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No. 27: Recent Jumps in Patenting Activities: Comparative Innovative Performance of Major Industrial Countries, Patterns and Explanations

by Mohammed Rafiquzzaman and Lori Whewell, Industry Canada, December 1998


Summary

In recent years, Canada has experienced an increase in patenting activities. Canadians are filing patent applications at an ever-increasing rate, both at home and abroad. Further, patent applications abroad by Canadian inventors have grown at a faster rate than patent applications in Canada from abroad, thereby widening the gap between the outflow and inflow of patent applications. All these trends are direct reflections of an increase in inventive activity in Canada. This paper analyses the nature, pattern and causes of these shifts in patenting activities in Canada.

The paper has five objectives: (1) to investigate whether the recent surge in patenting activities is a global phenomenon or something unique to Canada, and to examine the causes of these increases; (2) to examine Canada's inventive performance vis-à-vis that of other G-7 countries; (3) to demonstrate the trend in the flow of patent applications to and from Canada; (4) to understand the factors that determine international patenting activities of inventors from one country in another country; and (5) to identify the most innovative and dynamic industries within the Canadian manufacturing sector.

Trends in patenting activity indicate that Canadian inventors are well positioned in the field of innovation vis-à-vis those of the other six G-7 countries (the United States, Japan, Italy, Germany, France and the United Kingdom). Canadian inventors have been gaining ground in the development of technology more quickly than nationals of most other industrialized countries. We find that the propensity of Canadian inventors to patent in the other six countries has changed over time, as has the patenting activity of inventors from these countries in Canada. In particular, dramatic changes have occurred in cross-border patenting between Canada and the United States. While Canada still receives the largest share of its foreign patents from U.S. inventors, and the United States receives the highest share of foreign patents from Canadians, each of these shares has been falling over time. Canadians are increasingly applying for patent protection in countries other than the United States; in addition, Canada is becoming a more attractive place in which to seek patent protection for nationals of foreign countries other than the United States.

The paper considers two competing hypotheses to explain the causes of the recent increase in Canadian patenting activity: first, the pro-patent hypothesis, associated with changes in patent policy that have benefited patent holders and thereby increased the propensity to patent; second, the fertile technology hypothesis, related to the current technological revolution and innovation in the high-technology sector, particularly in the fields of biotechnology, information technology and software industries. The result has been an increase in the filing of patent applications related to these specific technologies. The findings of the paper suggest that, although both hypotheses are at work, the fertile technology hypothesis can better explain the recent increase in patenting activity in Canada.

Further, the paper finds that the characteristics of both technology source and destination countries, along with national patent systems, play important roles in international patenting decisions. Source country characteristics, such as research intensity and home country bias, are significant determinants of international patenting activity. Destination country characteristics, such as human capital, imports, market size, degree of intellectual property protection, and geographic proximity, tend to induce inventors from the source country to patent in the destination country. However, the cost of patenting was not found to be an important determinant of international patenting activity.

Finally, the paper finds that increases in patenting activity have not been uniformly distributed across all industrial sectors within Canadian manufacturing. The largest concentration of applications for manufacturing patents is found in the science-based industries. The science-based sector, which is the smallest sector within Canadian manufacturing, remains the most innovative, and a handful of industries within the science-based sector have become increasingly dynamic over time.

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