A two-tiered or a single-tiered patent system?

New research, presented at the European Policy for Intellectual Property (EPIP 2015) conference in Glasgow, organized by CREATe (Research Councils UK Copyright Centre), shows that it makes not much difference to the amount of patenting activity, with implications for IP policy.

Second tier patent systems may refer to utility model systems, short-term patent systems, utility certificate systems, petty patent systems and innovation patent systems. Generally, they are systems that are designed to be cheap, fast and simple alternatives to normal 20-year patents and often targeted to small and medium sized enterprises (SMEs). Since their standards are not regulated by international treaties (e.g. TRIPS), countries can in principle design their systems as they see fit. According to WIPO, utility model systems exist in 75 countries and also most OECD and EPO member countries have them. Nevertheless, surprisingly little empirical evidence exist about their economic effects in advanced economies. Does second tier patent protection actually boost innovation?

Prior research has documented that countries such as South Korea and Japan have effectively used utility model systems as stepping stones and learning devices in their technological development process. Currently China is executing a similar IPR strategy and India has been considering adopting a utility model system. However, it is less clear why advanced economies should provide second tier patent protection. In particular, non-harmonized national second tier patent systems seem to be at odds with the idea of a competitive European market. Internationalizing European SMEs need to invest costly time and effort to study the peculiarities of national IPR systems in the European single market.

The Netherlands offers an interesting case as it was the first country to abolish its second tier patent system in June 2008. Since April 1995 until the amendment of the Dutch Patent Act 1995 the Dutch patent office offered a possibility to obtain six-year patents. The system was initially designed to the needs of SMEs. However, as is common in most second tier patent systems, there was no examination for novelty and inventive step at the patent office and the unexamined six-year patents created legal uncertainty to competitors. This uncertainty was the main motivation for the abolition of the Dutch short-term patent system. Belgium followed the Netherlands in January 2009 by abolishing its short-term patent system but this trend of abolitions did not spread to other EU countries.

The current study investigates quantitatively how the amendment of the Dutch Patent Act 1995, which included the abolition of the short-term patent system, was associated with the subsequent patenting activity at the Dutch patent office. The patent data is taken from PATSTAT and I use synthetic control method to construct a reasonable counterfactual for the Netherlands. My (preliminary) results suggest that in the Netherlands the transition from two-tiered patent system back to a single-tiered was not associated with a permanent decrease in national patenting activity. This may indicate that potential short-term patent applicants shifted to apply for normal patents and domestic innovative activity was not adversely affected by the abolition. Future research could study the effect of patent reform on applicant behaviour and the structure of patent filings.

As a conclusion, the empirical evidence on the economic benefits of two-tiered patent systems in advanced economies remains non-existent. The increased use of EPO as a patent filing route in Europe may further decrease the importance and need for national second tier patent systems. In my view, European countries should reconsider what kind of national patent systems best serve their needs. The question is, should the (somewhat peculiar) second-tier patent systems be retained, should we harmonize them or should they be abolished completely.


Notes for editors: “The relationship between first and second tier patent protection: The case of the Dutch short-term patent system abolition” by Jussi Heikkilä is a working paper to be presented at the European Policy for Intellectual Property (EPIP) Conference, University of Glasgow, 2-3 September 2015. For more information visit: http://www.epip2015.org/

Jussi Heikkilä is a Doctoral student, School of Business and Economics, University of Jyväskylä

For further information contact the author of the study Jussi Heikkilä (email: jussi.heikkia@jyu.fi) or the CREATe PR team (email: contact@create.ac.uk).

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