IP Canada Report 2021
Appendix B

Interpreting patent data

Patent data are a good starting point for analyzing the development of new technologies because they provide important information on the specific innovation in the invention and who the inventors and applicants are. Like any data source, patent data have strengths and weaknesses and if used in the wrong way can lead to erroneous conclusions and poor policy. The following provides context on the use of patents to understand innovation.

While patents measure the flow of new ideas, it has been argued that patents may not measure innovation for 3 important reasons: patents do not include non-patented innovations, not all patents result in commercialization, and many patents are strategic in nature. For these reasons, the analysis is based on patent families that include applications in at least 2 jurisdictions. This makes it more likely that these patent families be a higher-value invention and that the firm expects to commercialize the invention.Footnote xxix

Another challenge is that many innovations or inventions remain hidden as trade secrets. These innovations will be missed in a measure that includes only patents. However, a 2008 study indicates that world-first innovators patent more frequently. Conversely, firms that patent infrequently tend to be imitators.Footnote xxx In addition, the study finds that firms that protect their IP are more likely to increase their profits than those that do not patent. Moreover, small- and medium-sized enterprises that patent are more likely to be high- growth firms, which is important for success.Footnote xxxi These conclusions are reinforced by a Canadian study showing that firms that are aggressive innovators, introducing radically new products that involve patent protection, have higher profits.Footnote xxxii Finally, while some inventions are not patented, patents are obtained for almost all economically significant inventions.Footnote xxxiii

Below are the primary ways to view or interpret patent data.

Market reach

Patent filings in foreign markets are a good indicator of firms accessing those markets. Surveys have shown that firms that hold patents are more likely to be exporters.Footnote xxxiii

Innovative activity

When we do not account for filings in multiple jurisdictions, we are double and triple counting the number of patented inventions or innovative activities. In order to address this, patent data allow for the formation of patent families whereby each family includes all related or similar patents in all jurisdictions.

Scientific strength

It is possible to identify the researchers or scientists rather than the company or applicant. While they can be one and the same, they are often different. Such identification makes it possible to see the inventive activity of Canadian researchers working in other countries or for non-Canadian companies.

Relative advantage

Canada is a small, open economy. For this reason, it is unlikely that Canadian industries or innovators have an absolute advantage in a particular area, be the most prolific IP users, or have the largest global market share. However, there are areas where they have a comparative or relative advantage. Much work has been done in the area of creating metrics of relative technological advantage and relative specialization.