Now we'll talk about the administration of intellectual property. As I've mentioned before, we belong to the Canadian Intellectual Property Office, Canada's administrator for IP.
We have a very specific role, basically to examine applications for IP and to grant or register rights. Part of that role also has us manage the first appeals process. We do that for trademarks through our Trade-marks Opposition Board, and on the patent side, through the Patent Appeal Board.
Once we've exhausted those types of administrative activities, the only way to appeal some of our decisions is through the Federal Court.
Our mandate is very clear. We're there to deliver high-quality and timely IP products and services to our clients. We also have a mandate to improve awareness of IP with Canadian companies, and we have an international role to play with the World Intellectual Property Organization.
We've given you volumes for the year 2011-2012. It has been a slower year than usual because of the recession. We get, on average, about 100,000 applications for IP in a given year. It takes many years to go through the process, and what you see on the second line of the table on slide 2 is the number of grants that we will actually allocate in a given year.
If you look at the column for patents, you'll see that we've received about 37,000 applications. Those will not be processed for a number of years, but of the patents that we've processed—which we received a few years ago—we've actually granted 20,911.
What I'm also showing you here is the timeframe required to process an application from the day we receive it to the day a decision is made to either grant or not.
Something to note here is that on the patent side, we're showing 78 months. I just want to highlight the fact that in Canadian patent law, a user who files has up to five years to ask us to treat their application. About 25% to 30% of them wait for the fifth year before they ask us to do that. So this is not a record of our performance, because the users actually have quite a bit of leeway with respect to when they want to start the process. So this circumstance creates a situation of “patent pending” for the duration of the waiting period.
What I'd like to look at now is the global perspective of the IP situation. The three lines on the graph indicate that each type of the three main IP products has been experiencing quite a bit of growth over the last few years. All three of them are growing. The main reason for their growth is the BRIC countries, and in particular China, which has been pursuing a strategy of incremental filings for the last five or six years. In fact, China has seen a sevenfold increase in the number of their applications, so that has had quite a global impact on the IP community.
Now, for the Canadian picture, what I'm showing you in the graph at the top of the page are the Canadian applications. I've broken them down into the two types that we see. The dash lines represent Canadians applying for IP abroad, outside Canada. As you can see, they have experienced quite a bit of growth.
The line at the bottom shows the number of Canadians who apply in Canada. Clearly, we are in a situation where Canadian applicants are filing outside of Canada first.
The table at the bottom is not about applications now. It's about patents that have been approved, so patents that are in force. The first two lines represent the Canadian experience. The first line in the table, “Canadian patents in Canada”, shows the number of Canadians filing in Canada. As you can see, from 2005 to 2010 there has been substantial growth in that.
The number for Canadian patents abroad is substantially higher than the number of patents in Canada, and there's quite a bit of growth there too. In fact, Canadian patents in force have been growing at about 30% since 2005.
What's interesting here is that when we compare the number of Canadian patents in force to the number for the worldwide picture, you can see at the bottom of the table that Canada owns about 1% of patents globally.
We saw a slight decrease from 2006 to 2010. It's relative to global growth, but in essence, Canadian growth kind of meets global growth. We're within a few decimal points. We're losing a little bit of ground, but not too much. We're maintaining the global growth momentum here in Canada.
Because Canadians apply globally, it means that foreigners also apply globally.
I just want to highlight some of the peculiarities that we're seeing here in Canada with respect to the distribution of domestic IP and foreign IP. If I look at the patent filings, in terms of the 36,900 applications we receive in a year, 88% are from foreigners and only 12% are from Canadians. That makes us, in Canada, an office of second filing.
Offices of first filing, such as the United States, China, Korea, and the EU, will actually receive patents before we will, making them an office of first filing. That is usually explained by the interest companies have in filing in their biggest market first. Then they come to offices of second filing. Offices of second filing would include Canada, which is one of the largest in the second filing group, the U.K., Australia, and countries that are usually close to us, from that perspective.
To give you an idea of how many domestic patents the U.S. receives, where we are at 12%, the U.S. IP offices receive about 52% of their patent applications from Americans themselves.
Clearly IP is a global play, particularly with respect to its administration. From an administration perspective, it is essential for us to be well plugged in to other countries and that we spend a great deal of effort harmonizing our intellectual property activities so that it's a lot easier for Canadians to file abroad and a lot easier for foreigners to file in Canada. If that balance is not well achieved, it doesn't make Canadian companies very competitive and it makes it hard for foreigners to invest in Canada.
We have quite a number of activities with the World Intellectual Property Organization. We collaborate on quite a number of committees with them.
We also engage in bilateral agreements. One in particular that I'd like to bring to your attention is something called the patent prosecution highway. We basically give credit for the work done by another country. We have a bilateral agreement with the Americans, for example. If the application that comes to Canada is the same as one filed in the U.S., instead of taking 78 months to process, on average, it takes about six to 12 months. So we greatly accelerate the granting of the patent. That puts the company looking at this service in a very good position to commercialize its goods in Canada a lot sooner.
I'd just like to highlight some of the contributions CIPO makes to innovation and to helping SMEs, in particular, leverage the IP framework to their benefit.
In terms of what we do when we look at granting IP rights on a timely basis, we keep in mind that quite a number of our applicants actually are looking to commercialize their goods. So the sooner we can get to a decision, the better it is for them in terms of taking their goods to market.
Second, the principal thing we do when we examine a patent application, for example, is look at the scope. Typically we get applications that ask for a big scope, because if we grant it, they'll have a monopoly on a whole lot more play.
What we do, through a number of intricate cycles, is bring the scope down to the essence of the innovation, or the invention in the case of a patent. When we take that play from what we typically receive down to what we typically grant, we're looking at the quality of the patent. That's what we call the quality or the “scoping” of the patent. When we don't scope properly, what you will see is a situation where there's no clarity in the market. That will usually lead to litigation.
When companies take each other to court they're using that money, but not necessarily for the purposes of developing new products or for capital investment. We want to make sure that we scope the applications and grant the patents in the best way possible to make sure that we bring certainty to the market.
The third thing that I'd like to bring to your attention with respect to our contribution to innovation is basically what we call incremental innovation. When someone applies for an IP the value proposition is that we will exchange with you, Mr. Inventor, in the case of a patent, a 20-year monopoly in exchange for public disclosure. The public disclosure then is, in essence, to be used by other innovators and other inventors. If the first applicant with the first idea actually commercializes their idea and they create jobs and build a plant there's economic growth and that's good. From an incremental perspective, now if someone takes the idea, reshapes it, adds something to it, and they get another patent and they create jobs in a plant and something else, that's economic growth as well. So that incremental cycle is really at the essence of the value proposition that we look for.
In conclusion, clearly the administration of IP continually evolves. It is truly a global play. I want to leave you with the notion that at CIPO we are quite committed to making sure that we are always going to be in line with helping the innovators out there in Canada.
Thank you, Mr. Chairman.