By William New
The World Intellectual Property Organization may see significant revenues from its record high patent filings and it may be nearing agreement on a new budget designating how to spend it.

WIPO’s Audit Committee is meeting this week, addressing concerns about oversight, staffing and new construction, and the General Assembly will be reconvened in late March to try to agree on the current year’s budget.

Filings for international patents under WIPO’s Patent Cooperation Treaty increased 4.7 percent in 2007 to an estimated record total of 156,100 applications, according to WIPO. WIPO typically receives CHF1400 per application, with substantial discounts for least-developed countries and some in developing countries.

The United States maintained its sizeable lead over the rest of the world in patent applications, followed by Japan, Germany, Korea, France, United Kingdom, China, Netherlands, Switzerland, Sweden, Italy, Canada, Australia, Finland and Israel. Korea (18.8 percent growth) and China (38.1 percent growth) each rose one place in the rankings, reflecting the continuing trend of highest growth occurring in northeast Asia.

Filing a patent under the PCT makes it possible to seek protection of a patent in many countries with a single application. PCT fees account for about 75 percent of WIPO’s overall annual revenue of approximately $300 million, Gurry said.

WIPO’s financial resources are “very positive,” he said. “While we have had a budget crisis, it is not a financial crisis.”

The annual General Assemblies ended last October without agreement on a budget for the 2008-2009 biennium, in part because developed countries blocked it. Those countries sought to hold a discussion in the assembly on concerns about the WIPO director general, and also sought a reduction in patent fees - much of which are paid by developed country industry and individuals – commensurate with WIPO’s financial surplus.

The United States and possibly other developed countries have resisted restarting budget talks, in part out of an apparent concern for putting new funds in the hands of the current administration. Director General Kamil Idris is scheduled to leave office next autumn, one year early.

But agreement was reached recently to hold, on 31 March, a special session of the General Assembly to resume talks on the programme and budget. It may not be the last such meeting before agreement is struck. Initially, it was foreseen that the session would be brief, without a reopening of the debate, but it appears that one or more developed countries may wish to discuss details of how WIPO’s proposed budget may have changed in the nearly six months since the assemblies. Targets could be to reduce amounts designated for staffing or other administrative activities, sources said. Whether to cut patent fees also is expected to be discussed.

Audit Committee and Construction Project

The announcement of the positive PCT results was well-timed, as this week’s WIPO Audit Committee meeting, from 18 to 21 February, neared conclusion. This secret committee of about nine members, about which even the agenda is not public, has been addressing issues such as internal audit and oversight functions at WIPO, information and communications technologies, a desk-to-desk review that found significant room for improvement in staffing matters, and the construction of a large, new building on the vacant lot adjacent to WIPO headquarters.

On the construction, member states previously agreed that this could proceed in the face of financial questions at WIPO in part because it would be cheaper than the rent paid to as many as 10 locations around the city where WIPO staff sit. The construction had been set for February of this year but got pushed to April, just after the scheduled special assembly meeting, perhaps by coincidence. The estimated cost of construction has been rising and now appears to be estimated at more than CHF150 million, up from the 2005 estimate of some CHF125 million, according to government sources and documents. The new figure appears to bring the total cost of the project (including land, consultant, interest, reserves for unforeseen expenses and so forth) to nearly CHF180 million.

Large Loan Inconsistent with Budget Questions?

But questions have been raised by some officials about a decision to allow WIPO to take a large loan, said to be $114 million, for the construction project, at a time when its handling of a few million Swiss francs within its budget is being challenged. In addition, questions are being raised over the granting of the construction work to a Swiss firm seemingly without sufficient transparency or competition for some governments’ taste.

But a developed country official said the loan had already been approved before the questions on budgeting arose. Developed countries have taken the position that the budget holdup does not significantly impact WIPO’s operations. This was discussed, among other places, at an informal late January meeting with WIPO Comptroller Carlotta Graffigna and others on budgetary matters, according to government officials. But in that meeting, officials were said by one participant to have raised concerns for their programmes if the new budget were not approved.

The report from the 3 to 6 December Audit Committee, WO/AC/7/2, obtained by Intellectual Property Watch, shows a good deal of dissension about the handling of internal auditing. “The committee finds it wholly unsatisfactory that, de facto, IAOD [Internal Audit and Oversight Division] is not functioning in accordance with its mandate, and the needs of the organisation, and will be unable to do so realistically for the foreseeable future,” the report said.

The construction project falls under the responsibility of WIPO Deputy Director General Philippe Petit, who handles administrative matters and who is a declared candidate from France for the director general position to be filled later this year.

IT, Desk-to-Desk Review

On the separate issue of information technology within WIPO, it was said in the report that recent budgetary restrictions have meant that “the organisation’s ICT infrastructure has not kept pace with technological advances.” Passage of the 2007-2008 budget will allow investment but still may not be enough, it said.

This issue was expected to be addressed in this week’s committee meeting under consideration of a proposed “enterprise resource planning” system which relates to the possible use of WIPO’s extensive financial reserves.

Also at this week’s meeting, concerns about progress on staffing matters raised in the 2006 desk-to-desk employment review by independent consultant PricewaterhouseCoopers were to be discussed.

The December committee report raised questions about the November 2007 establishment of an Organisational Improvement Programme Committee suggested by the consultant’s report, and whether “real progress” could be made on the committee until a new director general is appointed. But the committee said failure to make progress during this year “would have a negative impact on the organisation.”

Also being addressed is the implementation of new financial regulations that insert member states more fully into the WIPO budgetary process.

Record PCT Year

Matsushita, a Japanese conglomerate concentrated on electronics, was the top filing company (2,100 applications) in 2007, overtaking Dutch electronics company Philips (2,041 applications), which had held first place at least since 2003, according to WIPO Deputy Director General Francis Gurry, who oversees patents. Both companies actually saw a decline in applications, but Philips’ decline was greater. Siemens (Germany), Huawei Technologies (China), Robert Bosch (Germany), Toyota (Japan), Qualcomm (US), Microsoft (US), Motorola (US) and Nokia (Finland) were the remaining top 10.

Among developing countries, India (686 applications) and Brazil (384 applications) saw increases but Gurry said they could be expected to rise by larger amounts in the future. In India’s case, he suggested the relatively low number of applications might be related to its emphasis on innovation in economic areas such as software and services, which do not typically involve patents (software is more commonly protected by copyright).

Areas receiving the most PCT applications were telecommunications (10.5 percent of the total), information technology (10.1 percent) and pharmaceuticals (9.3 percent). The fastest growing areas were nuclear engineering (24.5 percent increase) and telecommunications (15.5 percent increase).

Speaking at a press conference, Gurry also said there appears to be a loose correlation between countries with few natural resources and countries that rely heavily on patenting.

Gurry also said the patent system is moving increasingly to an electronic environment. Gurry also is a declared candidate for the WIPO director general position.

William New may be reached at wnew@ip-watch.ch.