Overview

IP for a skilled, diverse and productive economy

Innovation is the engine of sustainable growth in living standards. Through technological breakthroughs, and diffusion of new ideas, we learn to produce goods and services with fewer resources, reducing our footprint. We develop new solutions to meet our needs. We free time and can better use our society’s human capital.

The IP system aids this process in three fundamental ways – it encourages innovation, facilitates diffusion and enables more transparent and efficient trade.

Encourages innovation - Without IP rights, it can be difficult to exclude others from reproducing an innovation once it is made public. When an innovation is copied, its original producer may not financially benefit from their work as much as they would have otherwise. Patent, design and plant breeder’s rights (PBRs) provide temporary exclusive rights for innovators to exploit their inventions in the market, creating an incentive for innovation.

Facilitates diffusion - In return for limited exclusive rights, innovators are required to disclose new technical knowledge in their inventions. The effect is to coax inventive solutions to practical problems out of secrecy and into public view so that others can rework inventions.

Enables efficient trade -  Intangible assets, such as data, software, inventions and brands, are an increasingly important source of business value. When protected as IP,  they become tradeable assets – able to be licensed and sold to others. Trade marks also increase transparency between producers and consumers, increasing the likelihood that consumers will reward producers for quality.

The Australian IP Report analyses current trends in technology, commercialisation and trade through the latest IP statistics. The 2023 report considers the IP system’s role in harnessing skills, diversity and innovation to create a more productive economy, drawing upon new research by IP Australia and other contributors.

Outlook

Patent applications reached the highest level on record in 2021 and they neared that record level in 2022. This result reflects the resilience of global innovation investments during the first two years of the COVID-19 crisis¹. In 2022, applications for PBRs also grew by 1.3% on their 2021 level.

However, from their peak levels in 2021, trade mark applications fell by 11.2%, and design applications fell by 3.6%. Some of this involves a correction from significant growth in IP filings over the pandemic period. At the same time, rapidly increasing costs of living, rising interest rates and declining real wealth are also expected to affect applications by weighing on demand. In Australia, consumption growth moderated late in the year. Consumer sentiment fell to levels not observed since the onset of the pandemic and the 2008 Global Financial Crisis². Trade mark filings indicate the introduction of new products and services. Trends in trade mark filings react quickly to changes in expected demand and can anticipate the business cycle³.

The first two years of the pandemic saw growth in patenting related to digital and health technologies⁴. Patenting in health technologies continued to grow in 2022 – by 12.2% for pharmaceuticals. The evidence for digital innovation is mixed. In 2022, patent applications fell by 4.4% for computer technology and 26.6% for digital communications. However, trade mark applications grew for services related to computer security, medical research and other science and technology fields. Financial services also saw strong growth in trade mark filings, as digital technology has widened the scope for new products, payment systems and platforms.

Insights

IP in a slowing economy

Australia’s economy expanded strongly over 2022. However, as inflation peaked around the end of the year, rising living costs weighed on demand, and consumption growth moderated. In this year’s report, we preview new research by economists at the Reserve Bank of Australia (RBA). Using Australian microdata, they examine how a slowing rate of economic activity and weakening demand affects innovation in Australia. They consider outcomes across a range of innovation measures, from research and development (R&D) and patenting to technology adoption and commercialisation.

IP, productivity and wages

This year’s report presents new research considering the IP system’s role in developing a more productive economy. In Australia, and across developed economies, a decline in economic dynamism has contributed to slow productivity growth over recent decades⁵. Reduced dynamism is reflected in low rates of business formation, technology adoption and job switching⁶.

Recent research suggests that, for businesses with valuable inventions, being granted a patent can cause substantial increases in productivity which flow through into higher wages for workers⁷. Using Australian microdata, Chapter 8 explores the relationship between business patenting and employee outcomes, including retention, higher wages, and job switching by employees with different backgrounds. The findings suggest that patent-holding businesses play a significant role in attracting workers away from less productive businesses, consistent with prior evidence.

IP, diversity and innovation

At the end of 2022, Australia’s unemployment rate was at its lowest level in about 50 years. Australia’s labour participation rate was at a record high, driven largely by women and young people entering the workforce. Net arrivals from overseas increased, helping meet the strong demand for labour and skills⁸. Maintaining these labour market gains is important for long-run productivity because diversity underpins innovation. Chapter 8 examines women and migrant participation in Australia’s IP-active businesses, and its importance to innovation. Chapter 7 also looks at how the returns to innovation in businesses that patent are shared among workers of diverse occupations and backgrounds. It highlights how having quality people across many roles – from inventors and product assemblers to sales workers – is crucial to innovation.

IP data for policy and decision making

The IP analytics in this report are derived from IP Australia’s open data product, IPGOD. This publicly accessible data provides information on over 100 years of IP applications in Australia – a rich history of innovation in Australia since Federation. IP Australia periodically revises its data and annual time series as more up-to-date or better-quality source data becomes available.

The research in this report is enabled by access to a unique dataset from the Australian Bureau of Statistics (ABS). The Multi-Agency Data Integration Project (MADIP) combines administrative data from across government agencies at the person-level. It combines information on individuals’ demographics, education, income and taxation, occupation and employment in a highly confidential, anonymised and secure data environment. The data provides information on around 14.5 million Australian workers observed over 2011 to 2019. As there were around 13 million employed persons in Australia at year-end 2019, this provides substantial coverage of Australia’s total workforce. This person-level data is linked to comprehensive data on individuals’ employers, contained in the ABS’s Business Longitudinal Analysis Data Environment (BLADE). IP Australia has worked with the ABS to integrate information on the IP activity of Australian businesses into this linked employer-employee data.

Office of the Chief Economist  | chiefeconomist@ipaustralia.gov.au