Last year we wrote about the impact of the pandemic on the US patent activity and the patent prosecution practice (Patexia Insight 79). We estimated a drop of 2 to 4 percent in the filing activity in 2020 and 2021, mainly due to the weakening global economy in many sectors, which was accelerated by the pandemic.

This week we will look at the patent activity and see if any of our predictions have come true. We will also talk about the best sectors and geographical locations that patent practitioners can gain or expand their clients.

The US patent office has not yet released the number of new filings in 2020. This number usually comes out in the second quarter of the year. But for the time being, we are going to analyze the number of issued patents as well as the maintenance payments by majors corporations to see if there are any signs that we can use to find out the impact of the pandemic and also figure out the trends in the following years.

The following chart shows the number of issued patents by the USPTO in the last five years. There is a small drop of about one percent in the number of issued patents in 2020. We understand that some companies might have decided to abandon the pending applications or have not paid the allowance fees to save some money, but this most likely was a very small percentage and had minimal impact on the number of issued patents in 2020.

There is usually a 2 to 3 year lag between filing and issuance. Therefore, we will see the true impact of 2020 filing activity in 2022 or later. This one percent drop was expected as we explained the general slowdown in recent years in Patexia Insight 79. We believe the pandemic may just accelerate this decline in the following years.

Activity of the Top 10 Most Active Companies

If we take a closer look at the activity of the top 10 USPTO Clients, we may learn about the trends. The following chart shows the number of patents issued to these 10 companies for a 5-year period from 2016 through 2020.

During this 5-year period, the USPTO issued approximately 1.8 million patents. The top 10 companies, made up to 12 percent of the PTO’s total volume. Therefore, any significant change in the behavior of these companies will impact the USPTO’s revenue and also may trigger other companies to adjust their strategies in a similar fashion.

IBM has been the volume leader for more than 28 years and while the company has maintained its top position as the most active filer, a comparison of their activity in the last two years shows that they are slowing down. In fact, our review of the top 10 companies shows that almost all of them have had a drop in the number of issued patents in 2020. Only Apple shows double-digit growth in 2020.

Company	Patents (2019)	Patents (2020)	Change
IBM	9262	9130	-1.43%
Samsung	8047	7861	-2.31%
LG Electronics	4861	4634	-4.67%
Canon	3705	3300	-10.93%
Intel	3845	3626	-5.70%
Sony	3596	3619	0.64%
Microsoft	3172	3004	-5.30%
Apple	2817	3138	11.40%
Google	2364	2101	-11.13%
Qualcomm	2374	2290	-3.54%

Analysis of activity by Country

One apparent trend in the above table is the drop in filing activities by foreign companies such as Canon. Japan has been the largest client of the USPTO after the US. Our review of 2019 and 2020 issued patents show that filing by the Japanese companies has dropped from 57,205 in 2019 to 55,237 in 2020. This represents a 3.5% decline.

In fact, the only two countries out of the top 10 that have shown growth in their US patent activity are China and Taiwan. Chinese companies obtained 19,469 patents in 2019 vs. 22,047 in 2020, which shows a 13 percent increase.

China activity may also slow down once the foreign patent subsidy by the local Chinese government ends in 2025 (in fact, some subsidies may end as early as June 30, 2021). USPTO released a report on January 13, 2021, highlighting some of the non-market factors, contributing to higher filing activity by Chinese entities (Read the full report here).

Analysis of Patent Maintenance Fees

Last year we predicted that many companies will reduce their IP spending by reducing their patent renewal budget. This means more patents will be abandoned due to non-payment of maintenance fees compared to prior years.

Our research team reviewed the patents that were abandoned in 2020 due to non-payment of maintenance fees and found that it increased 9 percent compared to 2019. In 2020, a total of 135,842 patents expired due to non-payment of either 1st, 2nd, or 3rd maintenance fees. This number was 124,925 in 2019.

Our data also shows that patents that were due for the second maintenance payment had the highest rate of drop. In 2020, the non-payment of the 2nd maintenance fee increased 15 percent.

We estimate that this drop in renewal reduced the USPTO’s revenue by more than $40 million in 2020.

We also reviewed the maintenance payments for IBM to see if the company as the volume leader has changed its strategy and has reduced its IP spending in 2020. Our data shows that the company abandoned 7,785 patents in 2020 compared to 6841 in 2019. This represents approximately a 14 percent increase in 2020. We also found that IBM increased the rate of abandonment for the 3rd maintenance payment by as much as 27 percent in 2020 compared to 2019.

Observations and Conclusions

The above analysis suggests that both “micro” and “macro” effects are important and law firms or companies should consider both when defining their IP strategies.

The decline in 8 out of 10 top clients of the USPTO suggests that generally, we may see further weakness in filing activity and a decline in the USPTO filings in the following years.
The sharp increase in Apple’s issued patents suggests that innovative companies will likely continue to invest heavily in patents. Apple is known as one of the most innovative companies and is currently the largest company in the world by market capitalization. Most likely we will see similar growth in the number of patents filed by other emerging technology companies in growth areas such as green energy, driverless cars, bioinformatics, etc.
The United States and most other western countries including Germany, France, Canada together with Japan have decelerated their filing activities. This may be an indication of a weaker economy ahead and slower/negative GDP growth for some of these countries in the coming years. We believe that this decline will continue in the following years.
Growth of China and some of the other Asian countries have been strong. The Chinese government subsidies will end in 2025, but as the country’s GDP grows, some of the Chinese tech giants will continue their global expansion and this means they will increase their filings in the US to protect their future market in the country. However, this may negatively be affected by the US foreign policy and the relationship between the two largest economies in the world (China Calls for a Reset - Feb 21, 2021).
Some of the USPTO volume leaders such as IBM and Canon seem to be slowing their US filing activities. It is hard to understand their strategy but most likely the cost of maintenance, lack of good return on their IP investment and effectiveness of IPR and PTAB in killing low-quality patents, have contributed to their decisions. This helps them lower their IP spending.
Companies have increased their rate of abandonment of US patents in 2020 by 9 percent. As they have reduced their IP spending, the USPTO revenue has also been suffered.

Patent firms and attorneys should focus their business development efforts on innovative companies specially the emerging technologies. Some of these companies will take the position of some of the current top 10 in the next decade.

In the following weeks, we plan to review some of the best performing and most active law firms in district court patent litigation in 2021.