Yesterday, the German Patent & Trademark Office (Deutsches Patent- und Markenamt; DPMA) issued a press release on its 2021 annual report, and the headline translates as follows:
"China ever more innovative in digital technologies"
The German PTO highlighted that China has, for the first time, overtaken the United States in the field of digital communications technology patent applications as its numbers increased by 6.8% from 4,032 to 4,308, while the figure for the United States--home to the most aggressive proponents of the devaluation of standard-essential patents (SEPs)--went down by 2.4% from 4,218 to 4,115. Even if the U.S. figure had remained stable, China would have taken the lead.
While China's ascent to the top is indisputably impressive, it's arguably no less remarkable that Sweden--a relatively small country --is #4 on the list as it overtook Korea. Sweden's patent filings in this field went up by 3.6% (from 1,223 to 1,267--more than quarter of China's numbers!), while Korean patent applications declined by 5.8% from 1,249 to 1,176.
If we want to understand these dynamics, which are immensely important from an innovation policy perspective as well as with respect to pending SEP litigations (Ericsson v. Apple (Apple is countersuing only over non-SEPs), Nokia v. OPPO/OPPO v. Nokia), we need to take a look at the major players. The German PTO's annual report doesn't list particular filers, but fortunately the European Patent Office (EPO)--whose report equally attests to China's and Sweden's incredible achievements--provides a list of the top 10 filers in the field of digital communications (click on the image to enlarge):
Key takeaways and observations
Despite Trump's trade war that the Biden Administration continues, Huawei is unstoppable--and the undisputed number one in the world. They have a corporate presentation coming up next week, and I plan to follow it over the livestream--it's a must-attend given that company's strength in wireless patents.
The other Chinese companies among the top 10 filers in the field are OPPO (#5), which is in the top 5 and has surpassed Nokia (688 v. 658), with which it is embroiled in two-way litigation; ZTE (#7), which is increasingly interested in outbound licensing and has recently started enforcement actions and Vivo (#10), which is being sued by Nokia but also countersuing in Dusseldorf.
Ericsson is #2, clearly ahead of Qualcomm in the third place and more than twice as strong as Nokia (#6). Sweden's strength in digital innovation is almost entirely attributable to Ericsson alone. One cannot respect innovation without applauding Ericsson's engineers.
But what about Apple, against which Ericsson is enforcing SEPs? Nowhere on the list. Over the years they've acquired SEPs (such as from Nortel and Intel), but that's about it. It's been a few years since they acquired Intel's mobile chipset business, so I'd have expected them to play a more significant role already. But... they are nowhere to be seen.
Apple is a luxury goods company making the closest thing you can find in the digital economy to a Veblen good. More than anything else, Apple brutally exploits its market power over everyone, with my primary concern being how it treats app developers. It squeezes suppliers and seeks to deprive employees of their rights to form unions (just yesterday, Microsoft announced a far more cooperative stance on unions).
Policy makers in the U.S. and elsewhere must understand where Apple is coming from when it takes positions on patent policy and on mobile app stores. It seeks to substitute market power for foundational research. That formula, however, doesn't yield a consumer surplus. Nor are deceptive lobbying practices by Apple-funded organizations the answer.
Apple won't change unless it has to. It's up to policy makers, competition regulators, and the courts of law to require Apple to compete on the merits, to fairly reward innovators, to open up iOS app distribution, and to invest not only in its expansion into ever more markets (it's like an insatiable octopus in that regard) but also in the digital communications technologies without which its gadgets wouldn't work in the first place.
The United States has no one but itself--and above all, Apple's ability to perpetuate its market power and spawn monopoly after monopoly--to blame for having lost the lead in this field to China, and for trailing (relative to population size) a country like Sweden by a huge factor.
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