An effective patent system is a critical aspect of the UK Government’s drive for innovation, as the protection offered by patents may be considered to be a catalyst for innovation.

Patent filing numbers in the UK and beyond

Patent protection is a rapidly-growing field worldwide, with the number of new patent applications globally rising by an average of 5% annually between 1995 and 2006. Growth is particularly strong with European patent (EP) applications (7.7% per year). When including EP applications in UK patent counts, the UK was ranked sixth in the world in terms of numbers of filings in 2014. This is comparable to Germany (fourth with EPs) and France (seventh with EPs).

While the number of new patent applications being filed may be considered an important indicator of innovation, this data cannot be taken in isolation. These numbers do not consider factors such as the scope of the claims, the number of patents granted, the quality of the patent system, or the filing strategies of companies using that patent system (or not, as the case may be). For example, some companies may consider the use of trade secrets to be more appropriate to protect their inventions.

UK patents offer high returns on investment

The majority of companies base their filing strategies upon consideration of where the consumer markets exist for their products. Attractive markets (and therefore targets for patent application filings) have high GDP and large populations with high levels of consumer spending.

The UK is therefore seen as an important consumer market by applicants; the UK market is where many companies and their competitors are active in manufacturing and selling products. It is therefore important to protect market share in the UK, which may be achieved with the use of relevant patents. This leads to a large number of filings covering the UK market; adjusting patent counts for GDP or population, the UK is fourth or second in the world (respectively) for number of filings. This is ahead of comparable European markets, illustrating the importance of the UK market.

The UK is also seen as a cost-effective jurisdiction to patent in as, when adjusted for GDP, it is the third cheapest major patent office and the cheapest in Europe.

UK patents therefore represent a good-value investment, as the potential consumer market is large relative to the costs of patenting.

Who patents in the UK?

93% of UK patents (including EP-originating applications) belong to foreign applicants; almost a quarter of these have US owners, with German and Japanese owners making up another 31% of the total. When considering patents filed only directly at the UKIPO, 50% of the granted patents are held by UK-based applicants. It is clear that non-UK companies rarely take the direct route for obtaining a GB patent; US companies are most likely to do so with only 8.5% of published applications in 2012 resulting from direct filings at the UKIPO.

Considering the high returns on investment that are provided by a UK patent, it is apparent that many applicants may be underestimating the importance of filing directly at the UKIPO when drawing up their patent filing strategies.

Benefits of the UK patent system

In general, the UK patent system is seen as an attractive one; the application and renewal costs are low compared to most other major patent systems, and the standards for both examination and customer service are seen as excellent.

The options available for accelerating prosecution are seen as good, although awareness of them could be improved, and this may allow applicants to reduce costs and expedite prosecution elsewhere by utilising schemes such as the Patent Prosecution Highway (PPH).

While there has been an increase in processing times in recent years, this is common amongst most major patent offices. This may be driven by the worldwide increase in the number of new applications filed, in addition to a trend of an increase in the number of amendments per application before proceeding to grant. Nevertheless, in 2012 it was reported that 38% of applications at the UKIPO granted within two years (comparable with other major patent systems, with only France performing significantly better) and 92% within four years (the highest rate in the patent systems considered).

The courts of England & Wales have traditionally been well regarded for patent litigation. The report notes that, in 2015, the US Chamber of Commerce ranked the UK the best jurisdiction in the world in terms of the enforcement of IP rights, with a score of 5.48 out of 6.

The competence, reputation and specialisation of the judges are seen as being advantageous, and the consistency of their decisions is beneficial for all parties. These decisions often have a large influence in other jurisdictions, further increasing their value.

The UK may also be seen as a desirable jurisdiction to litigate in in view of the opportunities for a quick resolution. One example of this is that of Napp Pharmaceutical Holdings Limited v Dr Reddy’s Laboratories (UK) Limited and Sandoz Limited [2016] EWCA Civ 105 (we have discussed this case previously, see: www.dyoung.com/knowledgebank/articles/patent-litigation); here, the UK courts recognised the commercial importance of the case and ordered an expedited trial. The opportunity for a quick resolution meant that the defendant agreed not to launch their product (removing the need to consider an injunction, streamlining the process), and the court gave its decision less than six months after commencement. In conjunction with the weight that UK judgements carry in other jurisdictions, an early judgement can be very significant for multinational litigation strategies.

The report notes that the cost of enforcement is sometimes more expensive than other jurisdictions, although the report notes that respondents listed overall costs behind ‘competence, reputation and specialisation of judges’ and ‘ability of competent professional advisors’. In addition to this, it may be the case that views on the cost of UK litigation are outdated. In recent years there have been a number of changes in UK courts, reducing the costs and bringing litigation costs closer to those of continental Europe.

One area in which this is particularly true is that of the Intellectual Property Enterprise Court (IPEC). Procedure in the IPEC is streamlined with the trials usually limited to two days lowering costs significantly. While the IPEC does have a damages limit of £500k, the limits on cost recovery (£50k) and the possibility of pursuing an injunction (which is often more important than the awarded damages) make this an attractive option for many.

In addition to this, since October 2015 the Patents Court has been running a pilot scheme, the Shorter Trial Scheme, that aims to make the litigation process more streamlined. This scheme is intended for use with cases that are expected to be resolved quickly, or that are particularly suitable for a flexible approach. These schemes place restrictions on disclosure and cross-examination, as well as the length of the trial, which should make sure that costs do not rise to unreasonable levels.

It is clear that the UK has become an increasingly attractive jurisdiction in which to litigate, in view of the lowering costs, quick resolution, and considerable expertise of both judges and advisors.

Conclusions

Not surprisingly, the primary motivation in where businesses choose to patent is based on where their markets are.

Differences between patent systems are of relatively minor importance for companies when developing an international filing strategy; although this may not be the correct approach. For example, the benefits of the UK patent system are clear and yet some of the advantages are not available to those seeking to gain protection in the UK via an EP application. It may therefore be beneficial to file directly at the UKIPO in addition to filing a European application in order to fully exploit the advantages of the UK patent system.