Canada Sees Downturn in IT Innovation

Eugene Derenyi for The Lawyers Weekly

October 2, 2009


A variety of economic indicators such as the GDP could tell us whether the recent economic downturn affected the pace of innovation in the information technology field. However, the number of patent filings - a measurement not typically used to gauge economic activity - may be a better resource, since patent filings are perhaps the most closely correlated to the level of innovation activity.

The PCT system

The World Intellectual Property Organization (WIPO)'s PCT patent application statistics give us insight into global patent filing trends. A PCT patent application is an international patent application under the Patent Cooperation Treaty of 1970, which set up a simplified procedure for filing patent applications internationally.

There are currently 141 PCT member states. An applicant from a member state such as Canada can lodge an international PCT application in which all of the member states can be designated for future filing. Instead of having to file in all countries where protection is desired at the outset, the PCT system allows patent filings in foreign countries to be deferred for at least 30 months. This provides additional time to commercialize the invention before incurring the expense of filing in foreign countries.

The global downturn became acute in the fourth quarter of 2008. How did patent applicants react? Somewhat surprisingly, the number of PCT applications lodged globally held up well, with less than a one percent drop as compared to the fourth quarter of 2007. The story was even brighter for information (computer) technology, with an increase of 8.1 percent in the number of PCT applications filed for information technology over the same period.

This means that, despite the economic uncertainty and the significant expense of a PCT application, applicants across all technologies were still generally willing to reserve their option to protect their technology in foreign markets down the road, with information technology firms appearing to be quite optimistic about future filings.

The statistics for 2009, however, show what may have been a delayed reaction to the crisis. Filings were down 7.9 percent in the first quarter of 2009 as compared to the first quarter of 2008. PCT filings for information technology fell hard by 13.6 percent, the apparent optimism of the quarter before having evaporated.

The drop appeared to intensify with the number of PCT filings in April 2009, the last date for which official statistics are available. These filings show a global drop of 10 percent from the year before, with information technology filing statistics for April not yet available. A 10 percent drop is troubling, but PCT filings appear to have recovered since April when compared with statistics reported by Joff Wild (in Dennis Crouch's blog at on Aug. 7).

Canada's status

To see how Canada fared during the crisis, it is useful to look at how popular Canada is as a destination for patent filings. About 87.4 percent of Canadian patent applications are filed by applicants from other countries and the number of Canadian patent filings is a barometer of the value of the Canadian market to foreign companies.

WIPO statistics show that Canadian use of the PCT system actually increased slightly: from 2007 to 2008, there was an increase of 1.5 percent in Canadian PCT applications. Statistics from the Canadian Intellectual Property Office (CIPO) indicate that the total number of Canadian national filings decreased by 1.3 percent from the 2007-08 fiscal year to the 2008-09 fiscal year (both ending in March) after having increased an average of 1.6 percent in the previous three fiscal years. Canadian residents' share of the total Canadian national filings actually increased by approximately 0.9 percent from 2007-08 to the fiscal year ending March 2009.

As for information technology (computer related) applications in Canada, after increasing by 1.7 percent from the 2005-06 fiscal year to the 2007-08 fiscal year, these applications showed a dramatic drop of 14.2 percent in the 2008-09 fiscal year as compared to the previous year.

Looking at these CIPO and WIPO statistics, Canada appears to have fared well overall in the patent world, seemingly consistent with the view that Canada has fared better economically than most during the downturn. However, the information technology field has not shown the same resiliency.

However, information (computer) technology does not take up a very large share of all patents filed. WIPO statistics show that in 2008, patent applications in this field made up 8.6 percent of all PCT applications filed. In the first quarter of 2009, such patent applications took up approximately eight percent of the total PCT applications filed. Meanwhile, CIPO statistics show that in the 2008-09 fiscal year, Canadian computer- related IT patents made up 15.3 percent of all patents filed at CIPO.

Patent statistics from both CIPO and WIPO indicate that the pace of innovation as a whole does seem to be suffering due to the economic downturn. Canada, however, appears to be bucking the trend - except in the area of information technology.

Eugene Derényi heads the patent section of ">Stikeman Elliott's Intellectual Property Group. His practice focuses on all aspects of patents, including the protection of information technology. He thanks Anny Vexler, student-at-law at the same firm, for her assistance with this article.

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