While world slashed R&D in crisis, China innovated

While businesses worldwide cut their research and development budgets in the economic downturn, China invested heavily in innovation and sought more patents and trademarks, a United Nations agency said on Wednesday.

The World Intellectual Property Organization (WIPO) said U.S. applications for patents protecting new inventions were flat in 2008 and 2009, when recession made capital harder to access and customers harder to find.

Filings for patents -- which permit inventors to profit from novel developments for a limited time -- dropped 7.9 percent in Europe and 10.8 percent in Japan last year, with filings from Germany, Britain and France also lower.

But in China, a growing engine of the global economy, WIPO said patent applications jumped 18.2 percent in 2008 and another 8.5 percent in 2009.

Chinese filings for trademark protection -- affording rights to logos or distinctive signs on an indefinite basis -- jumped 20.8 percent last year, when such applications fell 11.7 in the United States, 7.7 percent in Germany and 7.2 percent in Japan.

"The post-crisis innovation landscape will invariably look different from that of a decade ago," WIPO Director-General Francis Gurry said in an introduction to the World Intellectual Property Indicators report.

"China is moving up the value chain and rapidly increasing exports based on domestic innovation, so inevitably it is filing an ever-growing number of patent applications," the WIPO chief later told a news conference.

WIPO Chief Economist Carsten Fink said China's ample cash reserves allowed it to continue financing innovation in a time when loans and venture capital were difficult to come by.

"There is a tremendous pool of finance for domestic investment in R&D and industrial design," he said.

Research and Development

Gurry said the patent and trademark trends seen during the recession suggested plenty of momentum for developing countries.

"While the strength of the recovery remains uncertain, there will likely be a continuing geographic shift of innovative activity toward new players, especially in Asia," he said.

Beyond China, other emerging nations also sought to protect their innovations before the recovery, with double-digit growth in patent filings in Belize, Peru, Romania and Turkey in 2008.

But in much of the rich world, the global downturn reduced corporate cash flows and ratcheted up business uncertainty, putting strains on research and development spending.

General Motors slashed its R&D budget by 24.5 percent from 2008 to 2009, Toyota cut such spending 19.8 percent and Honda R&D spending dropped 17.7 percent, according to the WIPO report, citing U.S. Securities and Exchange Commission filings and annual reports. Some of the figures are for fiscal and not calendar years.

Outside the auto sector, heavy machinery maker Caterpillar also decreased R&D spending 17.8 percent. Consumer goods group Procter & Gamble's R&D spending dropped 7.6 percent and competitor Unilever's cut R&E spending 3.9 percent.

While some technology firms such as Hewlett-Packard and Motorola reduced their innovation spending, with decreases of 20.4 percent and 22.5 percent, respectively, others recorded a big boost in the peak of the crisis.

ZTE, China's No. 2 telecoms equipment maker, boosted R&D spending 44.8 percent and Huawei Technologies spending jumped 27.4 percent. In the United States, Apple spent 20.2 percent more on R&D from 2008 to 2009 and Microsoft's spending rose 10.4 percent.

WIPO said improved access to capital since late 2009 should help edge up investment in innovation as well as the number of patents sought for new inventions.

But it warned a full rebound would take time. "The crisis is likely to have a lingering impact on (intellectual property) filing behavior in 2010 and 2011," the report concluded.

[Source: By Laura MacInnis, Reuters, Geneva, 15Sep10]

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