Intangible assets – the new economic indicator
Intellectual property has evolved from a collection of legal rights to now being a major asset that performs independently, when compared to other assets. Has this evolution changed the way in which IP performs relative to economic change?
Last week the World Intellectual Property Organisation (WIPO) released statistics for each country’s registered IP trends against GDP and other indicators. Registered IP includes patent, trade mark and design registrations.
These statistics show that the rate of growth of registered IP in the major economies have had a marked decrease: that is, the growth in the number of patents, trade marks and design rights filed has fallen from 2008 onwards. WIPO’s mapping of registered IP filings against GDP, shows registered IP filings to be much more volatile and extreme when compared to change in GDP.
In the above graph Australia’s economic growth is shown not to have experienced a downturn, which is a different position when compared to registered IP filings – here the trend is a much more dramatic fall.
Was this registered IP fall in growth reflected in other jurisdictions such as the USA, United Kingdom and other regions? Yes! You can look at WIPO’s data on a country by country basis and see that in the major economies of world there has been a significant decrease in the growth of registered IP filings. However, there are exceptions: countries that are doing well economically are also doing well with their registered IP filings. For example, China is performing exceptionally well.
Was this what was expected? No.
Historically “patent activity (litigation, innovation, etc) only surges in response to a recession” since “when money becomes tight, companies look for alternatives to increase their cash flow and find two paths: 1) product innovation, and 2) litigation” Such statements were made in October 2008 by Tyron Stading, who had mapped IP filings against the three recessions in the period from the 1980s to 2008 (not including the 2008 downturn). Stading stated that “on average, patent filing activity increase 10-11% across the three recession periods”.
The downturn of 2008 shows the opposite happening when looking at WIPO’s data. Registered IP is no longer counter cyclical, but is now cyclical and more sensitive to economic performance.
In the USA, the growth downturn of registered IP filings is 10%, in the UK the fall has been around 4%, whilst in Australia it has been around 15% (see WIPO’s statistics for the latest data). Interestingly, however, IP Australia’s data does not reflect WIPO’s data. IP Australia’s data shows the fall in growth of registered IP filings to be much less pronounced and they promote “Trade mark applications are up – to pre GFC levels in fact. Last financial year saw trade mark applications from Australian businesses in a record 69,003 classes”. However, it appears that IP Australia’s data is focusing on internal filings only as opposed to the total number of filings which is inclusive of external filings into Australia as well as Australian internal filings. Therefore, as an economic indicator, IP filings can reveal external investment into Australia as well as internal investment.
Is this change in the performance of registered IP relative to the economy taking place due to the change in the perception of IP rights?
- IP was perceived as a collection of legal rights when mapped against the economy in previous recessions registered; whereas
- IP is now perceived as an independent valuable asset.
From recent data it appears that registered IP such as patents are performing as do most other assets – they rise and fall as the economy rises and falls. Thus, the intangible asset becomes more tangible as an asset.
Could the rate of change in registered IP be a more sensitive indicator of a county’s economic performance?
Since registered IP is now more aligned to bull and bear markets, it may be a more sensitive indicator as to how a country’s economy is performing. Registered IP can detect subtle differences in a country’s economic health at a micro-level and is jurisdictionally based, so any change within a country’s performance and relative performance with other country(s) can be objectively assessed. Further, registered IP is a direct indicator and is open to public inspection.
Registered IP – the intangible asset – is now more tangible as an economic indicator.