Copyright © The Authors 2007. Published by Oxford University Press.
Per un pugno di dollari: a first look at the price elasticity of patents
* FNRS Research Fellow. Université Libre de Bruxelles (ULB), ECARES, CEB, e-mail: gderasse{at}ulb.ac.be
** European Patent Office, ULB, ECARES, Solvay Business School, CEB, DULBEA, CEPR, London, and Solvay SA Chair of Innovation, e-mail: bvanpottelsberghe{at}epo.org
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Abstract |
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This paper analyses the role of patent-filing fees requested by the member states of the European Patent Convention (EPC). We provide first empirical evidence showing that the fee elasticity of the demand for priority applications is negative and significant. Given the strong variation in absolute fees and in fees per capita across countries, this result indicates a suboptimal treatment of inventors across European countries and suggests that fees should be considered as an integral part of an intellectual property policy, especially in the current context of worrying backlogs. In addition, we show that the transfer rate of domestic priority filings to the European Patent Office (EPO) increases with the duration of membership to the EPO and the GDP per capita of a country, suggesting that member states experience a learning curve within the EPC. The high heterogeneity in the transfer rates casts some doubts on the practice that consists in relying on filings at the EPO or at the United States Patent and Trademark Office to assess the innovative performance of countries.
Key Words: fees • patent filing • price elasticity
The views expressed in this article are purely those of the authors and may not in any circumstances be regarded as stating an official position of the EPO or of the ULB. The authors are particularly grateful to Alison Brimelow, Dominique Guellec, Bronwyn Hall, Dietmar Harhoff, Karin Hoisl, and Nicolas van Zeebroeck for their useful comments, as well as to the participants of the conference at Monte Verità, ‘The Economics of Technology Policy’, 17–22 June 2007. The paper was partly written when Gaé tan de Rassenfosse was visiting scholar at the EPO.
1 The Economist, 8 September 2007, p. 23.
2 Pending applications soared by 41 per cent, 79 per cent, and 98 per cent from 2000 to 2005 at the EPO, the Japanese Patent Office (JPO), and the United States Patent and Trademark Office (USPTO), respectively (Trilateral Statistical Reports, 2000–5).
3 For instance, Alison Brimelow, the President of the EPO, ‘has been very keen to stress the importance of patent quality and has also said that she is worried that there may be too many patents being granted’ (Intellectual Asset Management, August/September 2007, p. 5). See Jaffe and Lerner (2004) and Guellec and van Pottelsberghe (2007) on the ‘quality issue’ and on the challenges faced by the USPTO and the EPO, respectively. Van Pottelsberghe and van Zeebroeck (2008) provide empirical evidence suggesting that the average value of patents filed at the EPO has been constantly decreasing since the mid-1980s.
4 USPTO, 2007–2012 Strategic Plan, p. 6.
5 A second approach concerns international patent filings and has been conducted at the country-level. Here, costs have been found to play a significant role in explaining international patent flows (see Park, 2003; Eaton et al., 2004). That is, once a patent has been filed in a country's NPO, subsequent filings in foreign countries are partly explained by fees.
6 See ‘As Europe Tries for United Patents, Italy Moves Alone’, Financial Times, 17 January 2006, Section C, p. 8, and Gazzetta Ufficiale della Repubblica Italiana, 6 April 2007, Serie generale—n. 81, p. 35.
7 As of 1 January 2007, the Swiss patent office cancelled 70 patenting taxes and lowered 11 taxes. The filing tax is nowadays 200 CHF. See the Règlement sur les taxes de l'Institut Fédéral de la Propriété Intellectuelle, 18 October 2006. Regarding Belgium, see Projet de loi 51-2756/1, advising a decrease in the search fee to make Belgian patents more ‘attractive’. From cumulated patenting fees of about 
1,000 as of July 2007, the project consists in reducing them to about 
300.
8 When the information provided by NPOs was unclear, we relied on Global IP, an online database that generates cost estimates for patents. Some additional working hypotheses are: one out of five pages is a drawing page, a courier service is used, and filings are done in time.
Besides these administrative fees, applicants also have to bear the cost of professional representation requested by patent attorneys to prepare, file, and prosecute patents. These costs are borne by applicants to various extents, as some companies have in-house resources to deal directly with patent authorities. The largest companies, which account for the large majority of patents applied for, generally have their own patent attorneys. Professional representation costs are not included in the present analysis because they are difficult to evaluate in an homogeneous way across countries. Van Pottelsberghe and Francois (2006) provide a recent evaluation of the various fees and filing costs (i.e. professional representations and translation costs) at the EPO, the USPTO, and the JPO.
10 The EPC includes 31 member states as of 1 January 2006. Liechtenstein and Monaco were excluded from the sample owing to lack of data.
11 The PCT route refers to the route applicants can use if they file their patent application under the terms of the Patent Cooperation Treaty. See Guellec and van Pottelsberghe (2007) for a detailed description of the European patent system.
12 Four important choices for counting patents are: (i) the criterion used to identify the geographical origin (i.e. the country of residence of the applicants or of the inventor, or the priority country); (ii) simple or fractional counts when the patent involves inventors or applicants from different countries; (iii) the choice of the reference date (i.e. the priority date, the application date at the EPO, or at the World Intellectual Property Organization (WIPO), or USPTO, or the grant date in a given patent office); and (iv) the choice of a database (i.e. USPTO filings or EPO filings or triadic filings which include patents simultaneously filed at the USPTO, the EPO, and the JPO). See Dernis et al. (2001) for an in-depth analysis of these counting methodologies, and Guellec and van Pottelsberghe (2001) for the substantial differences induced by counts by country of residence of the applicants and counts by country of residence of the inventors.
13 The count of priority filings excludes utility models. Regarding the variable PF_EPO, the country of the first applicant is used for identifying the geographical origin of the patent application. Note that the country of applicant has been identified for 66 per cent of EPO priority filings. The remaining 34 per cent were not accounted for.
14 Grupp and Schmoch (1999) argue that the number of priority filings is ‘no more a good proxy for national comparable statistics on technological strength [especially for] small countries being located in the neighbourhood of large and attractive markets for technology’ (p. 383) such as Canada (for the USPTO), Mexico (for the USPTO), Austria (for Germany), and Belgium (for France). We, however, doubt that this factor would substantially bias our estimates, because the sample is limited to the EPC member states, and the European applicants who want to reach the EPO without filing a national priority application generally file directly at the EPO (this is taken into account in the PF_TOT variable). For instance, out of the 14,000 priority filings applied for at the French patent office, 7 per cent came from foreign applicants.
15 This index may, however, not be fully exogenous: if it is reasonable to assume that a country without any IP protection would have very few filings, it is not obvious that raising IP protection would lead to more patent filings, especially in countries where the level of IP protection is among the highest. Instead, IP protection may be a consequence of the ever-rising IP awareness.
16 The results are available upon request.
17 There are several entry doors to file a patent application at the EPO. Alternative estimates with the shortest distance between the capital city and the Hague or Munich have also been tested. No significant effect was found.
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