Lies, damned lies, and workplace statistics

There have been recent comment on blogs such as IPKat concerning complaints made to ILOAT [the Administrative Tribunal the International Labour Organization]. 

These comments appear to indicate the EPO as being unusual in the number of complaints received. Reference is made by IPKat to an ILOAT document that contains interesting statistics, but not necessarily useful statistics.

ILOAT has an interesting  case law database.

Looking on the ILOAT database to the organisations with over 100 decisions against them [not necessarily representative of all organisations but a good proxy], and looking at the proportion where the phrase "case is dismissed" appears in the judgement, the following ranking is found:-

	Decisions	Complaint dismissed	% dismissed
UNIDO	105	99	94.3%
ILO	324	293	90.4%
EPO	725	645	89.0%
FAO	323	287	88.9%
ITU	155	136	87.7%
Eurocontrol	234	205	87.6%
WHO	446	380	85.2%
IAEA	105	89	84.8%
PAHO	109	92	84.4%
UNESCO	209	176	84.2%
WIPO	101	83	82.2%
CERN	103	83	80.6%

If working in IP where would you rather work? Somewhere where an independent body finds only 11% of complaints justified enough to not merit dismissal; or somewhere where the same independent body finds about 18% of complaints justified enough to not merit dismissal? 

Looking closer, one can consider the number of staff for each justified complaint [counting “justified” as synonymous with “not dismissed”, not placing any value judgement on the severity of the complaint].

	Complaint not dismissed	Number of staff	Number of staff for each complaint not dismissed
FAO	36	5779	160.5
CERN	20	3100	155.0
UNIDO	6	866	144.3
WHO	66	8265	125.2
IAEA	16	1832	114.5
EPO	80	8820	110.3
ILO	31	2983	96.2
Eurocontrol	29	1957	67.5
WIPO	18	1214	67.4
UNESCO	33	2156	65.3
PAHO	17	919	54.1
ITU	19	773	40.7

This shows that fewer than one in a hundred EPO staff files a complaint that is found justified, whereas for WIPO there is a much higher chance of a justified complaint being made.

Of course, the numbers are just numbers and do not necessarily reflect other factors at work, but:-

• appearing third in the list of percent of complaints dismissed would on the face of it appear either a commendation of the EPO or a comment on the nature of complaints filed;
• appearing average in the number of complaints not dismissed  per member of staff appears to show the EPO not out of the ordinary;
• on either measure EPO appears to be a better workplace than WIPO.

Of course, simply pointing to the number of complaints and judgements does not tell the whole story, and certainly does not capture aspects of "culture".

A more detailed analysis from ILOAT would appear appropriate.

It might also be appropriate for ILOAT to have some form of case management in the form of an initial filter to weed out cases where there appears little prospect of success, perhaps with a cost penalty if the case is continued.

Time spent on time wasters is damaging to those who have real and justified grievances.  

Who does what in IP?

Statistics are fun, you can torture them to say whatever you want. Unfortunately sometimes the information produced is in the form of incomprehensible screams.

A case in point is provided by the UK statistics on "Turnover of Legal Activities" [latest issue can be found in a spreadsheet here].

These statistics provide monthly turnover figures for Barristers, Solicitors, and a combined category "copyright and patent agents" [neither term in this category being graced with a capital letter].

Using hacker's statistics (choice of a selective time period and linear extrapolation) it would appear that the economic activity of patent and copyright agents would match those of solicitors in about six years’ time [is this a 2020 vision for those described as patent and copyright agents?].

The net balance of payments for legal services in 2013 was a positive £3.3 billion and it would be nice to determine how those exports were distributed among the various legal categories.

It would also be nice to know how much of the activity of patent and copyright agents was attributable to each of these peculiarly different professions/businesses. [The word "agents" seems to be all that is in common between them, just as "ch" is all that is in common between chalk and cheese].

How much of the activity of patent and copyright agents relates to services primarily related to the exploitation of artistic, literary and musical matters? And how much to services primarily related to the establishment, creation, licensing and assertion of registered intellectual property rights?

It would also be nice to have some kind of reliable baseline to compare with, so that when the Unified Patent Court and the Unitary Patent arrive the effect on trade in services can be assessed.

In short there are a lot of nice things we could have, but haven't.

Classification is a difficult exercise, and to maintain comparability between countries it is important that reporting is on a common basis [the UK SIC classification follows the European NACE classification which follows the UN ISIC classification]. However, everyone knows that there is a difference between accounting for reporting purposes, and management accounting. Why not so with government statistics?

When adhering to a classification hides information, and aggregates wildly different professions with wildly different business models, one has to ask why the Office of National Statistics don't have statistics that inform, in addition to producing statistics that conform.

Perhaps the legal professions should lobby ONS for more informative statistics.

Europe down the plughole?

The Select Committee for the Unitary Patent meets next week to discuss fee proposals that have been widely leaked.

The risk of damage to the reputation of Europe, and the finances of the European system, is extremely high if either proposal is adopted, both of which appear to reflect more fear of the future than a desire to improve the European system.  

Growth rates for European patents (direct filed and PCT regional phase) are already dismal compared with other major economies such as China and USA [EPO annualised growth rate over 2008-2013 was 0.3% compared with 36.9% for China and 5.1% for USA]. No amount of misleading press releases can hide this fact.

This dismal performance reflects not only the state of the European economy (which affects both the resources of European industry to file patents and the attractiveness of Europe as a market for external applicants), but also the reputation of Europe as a high cost patent system. Decisions are often based as much on reputation as reality: and the reality does not help Europe’s reputation.  

If the unitary patent too gets a reputation for being expensive, this will affect user’s decision on whether or not even to apply. Even though the alternative will exist of going for London Agreement countries, the reputation of high costs in Europe will spill over to affect demand overall.

This damage to reputation  will apply both to users within Europe and those outside Europe.

This could set the system on a death spiral:-

• Perceived added expense to an already expensive system acts as a deterrent to choosing to protect in Europe, leading to a reduction in the number of European applications filed.
• A reduction in the number of European applications filed affects both those EPC countries inside the unitary system and those outside, since if there are fewer European patents there will be fewer national validations, including fewer Italian patents and fewer Spanish patents.
• Fewer patents leads to lower renewal fee income for the EPO from granted patents.
• Lower renewal fee income for granted patents leads to more income being required from European applicants in the form of higher procedural fees and higher internal renewal fees.
• Higher procedural fees and higher internal renewal fees leads to Europe being perceived as even more costly leading to lower demand.
•  Lower demand leads to still higher fees to cover EPO liabilities.
• The system spirals to its doom such that the EPO becomes financially unsustainable and national offices have to look to their liabilities for “special financial contributions” under Article 40 EPC.
• National offices find that the reputation for high costs in Europe has led to a reduction in their national filings too.
• No money is available and government have to step in to bail out a system that would have been sustainable had fees not been set at a level guaranteed to deter customers.

Of course, if the unitary patent is abandoned that too could lead to a different death spiral:-

• Perceived failure to reduce the cost of an expensive system acts as a deterrent to choosing to protect in Europe leading to a reduction in the number of European applications filed.
• A reduction in the number of European applications filed affects all EPC countries.
• Fewer patents leads to lower renewal fee income for the EPO from granted patents.
• Lower renewal fee income for granted patents leads to more income being required from European applicants in the form of higher procedural fees and higher internal renewal fees.
• Higher procedural fees and higher internal renewal fees leads to Europe being perceived as even more costly leading to lower demand.
•  Lower demand leads to still higher fees to cover EPO liabilities.
• The system spirals to its doom such that the EPO becomes financially unsustainable and national offices have to look to their liabilities for “special financial contributions” under Article 40 EPC.
• National offices find that the reputation for high costs in Europe has led to a reduction in their national filings too.
• No money is available and government have to step in to bail out a system that would have been sustainable had the opportunity to send a message on costs been taken.

In short, the discussions in the forthcoming Select Committee meeting are critical to the European patent system.

The proposed Top 4 [Top 4 in later years, with matching to the EPO internal renewal fees in the early years] represents a significant increase over the EPO's current income from patent renewal fees. The proposed Top 5 represents a scandalous attempt to freeze out the very users the unitary patent was intended to benefit. Both proposals penalise SMEs who could not rationally choose a unitary patent given fees of such magnitude.

If either of these proposals is adopted, the damage to the reputation and the finances of the European Patent Office (and national offices) will be extreme.

Even Top 4 is high, since it includes two of the most expensive countries [Germany and Netherlands].

Please, Select Committee, send a message that you are serious about the future of the European patent system and decide on a renewal fee schedule Top 4 or below, and review it in a few years’ time to determine whether it is sustainable based on the pattern of take-up.  

Do not be driven by fear of what might happen to decide on fees so high they cannot meet the requirements of the regulation, and that guarantee immense damage to Europe. 

Choosing an appropriate level of renewal fees could lead to a virtuous circle of improved confidence and an improved environment for European business, rather than a self-inflicted death spiral.

A fair assessment

Yet again, in a recurring ritual, the EPO has released a misleading press release concerning filing statistics. It would appear that a more informative press release might run on the following lines.

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European Patent Office receives record number of patent filings – situation returning to normal?

Patent applications at the EPO grew by 2.7% in 2014, hitting a new record high of nearly 152 000, a mere 0.6% higher than the previous record in 2010 [that year numbers were inflated by introduction of the late unlamented divisional rules, which represented a tax on innovators at a time when innovators could least afford it].

In 2014 applications from European applicants grew by 2.2% and from non-European applicants 3.2%. These increases constitute a significant indication of a recovery in European industry, but mostly in non-European industry. [Over the period 2011-2015 applications from EPC applicants increased by 4.4%, whereas those from non-European applicants increased by 8.4%. In 2011 EPC applicants filed 50.4% of applications whereas in 2014 this has dropped to 49.5%].

As yet the recovery is weak. Had the trend prevailing for the 10 years prior to 2008 continued there would have been roughly 30,000 more applications in 2014 than there actually were. The period since 2008 represents relative stagnation.

European filing numbers still remain depressed due to the state of the economy. The following graph shows that EP filing numbers and EU GDP [EU 28 on a PPP basis – source, Eurostat] correlate closely up to 2013 [2014 data not yet on Eurostat].

It should be remembered that application numbers reflect not only the innovation within Europe: but also the attractiveness of Europe as a market. When Europe again becomes a thriving market and a place where people want to invest, the filing numbers should rise again.

The following graph shows the ratio in €m of EU-28 GDP per application. It is evident that Europe became a much more patent intensive region in the run up to the millennium: but since then has remained relatively static [apart from the year of the divisionals].



The prospect of a unitary patent [a single instrument covering a large proportion of the European market] may lead to strong growth, since this may make a European patent a more valuable asset.

As a final point it is worth noting that the term “patent filings” used in previous press releases is now thoroughly discredited as a useful measurement of anything. Combining European applications made and PCT applications made has little relevance to demand for European patents, as is indicated by the ever declining proportion of PCT applications that enter the European regional phase [a further indication that Europe has to come to grips with its place in the world].

In an effort to improve transparency the EPO will henceforth cease using the misleading “patent filings” metric and instead will quote numbers that mean something.

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Let us see what happens next year.