These aren’t big decreases, maximum 10 per cent, and we shouldn’t infer that they will result in a reduction of the innovativeness of our economy. I’d like to point out that during the global crisis Poland was the only European country where the number of applications didn’t fall. On the contrary, they increased. The fall over the last two years could have been attributed to the fact that some scientists withheld their patent applications waiting for a new law to be passed, enfranchising scientists and inventors and enabling them to acquire rights to the solutions they co-invented. The fall may also have been due to the fact that our scientists participate more frequently in research and development activities financed by foreign sources. The resulting inventions are submitted on behalf of the financing entities because it is up to them to decide who will hold the rights in the solutions created under their umbrella. From the perspective of Poland’s economic interests, this situation is not beneficial, although the participation of Polish scientists, specialists in international research activity is a positive phenomenon.

Poland has recently been the arena of a debate about who should have the last word about patenting an invention created by a scientist but developed using the infrastructure of a research facility. What is the final shape of the changes and what effects could they have?

AN: You are referring to the debate about the so-called enfranchisement of scientists. The changes eventually introduced to the Law on Higher Education and the Law on the Polish Academy of Sciences constituted a compromise but one that cannot be assessed positively. In 2014, when the legislative work on these changes was in progress, the academic community following the developments concerning intellectual property rights strongly criticized them and — demonstrating their negative consequences — addressed open letters to the Prime Minister and the Sejm Speaker, appealing for withdrawal of these changes. Regrettably, their view wasn’t taken into account.

As I said before, I have a negative opinion of the enacted compromise because it creates the risk of solutions developed in public research units being “intercepted” by groups of agents, also foreign ones, to the detriment of Polish economy. I am also worried of the unequal treatment of the employees of the scientific units affected by these changes, on the one hand, and other employees, on the other hand. A separate issue is the chaos these legislative changes could wreak, in both the research units as such and in their cooperation with the economy.

What is the experience of other countries in this field? Is the right to submit applications limited mostly to researchers or does it extend to the R&D centers employing them?

AN: In the vast majority of countries, the governing rule is that the intellectual property rights in the work created by scientists belong to employers. In some cases, especially if the employer is a public institution benefiting from public financing, these rights belong to the state. Several foreign legislations used solutions granting these rights to scientists (the so-called professor’s privilege), which were later abandoned (e.g. the United States, Germany, Austria, Denmark, Norway and Finland). In the European Union, the “professor’s privilege” continues to apply in Italy and Sweden.

Many countries, some of them in the CEE region, use tools known as the Patent Box, including tax incentives designed to encourage the registration of income and profit from inventions at their place of origin. Should Poland introduce them too?   

AA: Tax incentives as such should always be positively reviewed but what we often need is to view government revenues in a broader perspective. In the tax systems of the EU countries, tax incentives related to intellectual property rights are being augmented. Another move that is worth noting is the introduction of amendments to the Accounting Law which enabled the contribution in kind of all the intangible assets into companies in Poland. Apart from that, in Poland there is a number of tools favoring entrepreneurs who regard intellectual property as the foundation of their companies’ competitive advantage. In the so-called technological credit, for example, exclusive rights are one of the fundamental lending criteria. I’m sure that in the near future broadly defined innovation tax reliefs will play a significant role, although, actually, they have  already been made available with the recently largely expanded tax deductions for research and development activities. Proving such a profile of business to the tax office is not only based on demonstrating the creation of an innovation, but to a large extent on holding the exclusive rights.

Perhaps it would be worthwhile to undertake legislative work on a complementary tax relief directly associated with the commercialization of those results of R&D work that were granted patent protection or protection rights for a utility model in Poland.  Such a move would recognize the fact that in economic practice patents and protection rights are the only globally recognized measures of the innovative potential of engineering solutions. Such a relief would apply to income gained from commercialized, protected solutions. There are similar solutions, known as the Patent Box, used to varying degrees by several EU countries (Belgium, France, Spain, the Netherlands, Luxembourg, Hungary and the United Kingdom).

A tax relief of the “Patent Box” type would form a comprehensive system of tax incentives for Polish entrepreneurs commercializing engineering solutions. The introduction of such a relief would help raise interest in the acquisition of exclusive rights by innovators, as well as stimulate the development of an exclusive rights’ market  (such a market is practically non-existent in Poland).

Moreover, tax reliefs of the Patent Box type could help to raise interest in the development of home-bred solutions and in the location of R&D centers in Poland by international corporations. This in turn would contribute to increasing the demand for highly-qualified personnel conducting research work, which would result in a significant increase in the innovativeness and competitiveness of Polish employers and entrepreneurs, and the economy at large.

The proposal to introduce a tax relief would contribute to the accumulation in Poland of a “critical mass” of pro-innovative conditions, necessary to set in motion the processes driving the economic development towards innovation. Being aware that tax relief instruments should be used with great caution, I suggest that the legislative process include adequate macro- and microeconomic analyses and a series of consultations with the interested communities. The Polish Patent Office would be of help in the efforts aimed at developing and implementing this solution, within its capacities and competences.

The share of Polish scientific facilities in the number of patent applications in Poland has been gradually increasing over the recent years and is considerably higher than in Western European countries. How can we interpret this trend?

AA: Indeed, in comparison to highly-developed countries, the share of the Polish scientific sector in the number of submitted inventions is high — over 40 per cent. Regrettably, still few of these solutions get through to industry. The difference you’re asking about is above all due to the fact that in the Western countries it is industry that initiates R&D work and it very often commissions it to higher education institutions or research and development institutes. In this type of relationship, the rights to patent the result of this work usually pertain to the entity commissioning and financing the research, while the higher education institution or institute, apart from financial gains, develops and enriches its research potential. Due to the fact that the co-operation between Polish industry and science is still ineffective, higher education institutions submit patent applications in the hope that they will serve as an offer and encouragement for industry. However, the frequent lack of correlation between these solutions, market needs and the resolution of specific problems faced by industry isn’t favorable to innovation and, to my mind, this is exactly one of the reasons for these disproportion.

At the same time, they still submit very few applications to the European Patent Office. Why such a discrepancy?

AA: While submitting a patent application to the Polish Patent Office is relatively cheap, the costs of international applications, also to the European Patent Office, are substantial. Obviously, a higher education institution hasn’t got the capacity to implement the submitted solutions, it isn’t within the competence of scientists or the institution itself. Therefore, without effective co-operation with a business partner, a higher education institution or another academic facility won’t usually be willing to bear such costs unless there are clear prospects that the investment will pay them back.

What conclusion can we draw from the fact that in Poland, in opposite to other countries, companies have a very small share in patent applications?

AA: Above all, we can state that very few Polish companies regard patents as an instrument for improving their competitive position in the market. Patenting certainly isn’t the only development option for technology companies, but the changing external conditions, I mean, for example, the spiraling growth of global patent activity in the last two decades, are thought-provoking. Because it may soon turn out that a lack of own patents and other exclusive rights will significantly hamper or even prevent functioning, not only in the global market, but also in local ones.

What is the current situation of the European unitary patent? In Poland most experts have opposed this solution until now, I suppose. Why? 

AN: The system of a European patent with unitary effect isn’t operating yet. Although the European Union adopted the main legal acts forming the framework of this system at the end of 2012, the start of application of these acts depends on the entry into force of an agreement on a Unified Patent Court.

Work is also underway in connection with the establishment of the structures and the elaboration of the operating principles of the future Unified Patent Court. Presumably, it will be possible to start the granting of unitary patents in 2017. All the arguments against the validity of these patents in Poland will of course remain fully valid, and will even become more fleshed out — as further specific regulations (e.g. concerning costs and fees) are formulated.

Under what circumstances could the adoption of a European unitary patent be beneficial to Poland? 

AN: There is a short answer to this question: Poland’s accession would be beneficial if the level of innovation of our economy significantly improved and became comparable to the EU leaders in this field. I should perhaps add that we don’t oppose the very idea of unification of patent protection, but the solutions in the shape in which they were finally adopted, taken without proper consideration for the interests of Polish entrepreneurs and economy.

AA: I entirely concur with this view.

Alicja Adamczak — President of the Polish Patent Office since July 2002. Doctor of Laws, legal advisor and patent agent. Graduate of the Faculty of Law and Administration at the University of Warsaw. She conducts research at Kielce University of Technology.

Aurelia Nowicka — Professor of Legal Sciences. Head of the Chair of European Law at the Adam Mickiewicz University in Poznań. Author of over 150 scientific publications. Her research is focused on intellectual property law and EU law.

(gr3m, CC BY-NC-ND)