Canada | Publication | November 29, 2024
CIPO released a 2024 report showing a decrease of approximately 6% in overall patent applications filed into Canada, including both applications that are directly filed into Canada and those that enter into Canada during the national phase entry of an international application filed using the Patent Co-operation Treaty (PCT) mechanism provided by the World Intellectual Property Organization (WIPO). There was a 4% decrease in patent applications filed by Canadians abroad.
We note that the filing numbers are typically an 18-month lagging indicator due to a post-filing confidentiality period.
We are anticipating an increase of patent filings by Canadian applicants, both domestically and abroad in the coming years due to government support programs and preferential tax treatment to champion Canadian innovation.
The IP Canada Report 2024 is the ninth report in an annual series by the Canadian Intellectual Property Office (CIPO) that presents trends and research in IP usage, both in Canada (up to 2023) and by Canadians abroad (up to 2022). A special research section additionally summarizes findings from CIPO studies on IP-backed financing in Canada. Please note that the trends described below are lagging indicators due to the confidentiality period of patent applications and data collection delays.
The first section of the report presents recent trends related to applications for patents. In 2023, CIPO received 35,620 patent applications, a 6% drop led by decreases in both resident (10%) and non-resident (6%) filings, marking the end of the brief rebound period following the COVID-19 pandemic.
88% of all applications received in 2023 originated from non-resident applicants. This percentage has been stable over the last decade and highlights Canada as a destination market for international innovators.
Notably, patent filings from US applicants represent the biggest share (45%, 15,973 applications) of all filings in Canada, leading applications by Canadian residents (12%, 4,097 applications) by a large margin. The top six countries of origin for patent applications (representing 75% of all applications) in Canada were the United States, Canada, Germany, China, Switzerland, and the United Kingdom. While the US, UK, and Canada saw decreases compared to 2022, applications from Germany, China, and Switzerland increased by 4%, 3%, and 7%, respectively. Applicants seeking protection in multiple jurisdictions can either file at each IP office individually or seek protection simultaneously in multiple jurisdictions through the PCT.
The PCT channeled 29,221 patent applications into Canada in 2023. While this represented an 8% decrease year-over-year, the share of PCT applications in all applications received has steadily increased over the previous 10 years from 77% to 82%. A similar trend can also be observed in the outgoing international applications.
Patent filing abroad by Canadians in 2022 has remained largely stable when observed over a 10-year period. Although the 20,497 patent applications filed abroad in 2022 represented a 4% year-over-year decrease, this can be seen as a return to the pre-pandemic level (20,603 filings in 2019) after a decrease (8%) in 2020 and a drastic recovery (12%) in 2021.
The top six international filing destinations for Canadian applicants were the United States, the European Patent Office, China, Japan, and Australia. Notably, aside from a 5% annual increase in Australia, all other destination jurisdictions saw decreases in the number of applications by Canadians compared to 2021.
Among applications filed abroad by Canadians in 2022, PCT applications experienced a 6% annual decrease, interrupting a consistent growth in volume since 2009. However, this is attributable to the end of the post-pandemic recovery bump in 2021; PCT applications have seen a steady increase in both number and share of total application volume over the previous 10 years, reflecting an increasing preference for the PCT system over direct filing for international applications.
A special research section of the report summarizes studies conducted by CIPO on IP-backed financing in Canada. CIPO recorded 2,800 security agreements involving over 17,100 patents between 2000 and 2016. The report notes that IP is acknowledged as a significant contributor to value, especially by financial institutions. Companies with registered IP tend to receive financing amounts 2.4 times higher than those without. Using data from small- and-medium-sized enterprises (SMEs) in 2020 as an example, one study revealed the average approved amount of debt financing for SMEs owning formal IP to be $757,000 ‒ 3 times as high as the average amount approved for companies with no registered IP ($245,000).
The Government of Canada and provincial governments, such as Ontario, launched various initiatives to provide trusted IP support and services to enable businesses and researchers to innovate and grow. These programs include the IP Assist Program, the IP Ontario (IPON) program, and Elevate IP (EIP), and provide financial support through trusted service providers.
The EIP program recently circulated an update that it is accepting applications for the upcoming fiscal year, commencing in April 2025. We encourage startups to file applications as soon as possible. In our experience, this program has led to many first-time IP filings in Canada as well as filings in foreign jurisdictions.
In Budget 2024, the Government of Canada also introduced a change in tax treatment to allow for optional immediate expensing of certain patent costs. Specifically, as an incentivizing measure, Budget 2024 announced an accelerated capital cost allowance regime.
Generally, the Income Tax Regulations specify the capital cost allowance (CCA) of capital property based on the class of depreciable property to which the asset relates. Budget 2024 amends the CCA of Class 44 assets (generally, patents or the rights to use patented information), among others, from the current prescribed rate of 25% to an immediate 100% expense if the property is acquired on or after budget day and becomes available for use before January 1, 2027. Essentially, this “enhanced allowance” provides a 100% deduction in the first year the asset is available.
It is noteworthy that the deduction is subject to a restriction: if property has been used or acquired for use (for any purpose) prior to the taxpayer acquiring the asset, the property will only be eligible for the accelerated CCA if both: (a) neither the taxpayer nor a non-arm’s length party owned the property, and (b) the property has not been transferred to the taxpayer on a tax-deferred rollover basis. The taxpayer may also elect not to receive the accelerated CCA by electing out of Class 44 treatment. This would generally result in the asset being sorted into Class 14, which allows for a straight-line depreciation.
There has also been consultation on a potential new patent box regime to allow for a preferential tax rate for income derived from intellectual property. In the consultation paper, the government acknowledges the importance of patent-owning businesses and intends to make significant investments to encourage development and retention of IP stemming from research and development conducted in Canada. Any preferential tax regime would be subject to the OECD BEPS Action 5 Report.
We anticipate these programs will have positive downstream effects on the total number of patent applications filed in Canada and encourage applications to be filed abroad by Canadians.
Section 4.1 Budget 2024, https://www.budget.canada.ca/2024/report-rapport/chap4-en.html#s4-1 (see section under heading “Incentivizing More Innovation and Productivity.”
Consultation Paper: Creating a Patent Box Regime, https://www.canada.ca/en/department-finance/programs/consultations/2024/consultation-on-creating-a-patent-box-regime/consultation-paper-on-creating-a-patent-box-regime.html.
Elevate IP Application Portal (2024-11-26 communication encouraging startups to submit new applications), https://elevate-ip.ca/.
The authors would like to thank Daniel Wang, articling student, for his contribution to preparing this IP monitor.
For more information, please contact your IP professional at Norton Rose Fulbright Canada LLP.
For a complete list of our IP team, click here.
Publication
The District Court of Hong Kong had, on 9 December 2024, convicted Mr. Chim Piu Chun (Mr. Chim) and his son, Mr. Ricky Chim Kim Lun (Ricky Chim) on two counts of conspiracy to defraud Asia Resources Holdings Limited
Publication
In July 2024, we issued a legal update on the proposed introduction of the Protection of Critical Infrastructures (Computer Systems) Bill (the Bill) and mentioned that there would be a one-month consultation period with the relevant sectors after discussion with the Legislative Council.
Publication
As previously observed, conflicts occasionally arise between mortgagees and charterers where a mortgagee wishes to take prompt action to enforce its rights, but the charterer wishes such enforcement action to be deferred until the end of the charter.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright LLP 2023