US patent system jumps from 12th to 2nd in US Chamber IP report

The US Chamber of Commerce Global Innovation Policy Center (GIPC) has released its seventh annual International IP Index, “Inspiring Tomorrow,” which analyses the intellectual property climate in 50 world economies.

In last year’s report, the US ranked 12th in terms of the strengths of its patent system, as Managing IP reported in February 2018. This year’s index showed that the US’s score increased by a quarter of a point, bringing it joint second with 10 other (mostly European) countries in a tight race behind Singapore, which came in first place for patents.

Patrick Kilbride, senior VP at the GIPC, says the improvement in the US is a result of policies that USPTO director Iancu has put in place over the last year. The IPR process has become more predictable, and patent quality is improving, he says, but still, there’s always room for advancement. “Injunctive relief and patent eligibility are two categories where the US lags slightly behind Singapore,” according to Kilbride.

Some experts doubt the GIPC indices’ usefulness or credibility. Josh Landau, patent counsel at the Computer & Communications Industry Association, says the annual rankings are “based on completely arbitrary determinations”.

For example, the GIPC’s report last year explained the US patent system’s low score by citing a “disproportionately high rate” of trials and rejections at the PTAB. This year, the institution rate at the PTAB increased, but the US’s score for patents improved. “A ranking that doesn’t even use consistent metrics from year to year simply can’t be viewed as a trustworthy guide for anything,” says Landau.

He asserts that the US has the best patent system in the world, “just like last year, and the year before that, and the year before that. The fact that this year’s arbitrarily-assigned score is closer to reality than last year’s doesn’t make the GIPC ranking any more trustworthy”.

While the US’s patent system improved its ranking from 12th to 2nd place in the new report, the country remained in first place in terms of IP as a whole. However, its score dropped slightly from 94.95 in 2017 to 94.80 in 2018. David Torstensson, senior consultant at research company Pugatch Consilium, explains that the IP climate in the US did not actually worsen, but that the “variance can be explained by new indicators that were introduced this year”.

The additional indicators measure criminal sanctions for trade secrets violations, barriers to tech transfer, licensing deals’ disclosure requirements, government involvement in licensing terms, IP-specific tax incentives, and IP incentives for SMEs. “The US has R&D tax incentives, but lacks IP-specific incentives that other countries have,” says Torstensson, “which accounts for the marginal decrease.”

Overall, the report struck an optimistic tone, stating that countries with strong IP protections experience measurable economic benefits. These countries are:

• 39% more likely to attract foreign investment;

• Twice as likely to export complex products; and

• 33% more likely to receive private-sector investment in R&D.

However, some countries’ IP policies are moving in the wrong direction according to the GIPC, causing their rankings in the index to fall. For example, Chile, Columbia, Peru, and Russia have made some pharmaceutical patent licences compulsory, which the report states reduces the reliability of patents as a vehicle for return on investment, and jeopardises the availability of future innovative medicines in those regions.

An important change in the global IP landscape in 2018 was the US-Mexico-Canada Agreement (USMCA), which Managing IP covered here in October 2018. The GIPC evaluates it as better than any other international trade agreement in terms of its IP provisions.

The report calls the agreement a “significant improvement”, but also identifies the factors it lacks that prevent it from obtaining a perfect score: online copyright protection; defined terms for pharmaceutical patent term restoration; and clear standards for internet service providers to take down infringing content.

Another factor that decreased the USMCA’s score was simple uncertainty. The agreement does not apply to any measure adopted by Canada “with respect to a cultural industry”, and the scope of this exception is entirely unknown.

“In a bizarre twist,” says Ellen Szymanski, executive director of international policy at the GIPC, “no one knows if the exception applies to the IP chapter.” She explains: “For example, the USMCA extended the term of copyright. Is that going to apply to Canadian cultural industries? Is there an obligation to do so? Predictability needs to be improved.”

As rapidly developing large economies, China and India are both countries to watch. China’s ranking at 25th in the index remained the same as in the previous iteration, while India’s ranking jumped from 44th to 36th.

Szymanski explains that China’s rise has come to a standstill, and in 2019 it is at a crossroads. “On one hand,” she says, “national laws have improved. On the other hand, the sheer scale of theft continues to present a daunting challenge; over 80% of the world’s counterfeits are produced in China … If China truly wants to become a global player in innovation, it must have an open, transparent market, and protect all innovation, no matter the source.”

As for India, the GIPC’s Kilbride attributes its leap on the index to “a genuine political commitment” to IP by the government. “We’ve seen significant improvements since they slowly implemented a national IPR policy [in 2016],” he says. “They’re raising IP awareness, and if India succeeds, others will follow. It’s an indicator of IP as a road to success in the knowledge economy.”

Regardless of any possible inconsistencies in the GIPC’s methodology, the organisation’s annual indices illuminate the vital relationship between IP strength and economic prosperity. In the face of growing populism and shrinking economic confidence, the GIPC’s report notes, IP awareness, investment, and prioritisation are more important than ever.