Irish patenting low despite high foreign investment: Part 3

Despite the presence of significant units of some of the world's most innovative companies in Ireland, "Patenting in particular is noticeably low compared to the innovation leaders, and more recently compared to Singapore, which has now overtaken Ireland in filing volume," according to an international report.

The number of patents applied for and issued to residents (including indigenous and foreign-owned companies) of a country are imperfect measures of invention and innovation — the commercialisation of patents varies depending on industry sector and Brookings Institution research shows that the vast majority of research universities earn very little from their patent portfolios and almost 90% of US tech transfer offices operate in the red. Universities as a group receive so little income from licensing.

A patent count provides no information on relative quality.

Last year Henk Volberda, professor of Strategic Management and Business Policy at Rotterdam School of Management, said in respect of Dutch innovation:

We are measuring different factors, not just technological innovation. Here’s the fact that most CTO’s (chief technology officers) don’t know. Only 25% of Innovation success depends on the investments in ICT and related technologies. But 75% comes from other factors such as management innovation, leadership style, methods of organizing, investment in human capital and co-creation with partners.

Innovation is not just about discoveries in public or commercial laboratories. It is also about how technology is utilised and is relevant for both mature and modern business sectors. For example, Achille Gaggia filed a patent for the espresso coffee machine in Italy in 1938 and ten years later production of the machine began. However, it was Howard Schultz, a native of Brooklyn, New York, who transformed Starbucks, a small Seattle coffee company into a global brand. Ryanair became one of Europe's biggest airlines without having to pay a royalty to anyone.

Imperfect data or not, comparative country data, in particular international patent applications, can indicate the level of research intensity in a country.

A 2015 report commissioned by the Irish Government and produced by the Technopolis Group, a UK consultancy, noted that a small number of firms in Ireland are responsible for the majority of patent applications. Approximately 0.2% of firms in Ireland account for 77% of applications between 1999- 2013.

Data show that the patent filing trend of Irish inventors with foreign applicants (a proxy for foreign-owned multinational firms) has been in general decline since a peak in 2005. The trend is that of a steep decline from 2007 to 2010. Conversely, the filing of Irish inventors with Irish applicants (a proxy for indigenous firms) has demonstrated a positive trend, growing to 2008 and then steadily tapering away. Sectorally, patenting appears to be focused in pharmaceuticals, medical devices and ICT hardware, with some activity in the food and drink sector.

Irish indigenous firms that patent are not typically significant exporters.

Technopolis noted that in terms of patents by country of applicant, Ireland is 6th of 6 comparator countries in terms of volume with 36,100 published applications between 1999-2013 (Germany 2m; Sweden 242,200; Finland 150,600; Demark 89,000; Singapore 39,000). When normalised for GDP, Ireland moves to 5th, above Singapore. Normalised for population, it remains 6th. "Of greater concern is that Ireland has the second lowest proportion of companies (66%) contributing to overall patent filing by country applicant, just above Singapore (58%)."

The reports says company patenting activity is concentrated in a small fraction of the total business population: just 358 companies had applied for 10 or more patents over the time frame considered and this accounted for 77% of applications by companies where Ireland is the applicant country for the period 1999-2013. Ownership was assigned to 281 of the 358 applicant companies, and these 281 firms accounted for 65% of all applications by Ireland (as an applicant country) between 1999-2013. Based on these 281 firms, 57% were Irish owned, but foreign-owned companies account for 60% of the applications.

Of the 36,100 Irish resident patents, 12,900 related to Irish applicants and only foreign inventors — meaning no research was carried out in Ireland.

Technopolis said that as well as the declining numbers of patent applications by Ireland as an applicant country, Ireland’s conversion rate is lower still than that of the selected comparators, with only 31% of applications filed being granted compounding the effect of low application rates.

This may be related to a lack of quality or novelty in the applications, or to withdrawal during the process due to cost or time factors. These figures are matched closely by those for Irish inventors. The country with the highest grant rate for country applicant is Germany (41%), followed by Finland (40%), Sweden (38%), Singapore (37%), and Denmark (36%).

The US Patent and Trademark Office, and the European Patent Office (EPO) accounts for about two-thirds of Irish patent filings.

The EPO covers 42 countries and in 2015 Ireland had 582 applications, down 6.4% on 2014 while Switzerland again topped the per capita ranking in 2015, with 873 applications per million inhabitants. Second and third place went to the Netherlands (419) and Sweden (392), followed by Finland (365) and Denmark (346).

Ireland was at 119, below the EU28 average (see charts). 

The number of patent grants by the US Patent and Trademark Office (USPTO) in 1977-2015 was 5,163 for Ireland; New Zealand 4,960; Norway 8,784; Singapore 10,044; Denmark 17,248; Austria 20,331; Belgium 21,904; Finland 23,406; Sweden 49,974; Netherlands 50,344; Switzerland 57,135.

Israel which hosts several American-owned R&D centres has been granted a total of 35,900 patents in the period.

The USPTO made 515 patent grants to Irish-based applicants in 2015 compared with 1,048 to Singapore, 3,804 to Israel and 2,841 to Switzerland.

R&D in Ireland

Foreign-owned exporting firms account for almost two-thirds of business expenditure on research and development (BERD) and it's generally not at a level that merits patenting.

There is a 25% R&D tax credit and what's included in the spending may sometimes stretch the definition. Calling activities a "centre of excellence" can also work wonders!

The majority of FDI firms do not spend anything on R&D and according to the Central Statistics Office (CSO) the largest 100 enterprises in terms of R&D spend accounted for over €1.4bn, or 70%, of BERD in 2013. Of these top 100 enterprises, 80% of the spend was attributed to foreign owned enterprises.

The European Commission says that "Ireland’s research intensity ratio of 1.52% (of GDP) lies well below the EU-28 average for 2014 at 2.03%."

According to Eurostat based on purchasing power parity using 2005 constant prices, the per capita BERD spend in Ireland in 2014 was €388 (estimate); Denmark €549; Germany €606; France €382; Italy €160; Austria €660 and Sweden €653.

BERD was at 1.14% of GDP in 2014 compared with an EU average of 1.3%. The ratio for Sweden and Finland in 2013 was 2.28%.

The European Commission also highlights how miserly Irish business is in respect of funding public research:

the level of (Irish) business enterprise funding of public R&D as a percentage of GDP was 0.007% in 2013 (Eurostat data), one of the lowest in the EU-28 and much lower than the EU average of 0.05% (2012). This value is even more striking if compared with innovation leaders like Germany (0.114%) or Finland (0.065%) or other strong innovators like the Netherlands (0.088%) or Belgium (0.072%).

Pic on top: This is from a presentation on the European unitary patent

Handful of nations drive innovation in frontier technologies: Part 1

Ireland's high global innovation ranking is a fiction: Part 2