The report tackles several questions about the types, roles, and importance of intangible assets in global value chains. One key question is what role intellectual property plays in generating a return on these assets.
Although much of the report deals with traditional consumer products such as coffee and smartphones, of interest to readers of this blog is the chapter on innovation in the solar photovoltaic (PV) industry and, particularly, the section on PV related patent filings.
The report notes that the number of patent filing increased from less than 2,500 in the early 2000s to over 16,000 in 2011, a reflection of the growing market demand for PV installations. Most of those technologies originated in Japan and US until 2008, but by 2010 China had surged ahead to become the top PV patent filing economy.
The report addresses the question of China’s technological catch-up, positing that China enjoyed technology transfer by purchasing production equipment from international suppliers and cultivating skilled executives educated abroad to work for Chinese companies and teach at Chinese universities.
Another finding is that China, in particular, patents minor inventions or incremental improvements while maintaining critical innovations focusing on process as trade secrets. From this the report concludes that process innovations “are instrumental for introducing new PV products into the market and maintaining existing ones.”
According to the report, a more detailed look at the patent filings reveals that about two thirds of patenting activity relates to cell and module technologies; silicon, ingots and wafers constituted under 10% of patent filings, and the remainder is equipment.
The report finds that the growth in PV patenting activity has reversed recently; between 2011 and 2015, the number of PV-related patent filings fell by 44 percent. This fall has occurred in all major PV innovating countries except China.
The decrease is a result of two forces, the report concludes. The first is a decline in the number of applicants (though the number of applications per applicant has increased), particularly in the US, Germany, Japan and Korea. This is because many players have exited the market, and market entry is difficult.
The remaining players, however, seem to be filing more patent applications and increasing their R&D intensity. This focus on the next generation of technologies “suggests that IP-protected knowledge assets may become more valuable in this time of sectoral recomposition.”
The second reason for the decrease is a reduction of the internationalization of PV patents. In other words, applicants are filing in fewer countries outside their home country, opting out of international patent protection. The report finds that in the mid-2000s, each PV invention was filed on average in three different patent offices, but by 2015, the average was only 1.5.
The report notes that PV patent applicants typically file in only a few countries/jurisdictions (China, US, Japan, Korea and Europe) and rarely file in, e.g., Australia, Russia, Latin America, Africa, and the Middle East, or anywhere else.
While most innovation studies focus exclusively on patent data, the report has an interesting section on “reputational assets” such as trademarks and brand-related activities.
The report finds that trademark protection for PV products and services has grown in the last decade. Data from the US and international trademark application databases show that PV-related trademark filings were four to six times higher in 2016 than they were in 2005.
In the conclusion to the PV IP chapter, the report states that because PV panels and systems are now “mostly commodities rather than differentiated goods . . . the dynamics of the industry have been profoundly driven by strategies to reduce production costs, rather than by product innovation.” In addition, the solar PV market is “saturated with an incumbent technology whose depressed prices provide tight profit margins for companies.” Accordingly:
Firms can dedicate their R&D efforts either to high-level process innovations that will reduce production costs in the dominant technology, or to new solar PV product innovations whose production prices are below those for the incumbent technology.
With respect to China, the report calls the PV industry “a case study of a compelete form of technology transfer to an emerging economy.”