Impact of IP-Based Policies on Trend in Patent Applications

Since the implementation of the Patents Act 1983, there has been a gradual increase in the number of patents filed. This increase was more apparent in the 1990s, where the total number of applications has been consistently in the region of 4,000 to 6,000 a year since 1993. This could be attributed to Malaysia’s accession to the Paris Convention in 1990 which enabled foreign applicants to claim priority based on their earlier filing dates. Another factor could be the introduction of the modified substantive examination facilities for applicants originating from certain foreign patent offices in 1993, 2002 and 2003 (see Fig. 5).

Fig. 4.Royalty Payments, 2000-2005 (RM Million)

[Impact of the Intellectual Property System on Economic Growth ]

Patent Applications by Country of Origin 95

Foreign patent applications constituted a large part of the total number of patent applications (more than 90 per cent) (see Fig. 5). The total number of applications by all top 10 applicants has increased over the years. Filings from the US constituted one-third of the total cumulative patents applied for between 1986 and May 2007. The second largest foreign applicant has been Japan (19 per cent) followed by Germany (7.5 per cent) and the UK (6.2 per cent). Malaysian applications ranked fifth, accounting for 5.5 per cent of the total number of patent applications (see Fig. 6).

Fig. 5.Patent Applications by Nationality (1986-2006)

Fig. 6.Patent Applications by Country (1986 to May 2007)

[Impact of the Intellectual Property System on Economic Growth ]

96 It is noteworthy that Japan and the US have been the top two sources of FDI in Malaysia for the past few years (see Fig. 7).

Patent Applications by Area of Technology

Analysis according to areas of technology in 2006, showed that the highest number of applications came from the electrical and electronics sector (1,583), followed by chemicals and metallurgy (1,275) and performing operations and transport (1,155). The share of patent applications from the electrical sector increased from 11 per cent in 1993 to 23 per cent in 2006. For the chemical industry, the share of applications in 1993 was 39 per cent but by 2006 it had dropped to 19 per cent. However, the total number of applications grew by 153 per cent during this period. Applications from performing operations and transport constituted 13 per cent in 1993 and 17 per cent in 2006. The growth in applications was 583 per cent. For the physics sector, applications grew by 572 per cent while the share of this category in the total number of applications increased from 12 per cent to 15 per cent between 1993 and 2006 (see Fig. 8).

The patent application trend in the electrical and electronics sector recorded a positive correlation with performance in terms of sales and investment. During the period 2005-2006, the sales value of the electronic and electrical sector topped other industries by recording approximately RM190 billion, followed by chemicals at approximately RM130 billion (see Fig. 9).

Fig 7.Top Five Sources of FDI, 2005 and 2006 (RM Billion)

Fig. 8.Patent Applications by Category, 1993-2006

[Impact of the Intellectual Property System on Economic Growth ]

97

Table 1 shows that between 1996 and 2005, more than 60 per cent of investment in the country was concentrated in five industries, i.e. the electrical and electronics sector, accounting for 31 per cent of foreign investment, followed by petroleum products including petrochemicals (12 per cent), basic metal products (9 per cent), paper, printing and publishing (7 per cent) and chemicals and chemicals products (7 per cent).

Source: IMP3 (2006), Table 1.4, p. 8.

Fig. 9. Sales Values of Selected Industries, 2005 and 2006 (RM Billion)

Table 1: Total Investments in Manufacturing Sector by Industry, 1996-2005

[Impact of the Intellectual Property System on Economic Growth ]

98 Patents by Industrial Sector

In all four sectors (IT, manufacturing and equipment, automobiles, and pharmaceutical and chemical industries), steady growth in patent grants could be seen. However, the highest number of patents granted was in the pharmaceutical sector. The rate of growth was phenomenal; from a mere 10 patents in 1989 to 321 in 2006. The highest total grant of patents for the pharmaceutical industry was in 1993, with 197 out of 1,284 patents granted that year, accounting for 15.3 per cent of total patents granted.

However, there was a decrease in patent grants from this sector from 1994 to 2000. This could have been due to reasons unrelated to the reforms concerning the introduction of purpose-built product claims for medical use and the Bolar exemptions (see Fig. 10).

The statistics for patent grants were consistent with the phenomenal increase in the share of domestic investment in the pharmaceutical industry. The analysis shows that the share of average domestic investment increased from 65 per cent in the period between 1996 and 2001 to 76 per cent between 2001 and 2005. At the same time, the percentage of foreign investment dropped from 35 per cent to 24 per cent. One possible conclusion to be drawn is that the 1993 reform of the Patents Act 1983 to allow the patenting of purpose-built product claim applications provided more commercial opportunities to the industry; hence the boost in local investment.

A sudden growth in patent grants in the IT industry was seen in 2006: from a mere two patents in 1990, this grew by 500 per cent to 101 patents in 2006. The increase was apparent from 1998 onwards.

This phenomenon could be attributed to the special measures adopted by the government to boost development of the industry, particularly with the establishment of the Multimedia Super Corridor and the increase in funding of R&D on IT-related projects (see Fig. 10).

The manufacturing sector has remained an important sector as can be seen in the number of patent grants. In 2006, a total of 61 patents were issued to this sector, which amounted to 0.9 per cent of the total number of patents granted. In contrast, the number of patent grants for the automobile industry was negligible and sporadic: a total of nine such patents were granted between 1996 and May 2007.

Fig. 10.Patent Grants by Selected Industrial Sectors, 1988-2006

[Impact of the Intellectual Property System on Economic Growth ]

Filing Trend by Local Applicants and Patent Applications from Universities 99 and Research Institutes

The share of local patent applications has been increasing gradually over the years. A notable increase has been observed since 2000. The share of local patent applications increased from 2 per cent in 1986 to 3 per cent in 2000, before rising to 7 per cent in 2002, and to 10 per cent and 12 per cent in 2004 and 2006 respectively. In the first five months of 2007, local patent applications accounted for 28 per cent of the total.

The S&T policies contributed to the growth of local patent applications, particularly from universities.

The continuous support given by the government in financing R&D in universities through the IRPA grant was a major factor behind the growth of patent applications in this area (see Fig. 11).

The total number of applications from universities in 2006 was 104, which accounted for about 20 per cent of total local applications. Six of the top 15 patent applicants for the year 2006 were universities;

while three were statutory bodies specifically created by the government to conduct and commercialize research and development. This showed that a significant share of R&D in Malaysia took place in universities and government-led research institutes. This trend has to be interpreted together with the introduction of IP policies in universities and research institutes from the mid-1990s. Under these policies, universities allocated a major share of potential profits to the researchers, which provided an incentive to university lecturers to spend time on research and innovative activities.

IP and Economic Growth

There seemed to be a clear correlation between patent applications and the country’s economic performance. During the two economic recessions in the mid-1980s and 1990s, there was a noticeable decrease in patent applications. This downward trend reversed as the economy picked up again in 1988 (see Fig. 12).

Fig. 11.Patent Application Filed by Universities and Research Institutes, 1987-2006

[Impact of the Intellectual Property System on Economic Growth ]

100