US Patent Applicants Heading to the EPO

By Dennis Crouch

At the recent Mizzou-USPTO symposium there was some discussion about whether the European Patent Office (EPO) has positioned itself as a more favorable patent venue than the US.  Most practitioners will agree that the US is now more restrictive in terms of subject matter eligibility and the new pan-European patent enforcement court makes those patents obtained in Europe more all the more valuable.  Today, the EPO released a set of data that makes these prognostications appear to ring true.

The first chart below shows that the number of EPO patent applications coming from the US grew substantially over the past year (up 16.4%).  Top US-based EPO filers include United Technologies (UTX), Qualcomm, GE, Intel, Microsoft, J&J, and Honeywell – with these top seven collectively representing about 20% of the US-based EPO applications filed in 2015.  Some major U.S. filers (such as AT&T and GM) did not make the list.  UTX was not patent powerhouse in recent decades, but has ramped-up filings over the past few years. The growth in applications from the US almost accounts for the entire increase in filings over 2014.

EPOUSGrants

Although these are year-to-year changes, it is important to consider that the impacts will linger in the system for the next 20 years.

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

42 thoughts on “US Patent Applicants Heading to the EPO

  1. Below Malcolm wants to put “numbers in perspective” and draw an inference from those relative numbers.

    Let’s do the same for active patents compared to a case under appeal at the CAFC.

    Running the numbers from the graph of patents granted and eliminating patents not renewed at the various maintenance fee levels (and then adding the small number of expired patents that could still bring suit for past damages), and then putting that number into perspective from the CAFC appeals on patent cases, the “perspective” of the Oh Noes litigation b00gyman is that out of every 3,000 patents, a single one is before the CAFC.

    Or stated another way, 99.967% of patents are not involved in the “Oh Noes someone is trying to enforce their rights” up through the CAFC appeal process (that’s roughly 8 times the magnitude difference than Malcolm points out).

  2. Speaking of “lingering effects”, has everyone seen the devastating impact that New Zealand’s 2013 ban on software patenting has had on New Zealand’s tech sector? Because nobody will innovate new software there anymore? And companies will flee?

    Probably not. That’s because there was no such impact. The tech sector in New Zealand is alive and well.

    1. For a country of 4.5 million people, and can you name a single product AT ALL from New Zealand? The only thing I know is lamb. How about a software product from New Zealand? Office, perhaps? Or iOS or Android? Oh wait, those are from the US.

      And since New Zealand is such a small market, no one really cares about them. At least multi-national corporations (which can get patents elsewhere) do not.

      1. no one really cares about them

        New Zealanders care. That’s why software developers there overwhelmingly supported the ban on software patents. They saw through the game and they saw through the b.s. propaganda floated by fake “progress promoters”, just like many (most?) software developers in the US do.

        For a country of 4.5 million people, and can you name a single product AT ALL from New Zealand? The only thing I know is lamb.

        Not sure what your point is. Connecticut has 4 million people and most people in the US couldn’t name a single worthwhile thing coming out of that state.

        1. The point being that it is your own bs propaganda on some concerted New Zealand software industry rising up and speaking in a mighty massive voice on a topic the just is not massive for them.

          Oops.

          1. just is not massive for them

            Who is “them”? Last time I checked, the topic is still pretty “massive” to NZ software developers.

            link to zdnet.com

            New Zealand’s largest IT industry body, the Institute of IT Professionals, has backed concerns expressed by the New Zealand Open Source Society late last month that the country might capitulate over software patents.

            The bank accounts of the howling babymen attorneys (or fake attorneys like you) who stamp their feet and cry everytime their precious “do it on a computer” patents are given a haircut don’t really amount to a hill of beans in the US economy, as everyone knows. Likewise, everyone also knows that the impact on software development in the US of completely gutting protection for every class of “do it on computer” patents will be undetectable.

            The only people who really stand to lose are the US patent attorneys in the “do it on a computer” arts who are, as a class, some of the least skilled b0tt0m-feeders who ever practiced any type of law anywhere.

            1. Lol – yet more A.O.O.T.W.M.D.

              From the same guy that just applied de minimus reasoning to the entire EPO market, but wants to maximize a tech group among the sheepherders…

              1. “anon” the same guy that just applied de minimus reasoning to the entire EPO market

                What happened is Dennis (consciously or not) baselessly spun a data point in manner that you and your cohorts were liable to run with. All I did was demonstrate the problem with the spin (an incredibly easy task, by the way).

                No idea what you’re talking about but, hey, whatever turns your crank.

            2. …like looking at Slashdot/Techdirt and the lack of legal understanding and abundance of groupthink Kool-aid induced haze of lemmings marching over the cliff…

    2. Should anyone be surprised when someone who is so often wrong in so many ways is wrong again on yet another point that is easily verified, unless one is interested in propaganda and misinformation?

      www[DOT]patentbuff[DOT]com/2013/09/new-zealand-bans-patents-for-software.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Patentbuff+%28PatentBuff%29

      “So when we talk about software patents, if we actually mean computer-implemented inventions, we haven’t banned them at all.”

      The “ban” is nothing more than the U.S. PTO’s prohibition on software per se.

      1. Buckets: when someone who is so often wrong in so many ways is wrong again

        That would be you.

        easily verified

        LOL. You wrote: “The “ban” is nothing more than the U.S. PTO’s prohibition on software per se.”

        Well, you’re dead wrong about that.

        See, e.g., link to iponz.govt.nz: “[A] computer distinguished only by the program it runs is not patentable”.

        The New Zealand law is Alice on steroids. And — overwhelmingly — the software developers working there like it that way.

  3. How many patent applications are we talking about here in that 16%?

    What was the total number of EPO patent grants in 2015? 70,000 or thereabouts?

    1. Expressing it as “releasing data” might strike us as an exciting event. But folks, all that’s happened is that the EPO has published its Annual Report. Just drop in on the EPO website to read it.

          1. LOL — nothing! 68,000 granted patents in 2015 according to the graph.

            The first two times I opened the page, the graph never showed up (“never” = five seconds which is about as long as I’m willing to stare at a blank page).

            Third time’s the charm, I guess. Apologies for the confusion and thanks for making me check again. 😉

      1. Once on the EPO website and at the Annual Report, compare the numbers for “European patent filings” (which count all PCT applications) with those for “European patent applications” (which count only the PCT’s that entered the EPO phase). In that latter, you will see the greatest surges by just two countries. One of them is the USA. The other is China.

        The USA accounts for 27% of applications, 24% of filings. China 11% of filings but less than 5% of applications. So I was wrong: China enters the EPO on more than a tiny percentage of its current program of PCT filings. In that respect, it’s becoming more like the USA, following through on its PCT filings, into the EPO.

    2. MM: How many patent applications are we talking about here in that 16%?

      Now I see that I can answer my own question: approximately 6,000 more applications from all US applicants were filed in the EPO in 2015 versus 2014.

      Just to put that number in perspective, based on their published application rate, Microsoft by itself files about 300-500 applications per year in the US.

      6,000 also equals approximately 2% of the number of US patents granted each year by the PTO.

      In other words, while this may be big news for the EPO, it doesnt say squat about the relative desirability of filing in the US.

      Heck, search around for data in some other jurisdictions and I wouldn’t be suprised if one can find a 50% or even a 200% increase in US filings in 2015 relative to 2014. Does that number say anything about a “relative favorability” of the jurisdiction towards patent applicants compared to the US? Of course it doesn’t. People file in different jurisdictions for all kinds of reasons, including some of the most ridiculous reasons that you can imagine.

      1. Heck, search around for data in some other jurisdictions and I wouldn’t be suprised if one can find a 50% or even a 200% increase in US filings in 2015 relative to 2014.

        I wonder how New Zealand fares….

  4. Dennis: Although these are year-to-year changes, it is important to consider that the impacts will linger in the system for the next 20 years.

    What “lingering impacts” are you contemplating, Dennis?

    Dennis: [T]here was some discussion about whether the European Patent Office (EPO) has positioned itself as a more favorable patent venue than the US….. Today, the EPO released a set of data that makes these prognostications appear to ring true.

    To be clear, there is absolutely nothing in that data suggesting that any of those companies are favoring the EPO “over the US”.

    All it shows is that more applications were filed in the EPO than in previous years. That result could be tied to any number of factors completely unrelated to “more favorability” in the EPO versus the US.

    It’s also possible that the increased similarities between patent laws in the US and the EPO have made it easier for companies who previously found the EPO too onerous to start filing there habitually now. Once you get in the habit of preparing applications that are robust enough to be prosecuted in the EPO (where written description matters), you might as well file there (if you have the $, and the companies you mentioned certainly do have the $).

  5. EPO getting more popular in the USA? Because of the UPC? Really? Another reason might be how clinically efficient the EPO is, compared with the USPTO.

    What I am driving at is the number of Decisions in the EPO, between initial filing and a final outcome which offers no more appeal possibilities. That number is two.

    You file and get a first Decision (grant or refusal). In the case of a refusal, you might appeal. That leads to a second Decision, one which dismisses your appeal or else orders the EPO to grant you a patent.

    In the case of dismissal of the appeal, that is the end of the line. There is no further appeal instance.

    Industry craves certainty. That’s what the EPO offers, and at modest cost too.

    Industry might also quite like it, that the opportunities for prosecution firms to keep the work churning are rigorously constrained. The relatively high cost of patents in Europe is for another reason altogether, namely that there are 38 sovereign Member States in the EPC system and they all want the system to earn them a crust or two.

    1. Certainly, certainty is valued.

      But it clearly is not the only, nor the most important driver.

      Be aware of (and beware of) the analogy of achieved certainty in a “the disease is stopped by terminating the patient” syndrome. That way is certainly “certain,” but none the less not of value to the purpose of having a patent system.

      Note that there IS an important implication in having large international corporations “setting the tone” of patent law that is directly at odds of having patent law. That type of “certainty” is most definitely neither desired nor appropriate.

    2. When I was working in-house, we always had a difficult time figuring out where to file. Do you file based on your competitor’s locations (e.g., possibly in Europe), where you sell the most product, where you will have licensees performing fabrication, where you are headquartered, where copiers are most likely to be, etc.? Also, do you use the PCT or go national directly? Of course, this is also more complex because of national security rules in the US, China, and India, for those multi-national companies with inventors in those countries.

      I think it’s difficult to look at one data point and determine the influence that the legal conditions for patents in the US have on foreign-filing. Every country has its benefits and detriments. To me, many rules in the EPO make more sense (technical effect is better to me than Alice/”abstract + significantly more”) but some make less sense (inventive step comes to mind — it seems to me that the problem/solution test is the definition of hindsight analysis).

      The increasing number of EPO patents simply could be the global nature of US companies today. Many of them want to be global and on the “cloud” or make “software”, and none of them seem to want to build hardware. IBM just sold its semiconductor business to Global Foundries and makes basically no hardware anymore; GE is getting rid of its appliance division and supposedly going to concentrate on becoming a “software” company; etc. And the ones that do want to make hardware have increased competition throughout the world. So, the dynamics of US companies are changing, and that change could be driving the increased EPO filings.

      1. “…GE is getting rid of its appliance division and supposedly going to concentrate on becoming a ‘software’ company…”

        That’s not what they’re doing.

        1. “The wide-ranging letter calls for General Electric Co. to become less bureaucratic and more innovative as Immelt strives to turn it into one of the world’s 10 biggest software companies by 2020.”

          http://news.yahoo.com/ge-tries-woo-investors-digital-185131159.html;_ylt=A0LEVj7xjthWIJkAdn4nnIlQ;_ylu=X3oDMTByMjB0aG5zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzYw–

          You can read his letter here, where he mentions “software” 26 times:

          link to ge.com

          Granted, there’s a thrust to being a “high tech” company, but a major thrust is for GE to become a software (that ev il thing) company.

  6. First, dear readers, be extremely sceptical of any data that the President of the EPO is putting out, to the effect that his Office is getting more popular. Don’t trust one word of his blandishments.

    Second, distinguish between patent applications filed under the PCT (each of which immediately acquires an EPO application number), and the number of those that go on to enter the EPO regional phase. As we all know, only a tiny fraction of China-originating PCT publications go on to enter the EPO Phase. So it could be, that US applicants are filing more PCT applications and more often entering the national phase in, say, China, while at the same time filing LESS national phase entries at the EPO (and more at the German Patent Office for example).

    Third, is the European UPC patent court really that much of a game-changer for American Applicants? I’m curious.

    1. Your offered distinction of automatic EPO number and actual (eventual) filing is interesting, but if what effect on the story as written here by Prof. Crouch?

      As I indicated below, the Chinese have been active – but since the non-US level is seen to be flat (at the EP number generating level?), does this not mean that Europe must be down (at that same EP number generating level)…?

      And if the beginning of the funnel is in fact down, even if others such as the Chinese have a high fallout rate between the number-generating step and any later actual filing, does it not STILL point out that the trends for Europe must be diminishing?

      Or is it counter-intuitive that Europeans are dropping in their number-generating step but seeing an increase in percentage of those number-generated items turning into actual filings?

      1. Comparatively, perhaps not – but using MaxDrei’s own admission as to the (large) Chinese number being an “artificial” number due to a the “automatic” assign-a-number aspect, and the fact that the total number here is very much a zero-sum game, it stands to reason that actual Europe use of their own system must** be dropping.

        ** with the presumptions that I mention.

        MaxDrei – this is not something I “need to prove,” as at this level it is merely simple math and a logical proposition. I even note the possible (albeit counterintuitive) possibility that the Europeans may be starting with lower “automatic numbers” but having an increasing “utilization rate.”

        I do not have the actual numbers, so this type of easy to understand logical propositions and simple math are what I can contribute to the conversation.

        Those who may have the hard data are the ones that can substantiate the propositions and offer the “proof.”

        1. Between 5 and 10 years ago, the Chinese (Huawei, HTC and so on) were filing huge numbers of PCT’s. I’m sceptical they are currently filing under the PCT still at the same rate. My hunch is that their rate has dropped off a bit.

          But they might be taking a few more % of them through to the EPO regional Phase. Like, up from 10% of their PCT filings to 11%, or something. Ask the EPO President. He’s got all the figures. But does he want to share all of them with us, or just the stats that help his spin?

          Asian thinking, even before the AIA, is to use patent publications (WO docs) as a safety blanket, to neuter the patents of competitors. When they have figured out how much of a “leg up” the AIA gives them in that regard it will stimulate them to file PCT more, even if they never again enter one of them into the EPO Phase.

          In this way, the AIA is doing a sterling job of promoting the progress, by disseminating innovation to the world through the medium of English language PCT WO publications.

          1. English language meta-translations of low quality (to begin with) mainly defensive Chinese filings meant only as a defense does NOT sound in your supposed advance.

            Your view “sounds good,” but likely F A I Ls at any closer scrutiny.

    2. Max, the EPO director, the WIPO directors, the Olympics director, the Soccer (what’s it called) director, Formula I director, all seem to have the same problem. While this mainly is a European problem, only the US seems willing to do anything about it. IIRC, in the last year, the US arrested one of these folks for corruption. But it tells me that we all need to do a rethink on how we structure these international bodies.

      1. Nail on the head there Ned, how to “structure these international bodies”.

        I guess “we” (you and I) should start with the United Nations, eh? How shall we start? Thinking, you say. Well yes, thinking. But not sure how much mere thinking can do, to put things right.

        Formula 1 is a bit different from the other organisations you mention. As I understand it, its Members are not Sovereign Nations.

        At the EPO, the present President is a product of national champion Business School (ENA) and politics in France. At the EPO, he behaves as a CEO, as he was taught at school. He sees himself as a dynamic CEO, at eye level with the CEO of other Global Titan corporations. The point is though, at the EPO he is not subject to the Rule of Law and so can indulge his power cravings to the full, free from legal constraint. Every psychopathic CEO’s dream, isn’t it?

        Since 1978, till the arrival of Benito on the scene, the EPO staff has been free to concentrate entirely on delivering work product of the highest quality, regardless of cost. Then, after all that time, money matters came to dominate. The pendulum has swung now to the other extreme, as only a pendulum can swing when free of any restraint. BB was put in there to “do a job”. The Member States on the EPO’s Governing Body can hardly complain now, can they, on the day when Benito publishes in the EPO’s Annual Report his glittering figures of ever greater “quality” and productivity and cost-saving. That’s exactly what they required of him, isn’t it?

        Don’t know about WIPO, except that supplying a few bog standard PC’s to a Member State strikes me as a poor basis to impeach its Australian Director General. There are always going to be some disgruntled employees, when management is doing its job, but when half the EPO workforce is out on the streets of Munich protesting about the President’s personal “Investigation Unit” and their outside assistance from a security firm called “Control Risks”, when German TV runs documentaries about Examiner suicides, when questions are asked in the European Parliament, and when a local blog publishes docs which leave me wondering how criminal are some members of the President’s clique, and when the President routinely over-rules his own committees and, purely on his own whim, fires staff that have been exonerated, and docks their retirement pension rights, something at the EPO is far from satisfactory.

        But optimistically I think the EPO is a special case, and what the EPC Member States are learning from this debacle will improve governance at the EPO, from now on, going forwards.

        1. Well, Max, when I read about the complaint of the director of WIPO, I was struck by the fact that we have been having scandal aplenty regarding corruption. The EPO may be among the worst, but typically the corruption is not about a psychopathic CEO trying to do his job, but more about a director trying to feather his or her own nests, and the nests of its supporters on so-called oversight boards. Obviously, the structure does not work. (Another recent case involves the world bank.)

          Anyhow, Sanders, a presidential candidate here was running strongly because of his message about corruption. He may not win. But in the Republican side, Trump and Cruz, both anti-establishment types, are way ahead and the party seems to be splitting apart between the elite and the outsiders who the elite deplore.

          I don’t know what the US can do about the EPO, but to the extent we have a say, I am heartened by the efforts of our justice department to bring criminal charges against corruption.

  7. The growth in applications from the US almost accounts for the entire increase in filings over 2014.

    So, ROW using the EPO is essentially a net flat rate and ALL the growth is new US filings…?

    Recent trends have been a huge growth in Chinese filings. If the Chinese have gone to a no growth in filings that would be staggering news. I might think that such is not the case, which would mean that the ROW flat line must then include an offsetting drop in native EPO land filings – which would be an interesting innovation indication in itself.

    1. Don’t know, anon, what numbers lie behind the assertions out of China that are in your memory, that applicants in China are filing hugely more PCT’s this year than last (Or more last year than the year before. Or whatever). I’m at least as sceptical of stats coming out of China as of those spouted by the EPO President.

      Prove me wrong, but I suspect that old Europe just goes plodding along, filing much the same numbers each year, with no wild pendulum swings to file greatly more or less than last year.

      Perhaps you are right, that Europe is less innovative than it used to be. It could be. That is not my sense though.

  8. Most practitioners will agree that the US is now more restrictive in terms of subject matter eligibility

    Notwithstanding the fact that the US system has a wider net in that the Useful Arts is known to be broader than the “technical arts,” there is no doubt in my mind that certain regular “contributors” will deny this statement by Prof. Crouch and ask for “evidence.”

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