© Poh Kam Wong

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Enhancing Hong Kong’s Innovation System: Is There a Role for IP Policy?

Poh-Kam Wong

Professor, Business School & LKY School of Public Policy Director, Entrepreneurship CentreNational University of Singapore

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Scope of IP Policy• Protecting and enforcing IP rights

– Raising awareness & education

– Developing legislative framework & enforcement institutions

• Promoting the creation of IP and facilitating their commercial exploitation and market transactions

– In addition to promotion of R&D activities

– Supply stimulation, e.g.• subsidies for patent application expenses

• using patent output as a performance measure of public R&D institutions

• SBIR policy in the US mandating the allocation of certain % of R&D budget on exploring commercialization of IP

– Demand stimulation & market transaction facilitation, e.g.• incentivising SMEs to license-in & exploit IP

• promoting the development of intermediary industries (IP professional services, entrepreneurial financing institutions)

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Development of IPR Protection Policy

• Since 1997, HKSAR has developed a relatively comprehensive legal framework for protecting intellectual property rights (IPR), and is a party of all major international IP conventions • In terms of institutional development, the IP Department of HKSAR (created in 1990) has also been relatively efficient in terms of creating IP awareness & providing IP administrative infrastructure, while the Customs & Excise Dept (CED) has stepped up IPR enforcement • While the IPR environment of HKSAR has thus improved over the last 10 years, other economies like Korea, Singapore and Ireland have achieved even greater improvement based on a number of international benchmarking indices

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1960-75 1975-80 1995 2000

Hong Kong 2.04 2.46 2.57 2.90 China n.a. n.a. 1.55 2.48 India 1.68 1.57 1.51 2.18 Japan 3.24 3.94 3.94 4.19 Korea 2.87 3.61 4.20 4.20 Singapore 2.37 2.57 3.90 4.05 US 3.86 4.41 4.86 5.00 Switzerland 2.84 3.80 3.91 4.05 Ireland 2.69 2.99 3.32 4.00

Patent Rights Index, Economic Freedom of the World Report

Note: The index is based on five categories: (1) coverage (the subject matter that can be patented); (2) duration (the length of protection); (3) enforcement (the mechanisms for enforcing patent rights); (4) membership in international patent treaties; and (5) restrictions or limitations on the use of patent rights.

Source: 1960-75, 75-90 -- W. G. Park, “Intellectual Property & Patent Regimes”, Economic Freedom of the World: 2001 Annual Report, Chapter 4; 2000 -- W.G. Park & S. Wagh, “Index of patent rights”, Economic Freedom of the World: 2002 Annual Report, Chapter 2

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2000 2003 2008 (out of 10) (out of 7) (out of 7)

HK 6.3 (4.4) 5.3 5.4

China 3.22 (2.3) 3.4 3.9 India 3.27 (2.3) 3.5 3.7

Japan 7.55 (5.3) 4.7 5.7 Korea 5 (3.5) 4.5 5.0 Singapore 7.62 (5.3) 5.9 6.3 Taiwan n.a. 5.0 4.9

US 9.1 (6.4) 6.2 5.6 Switzerland 9.17 (6.4) 5.9 6.3 Ireland 7 (4.9) 4.7 5.6

GCR IP Rights Protection Index, 2000-2008, selected years

Notes: In 2000, the Likert scale is 1 to 10. Figures in bracket are re-scaled to the 1 to 7 range. In 2004, the index is measured by responses to the following question: Intellectual property protection in your country (1 = is weak and non-existent, 7 = is equal to the world’s most stringent).  The index in 2008 is measured by responses to the following question: Intellectual property protection and anti-counterfeiting measures in your country are (1 = weak and not enforced, 7 = strong and enforced).  Source: Global Competitiveness Report, various years

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Development of IP Creation & Commercialization Policies

• Relative lack of Strategic IP policy directions by the Innovation and Technology Commission (ITC)

• IP policy in the Public University sector – by and large, relative autonomy by individual universities to pursue its own IP policies, with no central direction

• No policy to promote the development of IP professional services industry

• Policy to promote the development of industrial designs primarily limited to physical infrastructure

• Little policy emphasis on promoting the development of entrepreneurial financing for IP-based ventures since the dot-com crash

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Comparing HKSAR vs. Singapore• Compared to HKSAR, the Singapore government has greater policy emphasis on promoting IP creation & commercialization

– Strategic visioning to become a regional IP creation & commercialization hub– Creation of Exploit Technologies (ETPL) to centralize IP management and commercialization for all public R&D institutions funded by A*STAR – New National Research Foundation (NRF) program has an explicit “academic entrepreneurship” promotion component targeted at IHLs– Explicit investment & talent attraction policy to promote IP professional services by EDB; IP Academy created to promote manpower development for IP professional services industry

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Did the more active IP Policy intervention by Singapore matter?

• Comparative analysis of IP output pattern and performance trends of HKSAR vs. Singapore in recent years

– focus primarily on patents granted by USPTO

– distinguishing utility patents vs. design patents

– quantity as well as quality indicators

– compare differences before mid-1990s vs. after

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Growth of Hong Kong and Singapore Patents, 1976-2007

Patents by HK inventors Patents by Sg inventors

HK

assignee Foreign

assignee Total

patents Sg

assignee Foreign

assignee Total

patents

No. of patents 1976 17 7 24 2 1 3 1977 25 8 33 3 2 5 1978 27 3 30 0 3 3 1979 21 15 36 0 0 0 1980 44 9 53 1 5 6 1981 57 13 70 3 2 5 1982 67 6 73 6 0 6 1983 64 1 65 4 2 6 1984 58 20 78 4 0 4 1985 56 17 73 7 7 14 1986 106 11 117 3 2 5 1987 80 20 100 10 6 16 1988 91 23 114 5 7 12 1989 116 27 143 16 12 28 1990 109 55 164 6 15 21 1991 144 79 223 17 14 31 1992 123 50 173 13 28 41 1993 154 43 197 19 42 61 1994 180 58 238 29 50 79

Notes: Where a patent is assigned to more than 1 country, it is allocated according to the country of the first-named assignee Patents by Hong Kong (Singapore) inventors include all patents with at least one inventor who is a Hong Kong (Singapore) resident Unassigned patents are allocated to Hong Kong (Singapore) assigneesSource: Database of the USPTO and NUS Patent Database

Patents by HK inventors Patents by Sg inventors

HK

assignee Foreign

assignee Total

patents Sg

assignee Foreign

assignee Total

patents

No. of patents 1995 218 58 276 30 51 81 1996 218 55 273 54 70 124 1997 207 85 292 55 77 132 1998 306 105 411 90 91 181 1999 337 105 442 102 105 207 2000 422 138 560 179 120 299 2001 426 167 593 233 154 387 2002 394 184 578 296 237 533 2003 419 201 620 291 273 564 2004 347 201 548 273 320 593 2005 327 162 489 210 255 465 2006 411 243 654 284 299 583 2007 351 369 720 241 294 535 Total 5922 2538 8460 2486 2544 5030

Annual growth rate (%) 1976-86 20.1 4.6 17.2 4.1 7.2 5.2 1986-96 7.5 17.5 8.8 33.5 42.7 37.9 1996-00 18.0 25.9 19.7 34.9 14.4 24.6

2000-07 -2.6 15.1 3.7 4.3 13.7 8.7

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Growth of Hong Kong and Singapore Utility Patents, 1976-2006

Patents by HK inventors Patents by Sg inventors

HK

assignee Foreign

assignee Total

patents Sg

assignee Foreign

assignee Total

patents

No. of patents 1976 15 7 22 2 1 3 1977 9 4 13 1 2 3 1978 19 3 22 0 3 3 1979 8 10 18 0 0 0 1980 24 7 31 1 4 5 1981 28 8 36 3 2 5 1982 18 5 23 6 0 6 1983 18 1 19 5 1 6 1984 22 8 30 4 0 4 1985 20 12 32 6 7 13 1986 29 8 37 3 1 4 1987 26 13 39 10 5 15 1988 35 14 49 5 4 9 1989 39 17 56 15 7 22 1990 30 30 60 4 12 16 1991 34 23 57 9 12 21 1992 49 21 70 11 27 38 1993 46 24 70 14 41 55

Notes: Where a patent is assigned to more than 1 country, it is allocated according to the country of the first-named assignee Patents by Hong Kong (Singapore) inventors include all patents with at least one inventor who is a Hong Kong (Singapore) resident Unassigned patents are allocated to Hong Kong (Singapore) assigneesSource: Database of the USPTO and NUS Patent Database

Patents by HK inventors Patents by Sg inventors

HK

assignee Foreign

assignee Total

patents Sg

assignee Foreign

assignee Total

patents

No. of patents 1994 44 31 75 23 48 71 1995 71 36 107 26 45 71 1996 73 36 109 48 57 105 1997 68 32 100 54 67 121 1998 131 61 192 85 70 155 1999 112 68 180 98 99 197 2000 120 88 208 167 107 274 2001 181 92 273 229 144 373 2002 182 98 280 288 217 505 2003 197 99 296 282 241 523 2004 187 110 297 260 284 544 2005 161 78 239 190 242 432 2006 183 131 314 252 264 516 Total 2179 1175 3354 2101 2014 4115

Annual growth rate (%) 1976-86 6.8 1.3 5.3 4.1 7.2 5.2 1986-96 9.7 16.2 11.4 33.5 42.7 37.9 1996-00 13.2 25.0 17.5 36.6 17.1 27.1 2000-06 7.3 6.9 7.1 7.1 16.2 11.1

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Growth of Hong Kong-Invented Utility Patents vs Singapore-Invented Utility Patents 1976-2006

0

100

200

300

400

500

600

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

HK-invented utility patents Sg-invented utility patents

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Utility Patenting Propensity, Selected Economies, 1985-2005

Utility Patenting Propensity

(Patents per 100,000 population) 1985 1995 2005

Japan 10.59 17.56 24.1 South Korea 0.1 2.62 9.2 Taiwan 0.91 7.83 22.9 Hong Kong 0.59 1.72 3.4 Singapore 0.47 2.0 9.8 China 0 0.01 0.05 India 0 0.01 0.05 USA 16.7 21.2 25.9 Germany 8.73 8.48 11.91 Ireland 0.88 1.83 4.81

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Comparison of Hong Kong and Singapore Patents by Patent Type, 1976-2006

Hong Kong Singapore

Utility Design Plant,

Reissue Total Utility Design Plant,

Reissue Total

No. of patents No. of patents 1976-85 295 318 1 614 56 7 0 63 1986-95 756 1169 2 1927 346 59 0 405 1996-00 920 1326 1 2247 912 95 0 1007 2001-06 2087 2191 7 4285 3253 233 6 3492 % of patents % of patents 1976-85 48.0 51.8 0.2 100.0 88.9 11.1 0.0 100.0 1986-95 39.2 60.7 0.1 100.0 85.4 14.6 0.0 100.0 1996-00 40.9 59.0 0.0 100.0 90.6 9.4 0.0 100.0 2001-06 48.7 51.1 0.2 100.0 93.2 6.7 0.2 100.0

Note : Includes patents by at least one locally resident inventor and patents with the first-named assignee is locally listed

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Breakdown of Patents by Hong Kong and Singapore Inventors1 (Local vs Foreign Assignee) (1976-2006, Percentage)

1976-85 1986-95 1996-06 Total 1976-85 1986-95 1996-06 Total

Hong Kong (% of patents) Singapore (% of patents)

Local assignee 81.5 75.7 69.9 72.0 57.7 39.9 50.8 50.0 Private Company 49.5 55.5 48.2 49.9 23.1 21.5 34.8 33.6 University 0.0 0.3 3.7 2.7 0.0 3.5 4.6 4.4 Govt/PRIC 0.0 0.0 0.1 0.1 0.0 0.8 6.0 5.5 Individual/Unassigned 32.0 19.9 17.9 19.3 34.6 14.1 5.4 6.4 Foreign assignee 18.5 24.3 30.1 28.0 42.3 60.1 49.2 50.0 Private Company 17.8 23.6 29.0 27.0 36.5 58.8 47.5 48.3 University 0.0 0.3 0.3 0.3 3.8 0.5 1.2 1.1 Govt/PRIC 0.0 0.0 0.5 0.3 0.0 0.0 0.4 0.3 Individuals 0.7 0.5 0.3 0.4 1.9 0.8 0.2 0.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Notes: 1Patents where at least one inventor is a Hong Kong (Singapore) resident Unassigned patents are included in “individuals” Allocation of assignee is based on first-named assignee University patents include patents from companies formed to commercialize university technologySource: Database of the U.S. Patent and Trademark Office (USPTO) and NUS Patent Database

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Citation Indices for Hong Kong and Singapore Patents

Hong Kong Singapore 1976-85 10.9 6.5 1986-95 11.0 12.9 1996-06 4.0 4.2 OVERALL 5.8 4.9

Average Citations Received per Utility Patent by Hong Kong and Singapore Inventors 1976-2006

Relative Citation Index, 1976-2005

Note: Computed using citations up to 2006. Because of truncation effect, more recent patents tend to have lower forward citation counts due to having less time to attract forward citations

All Patents Utility Patents Country of Invention 1976-

1985 1986-1995

1996-2000

2001-2005

1976-1985

1986-1995

1996-2000

2001-2005

Hong Kong 0.847 0.708 0.745 0.977 1.105 0.943 0.938 1.153 Singapore 0.652 1.116 1.265 1.074 0.641 1.110 1.277 1.187

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Citation Indices for Hong Kong and Singapore Patents (contd)

High Impact Index1, 1976-2005

1Top 5% most highly cited utility patents within 1-digit technology class

Using 1 digit Technology Class Country of Invention 1976-

1985 1986-1995

1996-2000

2001-2005

Hong Kong 1.272 0.879 1.204 1.244 Singapore 0.000 0.970 1.616 1.268

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Herfindahl Index of Technological Concentration, 1976-2006

Notes: Nationality of Patent is defined as having at least one inventor resident in the specified nation Herfindahl Index computed using classifications at the IPC Section level, with 8 categories in total.Sources: Computed from Database of the U.S. Patent and Trademark Office (USPTO) (various years) and the NUS Database of US Patents

Hong Kong Singapore 1976-85 0.277 0.281 1986-95 0.203 0.211 1996-00 0.203 0.282 2001-06 0.194 0.312

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Comparison of Technology Class of Patents by Hong Kong and Singapore Inventors, 1976-2006

Note: Patents include those where at least 1 inventor is a Hong Kong/Singapore residentSource: Database of USPTO (various years) and NUS Patents Database

8.62.1

7.914.2

8.4 7.52.1

14.8

14.725.3

6.3

4.4

3.55.7

4.020.4

27.1

27.4

32.4

24.1

46.8

2137.5

12.8

15.4

13.9

9.1

37.1

25.0

39.7

19.8

33.2

7.2

9.7 7.9

3.2

0

10

20

30

40

50

60

70

80

90

100

HK Sg HK Sg HK Sg

Chemical Computers & Communications Drugs & Medical Electrical & Electronic Mechanical Others

1976-85 1996-061986-95

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Top 20 Organizations with Hong Kong Patents1

1Patents where at least one inventor is a Singaporean. The first assignee company is used to count patents which are assigned to more than one company.2Includes Vtech Communications Ltd, Vtech Electronics Limited, VTech Telecommunications Limited, Vtechsoft Holdings Limited3 includes Johnson Electric Engineering, Ltd, Johnson Electric Industrial Manufactory. 4 includes North American Philips Corp., U.S. Philips Corp.5 includes STD Manufacturing Ltd., STD Plastic Industrial Ltd. 6 includes Timex Group B.V.Source: NUS Patents Database

Patent Count

No Companies Country 1976-1985

1986-1995

1996 -2000

2001 - 2006

Cumulative Total as at end 2006

1 John Manufacturing Ltd. Hong Kong 9 170 115 41 335 2 Hong Kong Uni of Science & Technology Hong Kong 0 1 27 53 81 3 Vtech Industries, Inc. 2 Hong Kong 0 17 37 21 75 4 One World Technologies Limited Hong Kong 0 0 0 70 70 5 Johnson Electric S.A. 3 Hong Kong 1 49 13 2 65 6 Hayco Manufacturing Limited Hong Kong 0 0 2 61 63 7 Astec International Limited US 0 34 16 12 62 8 Choon Nang Electrical Appliance Hong Kong 0 3 16 36 55 9 The Brinkman Corporation US 0 8 2 42 52 10 Hong Kong Polytechnic University Hong Kong 0 0 5 45 50 11 World Wide Stationary Manufacturing Co. Hong Kong 0 5 21 22 48 12 SAE Magnetics (Hong Kong) Hong Kong 0 0 1 45 46 13 Gold Coral International, Ltd. Hong Kong 0 0 0 45 45 13 Solar Wide Industrial Limited Hong Kong 0 17 17 11 45 15 Rosalco, Inc. US 0 44 0 0 44 15 Koninklijke Philips Electronics N.V. 4 Netherlands 7 8 8 21 44 17 STD Electronic International 5 Hong Kong 0 38 4 1 43 18 Motorola Inc. US 0 11 22 9 42 19 Goodway Electrical Company Ltd. Hong Kong 1 7 8 25 41 20 Alfa Technology Ltd. Hong Kong 0 0 30 10 40 20 Timex Corp 6 US 3 1 20 16 40

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Top 20 Organizations with Singapore Patents1

1Patents where at least one inventor is a Singaporean. The first assignee company is used to count patents which are assigned to more than one company.2Includes US Philips Corp 3A company called Tri-tech Microelectronics was granted a total of 56 patents before filing for bankruptcy and entering liquidation in 1999.4Includes ASM Technology SingaporeSource: Database of the U.S. Patent and Trademark Office (USPTO) (various years)

Patent Count

No Companies Country 1976-1995

1996-2000

2001-2006 Cum. 1986- 2006

1 Chartered Semiconductor Manufacturing Singapore 14 190 581 785 2 Hewlett-Packard Company United States 23 52 141 216 3 Seagate Technology United States 0 15 200 215 4 National University of Singapore Singapore 12 35 115 162 5 Micron Technology Inc United States 0 0 135 135 6 Motorola Inc United States 24 47 34 105 7 Texas Instruments United States 18 42 37 97 8 Koninklijke Philips Electronics., N.V.2 Netherlands 10 15 63 89 9 Institute of Microelectronics Singapore 1 18 62 81 10 ST Assembly Test Services Singapore 1 2 78 81 11 Matsushita Electric Industrial Co. Japan 3 24 49 76 12 Agency for Science, Tech. & Research Singapore 0 0 57 57 13 STMicroelectronics Italy/France 2 17 38 57 14 Tri-tech Microelectronics3 United States 3 49 4 56 15 Creative Technology Singapore 0 9 46 55 16 Advanced Micro Devices United States 0 9 43 52 17 Thomson SA France 15 10 20 45 17 ASM International NV4 Netherlands 0 0 41 41 19 Infineon Technologies Germany 0 0 41 41 20 Molex Incorporated United States 26 7 5 38

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Trademarks Applications and Registrations with USPTO

Trademark Applications filed Trademarks Registered Fiscal Year ending Sept HK Singapore HK Singapore

1990 285 48 82 9 1991 360 58 83 10 1992 484 66 130 17 1993 319 97 175 28 1994 396 172 160 23 1995 456 138 127 33 1996 456 110 168 45 1997 437 203 163 60 1998 478 161 169 49 1999 625 186 146 34 2000 1,097 419 194 44 2001 898 339 267 76 2002 860 283 288 82 2003 794 285 387 95 2004 862 205 391 102 2005 1,130 311 290 100 2006 1,113 355 373 110 2007 1,305 503 424 134

TOTAL (1990 – 2007)

12,355 3,939 4,017 1,051

Average Annual Growth (%) 1990-1995 9.9 23.5 9.1 29.7 1996-2001 14.5 25.2 9.7 11.1 2001-2007 6.4 6.8 8.0 9.9

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HKSAR vs. Singapore: Overall Findings

• utility patenting in Singapore has grown faster & overtaken HKSAR in quantity and quality in recent years

• universities and public R&D institutions, as well as subsidiaries of global high tech MNCs make greater contributions in Singapore patenting vs. HKSAR

• higher level of technology specialization in high tech clusters targeted by government in the case of Singapore

• trade-mark registration and design patents also growing faster in Singapore, although HKSAR still leads

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Role of IP policy in HKSAR: Overall Recommendation

• A case can be made for a more strategic role of the government of HKSAR in formulating and implementing a coherent set of IP creation and commercialization policies to support the drive towards a more advanced innovation system. • While recognizing that the role of IP varies significantly with the nature of technology fields and business sectors, there should be a high-level strategic overview by ITC to ensure that IP-related issues are taken into consideration in implementing sector-specific innovation strategies. • The strategic review exercise may be able to identify some common IP issues that cut across technology and business sectors.

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Recommendations I

• Promoting the development of HKSAR’s IP professional services industry

– to serve not just HKSAR, but also China in general and the Pearl River Delta (PRD) region in particular– PRD (and China in general) will be significantly increasing its innovative activities in the future, and hence will represent major market growth potential for IP professional services– HKSAR will risk being bypassed unless its IP professional services industry is upgraded, and develops greater domain expertise on China IP law – Market opportunities for IP professional manpower development & training – opportunities for HKSAR universities/public institutions in addition to private sector firms?

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Recommendation II

• Strengthening the role of the leading HKSAR universities as IP creators and commercialization facilitators

– giving the universities more funding resources for IP creation/commercialization activities (e.g. like Singapore NRF’s innovation fund for universities) – adaptation of US SBIR-like scheme to allocate proportionate resources to IP commercialization activities as a function of R&D funding (e.g. mandating 5% additional funding for IP commercialization activities on top of public R&D funding) –using the universities’ IP management capabilities as a leverage to access China’s much larger R&D manpower base and potential sources for IP–

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Recommendations III

• Promoting the development of HKSAR as an industrial design industry hub

– Industrial design as a special form of IP

– HKSAR already has comparative advantage & regional leadership in industrial design capabilities

– Potential for HKSAR to serve not just HKSAR companies, but also China and the Asia-Pacific region

– Potential for universities in HKSAR to play a greater educational role in industrial design, but need to go beyond technical training to encompass design IP management & commercialization/business expertise