R&D / Patent Trend - Emerging Countries Enhance Presence When Japan Stagnates

Osaka – Thursday, August 12, 2010




Nikkei, Japanese newspaper specialized in business and economy, reported on August 11 that emerging countries such as China and India are enhancing their presence in R&D. Patents of emerging countries in fields such as life science and energy are drastically increasing in particular. The number of patents applied and released by China in environment field is more than that of western countries and Japan, indicating that China is enhancing its presence in R&D.



On the other hand, Japan seems to be stagnating. This is because companies have been narrowing down the technologies to be applied in line with their patent strategy. Also, patent application by Japanese companies to growing emerging markets tends to be less aggressive compared to western counterparts. Some experts give warning to such situation.



1. How the number of patent application and release by China and India has been increasing?






1) China



According to WIPO (World Intellectual Property Organization), Chinese companies have applied 203,257 patents in 2008, domestically and abroad, which is 14 times as much as 10 years ago. Japanese companied applied the most with 500,034 patents followed by the U.S. companies with 389,073 patents, then Chinese companies. The number of patents applied by Chinese business owners and small businesses increased eightfold from 2000 to 2008. The increase is prominent not only of patents of technologies that support high economic growth such as water pollution but also of advanced technologies such as LED (light-emitting diode) illumination.



One reason for the drastic increase in patent applied by Chinese companies and business owners is the policy of China government. When the government gives subsidy or reduces tax, one of the requirements is the number of patents held by the company or business owners. Also, whether it leads to patent is taken into account when giving financial R&D support to universities.



According to NISTP (National Institute of Science and Technology Policy), as many as 104,164 scientific articles by Chinese scientists were introduced in worldwide major journals in 2008, which is only behind the articles by the U.S. scientists In addition, they are often cited, implying that quality as well as quantity of articles by Chinese scientists has been dramatically improving.



2) India



Companies of India made application of 4,537 patents domestically and abroad in 2008, which is increase by over 60% from 2005. More than half of them were made in the U.S., mostly in such industries of IT and pharmaceuticals.



2. How Japanese companies have been increasing patent applications in China






1) Overall trend



In order to validate patents abroad, patents need to be applied and acquired in that particular country/region abroad; therefore, Japanese companies have been increasing their application in China when China market is growing. Approximately 20,000 applications were made in Japan and the U.S. n 1998 but as many as 58,000 applications were made in 2008. Today, application made from Japan to China is greater than those made to Europe. In fact, it is only behind 80,000 applications made to the U.S.



2) Some examples of companies that are increasing applications in China



For Hitachi, the ratio of patents applied for Japan domestic vs overseas was 53% vs 47% in 2009, and would like to make overseas percentage more than 50% in 2010. The R&D executive of Hitachi says that until today patents applied abroad were mostly in western countries, but would like increase applications made in emerging countries in order to establish IPR (intellectual property right) in such countries where their businesses are expanding.



Panasonic is also increasing its application abroad, in China in particular because more R&D of home appliances and AV products are performed in such countries than ever. Similarly, Toshiba is increasing their application made in China in PC and digital consumer electronics, and semiconductors and electronic components.



3) Applications made in other emerging countries



Japan is behind western countries in increasing applications in other emerging countries such as India and Brazil. Among applications made to India, the U.S. covers 36% but Japan is only 10%. Similarly for applications made to Brazil, the U.S. covers 41% when Japan is only 6%.



3. Why Japan’s patent application is stagnating and what does it mean?






1) How patent applications by Japanese companies have been stagnating



The number of patent released by Japan in 8 growth areas (including environment, life science and energy) that Japan has been focusing on was 149,842 in 2009, which was only 0.5% increase from 2008. This is less than the U.S. and China is catching up with more than 120,000. Japan is said to be applying patents mostly in advanced technologies such as energy saving technologies, but some experts assume that by simple comparison of the number of patents applied, China may well overtake Japan within few years.



The result of the recent survey on R&D executed by Nikkei supports this assumption. 45% companies responded that the number of patents applied domestically decreased in 2009 from 2008, when only 23% responded that it increased.



2) Reasons / background for stagnating patent applications by Japanese companies



Primary reason is that Japanese companies have been focusing more on quality rather than quantity (number) of patents in order to improve R&D ROI, including patents of the 8 growth areas mentioned above.



Companies have been extremely selective in choosing which technologies to apply and acquire patents, to minimize patent related cost. Also, more companies are making application not in Japan but overseas where they do business (manufacture, market and/or sell).



3) Meaning of stagnating patent application by Japanese companies



Stagnating patent application by Japanese companies is not aligned with policy management of the Japanese government that has been trying to strengthen R&D with the slogan of “world leader in science and technology”. It is with this policy that 16 billion yen in accumulation from 2001 to 2009 was spent on R&D in the 8 growth areas. However, whether the global competitiveness of Japan’s industrial technology has improved is a question.



Moreover, an expert warns about the “quality over quantity” patent strategy of Japanese companies. The expert says that patents are deeply related to future of technology, and reduction of patent application is a sign of decrease in promising technologies.