E wo/pbc/23/3 original: english date: june 4, 2015 Program and Budget Committee Twenty-Third Session Geneva, July 13 to 17, 2015


ANNEX IV EVOLUTION AND DEMAND FOR SERVICES UNDER THE PCT, MADRID AND THE HAGUE SYSTEMS IN THE MEDIUM TERM



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ANNEX IV EVOLUTION AND DEMAND FOR SERVICES UNDER THE PCT, MADRID
AND THE HAGUE SYSTEMS IN THE MEDIUM TERM




PCT


  1. The level of PCT income is influenced by a variety of factors, including demand for PCT services and applicants’ filing behavior. Demand for PCT services is in turn influenced by a number of factors that may be internal or external to the patent system. External factors include: performance of the economy globally, and in countries of the highest and fastest growing demand; research and development (R&D) investment levels; technological confidence levels; and exchange rate fluctuations. Internal factors include: the level of PCT fees as compared to other filing routes; the attractiveness and value of PCT services as compared to other filing routes; the overall credibility of performance of the patent system; and individual corporate patent strategies.




  1. Applicants’ behavior influences PCT income as follows:

(i) Page Fee: The International Bureau receives 15 Swiss francs for every page over 30 pages in a given application.


(ii) International Preliminary Examination: Applicants making use of international preliminary examination under Chapter II of the PCT must pay an additional fee (a “handling fee”).
(iii) Electronic Filing: When applicants use electronic (instead of paper) filing they benefit from discounts.
(iv ) International Bureau as Receiving Office: Applicants who choose to file their application with the International Bureau acting as Receiving Office (IB/RO) must pay a special fee (the “transmittal fee”).


  1. The following paragraphs elaborate on current forecasts as regards: the level of demand; the expected level of Chapter II demands; the expected level of electronic filings; and the expected use of IB/RO17.



PCT Filing Forecast (Demand)


  1. After falling in 2009 by close to 5 per cent year-to-year, PCT filings grew strongly in recent years. Chart 1 shows the forecasted number of PCT applications for the years 2014 to 2017 (based on data at the end of January 2015).

Chart 1. PCT Applications 2012 to 2017








  1. Chart 2 below shows the forecasted numbers of files by the country of origin.

Chart 2. PCT Filings from Selected Countries 2014 to 2017






  1. The number of international applications will likely be within a range with certain probabilities. The following graph and table indicate the probabilistic distribution of the number of filings.

Filing Forecast Probabilistic Distribution


PCT Application Scenarios




Use of Electronic Filing Methods


  1. The estimated use of electronic filing methods (EASY, PDF or XML), as a percentage of total filings, is illustrated in Chart 3 below. As this chart shows, utilization of electronic filings continues to increase steadily. In the year 2012, electronic filing was close to 90 per cent of total filings.

Chart 3. Use of Electronic Filing Methods (EASY, PDF or XML) as a Percentage of Total Filings 2014 to 2017





Expected Level of PCT Income


  1. Charts 4 and 5 show forecasted PCT income in the period from 2014 to 2017, by type of income. The charts are based on the expected level of applications (Chart 1), an estimate of the expected level of page fees, the expected level of Chapter II demands, the expected level of electronic filings (Chart 3) and the expected level of RO/IB filings.




  1. Chart 4 shows the hypothetical PCT income forecast which is based on the assumptions that (1) all fees are paid within the same of year of filing and (2) all fees are converted to Swiss francs according to WIPO official exchange rates. Hypothetical PCT income indicates the possible revenue generated by the filings, without considering when the money is paid and how it is converted to Swiss francs. Since most applicants eventually pay their fees, the hypothetical income forecast reflects the long-term revenue expectation. The calculation takes into account all the major elements of the PCT fee structure: withdrawals, e-filing reductions and fee reductions for low-income countries.

Chart 4. Hypothetical PCT Income Forecast until 2017






Impact of Payment Delay on PCT Income


  1. The hypothetical income forecast assumes that fees are paid within the same year of filing. However, WIPO receives payments with a delay ranging from one to six months. Some applicants – especially those who file at the beginning of the year – pay within the same year of filing (usually around 85 per cent), while others pay in the following year (usually around 15 per cent). Therefore, actual PCT income in any given year consists of a portion of payments for filings in the previous year plus a portion of payments for those in the same year. As a result, the money received in a year does not equal to that generated by the filings in the same year. Annual differences between hypothetical and real income do not alter the long-term overall income. Any income shortfall due to payment delays will likely be compensated in the following year. If a large portion of the payment is delayed to next year, this year’s actual income will fall, but next year’s will be higher. On the other hand, if a smaller portion of the payment is shifted to next year, this year’s actual income will rise and next year’s will fall. The adjusted PCT income forecasts until 2017 taking into account the impact of the payment delay is presented below in Chart 5.

Chart 5. Adjusted PCT Income Forecast until 2017





Adjustment by Currency Exchange Rates


  1. PCT fees are paid in various currencies. For those paid in “freely convertible” currencies, the amount equals to the “equivalent amount” set by the International Bureau; whereas for “not freely convertible” ones, the receiving offices convert them into equivalent amount in Swiss franc, Euro or US dollar (PCT Rule 15). WIPO sets up the equivalent amounts according to the rules prescribed in the Directives of the PCT Assembly: (1) the exchange rates on the first Monday of October is taken as the new WIPO exchange rates for setting the equivalent amounts for the following year; (2) if for more than four consecutive Fridays the exchange rates are changed by 5 per cent, the Director General of WIPO should initiate consultation with offices for setting new equivalent amounts which should be effective after two months from their publication.




  1. Applicants pay international filing fee according to the equivalent amount on the filing date. However, due to delayed implementation of the equivalent amount, the market exchange rates are likely different from the WIPO rates at the time of payment, resulting in a gain or loss of PCT income. The following graph shows the difference between WIPO exchange rates for setting the “equivalent amount” and the UN operational rates of exchange for the three currencies, namely the US dollar, Euro and Japanese Yen.





  1. The difference between the equivalent amount on the filing date and the amount converted to Swiss franc on the date of payment under UN exchange rates constitutes gain or loss of the PCT revenue. The following graph shows the monthly gain/loss of the PCT income.





  1. To the great surprise of market participants, the Swiss National Bank (SNB) announced on January 15, 2015 that it would abandon its exchange rate floor to the euro, triggering a sharp appreciation of the Swiss franc. It is expected that the PCT income will likely loose further 3.1 million Swiss francs as a result.




  1. The current PCT schedule of fees is reproduced in the tables below.




PCT Fee Schedule

(as of January 1, 2004)



(in Swiss francs)


Revised PCT Fee Schedule

(as of July 1, 2008)



(in Swiss francs)







Madrid
Madrid - Forecast of Demand for International Registration



  1. Chart 6 shows the forecast for the years 2015 to 2017. The forecast of Madrid registrations is based on multiple models, including autoregressive models, econometric models and transfer models. The autoregressive models are performed on both registrations and applications. The results of applications are then transformed into registration forecast using the average processing delay. The econometric models are based on actual GDP data and GDP forecasts released by the International Monetary Fund (IMF). The results by different models are further combined to control for the uncertainty arising from the correct model specification.

Chart 6. Madrid Demand for International Registration








  1. The above numbers were added to the results from the autoregressive models. The registrations will likely be within a range with certain probabilities. The following graph and table indicate the probabilistic distribution of applications.

Application Probabilistic Distribution




Madrid application Scenarios


Madrid - Forecast of Demand for Renewals


  1. Chart 7 shows the forecast for the years 2015 to 2017. Renewals are similarly forecasted based on regression models and the transfer model. In addition to the autoregressive models on the renewal time series, we also used a regression model on both renewals and registrations. This regression model assumes that first-time renewals depend on registrations with a ten-year lag, whereas subsequent renewals depend on past renewals with a ten-year lag. The transfer model looks at the potential stock of registrations coming up for renewal, and applies a percentage that is calculated from past years. Results from different models are then combined.

Chart 7. Madrid Renewal Forecast





Renewal Probabilistic Distribution




Madrid Renewal Scenarios



Expected Level of Madrid Fee Income



  1. Madrid fee income derives from three categories of services offered by WIPO under the Madrid System, namely: (a) the recording of international registrations; (b) the recording of renewals; (c) the recording of subsequent designations and (d) other services, including different modifications and the issuance of extracts.




  1. Chart 8 below shows the estimated figures of Madrid fee income for the period 2015 to 2017, attributable to each of the abovementioned categories of services. Income estimates are based on the numbers of international registrations and renewals that are expected to get recorded from 2015 to 2017.

Chart 8. Expected Level of Madrid Fee Income, by Source


* Forecast figures.

Income Probabilistic Distribution

Madrid Income Scenarios




  1. The table below provides information on the actual and expected numbers of registrations and renewals for the period 2012 to 2017 and on the actual and expected evolution of the average fee during that period. The average fee is calculated as the total Madrid fee income divided by the total number of registrations and renewals in any given year.

Table 16. Madrid Total Fee Income and Average Fee





  1. A new forecasting model, similar to the one used for the forecasting of PCT activities, was adopted, for the first time, for the 2014/15 biennium for the forecasting of Madrid and the Hague registration activities. The more sophisticated model takes into account, not only earlier Madrid System activity, but also trademark application and registration activities in other offices, as well as economic forecasting data from IMF. As the global economic uncertainty continues and until more experience is gained with the new forecasting model, a slightly lower forecast level for Madrid was felt more prudent by the concerned business area. The lower forecast numbers are reflected in the table below and serve as a basis for the 2016/17 Program and Budget.

Table 17. Madrid Total Fee Income and Average Fee (Basis for PB 2016/17)




Hague
The Hague - Forecast of Demand for International Registration



  1. Chart 9 shows the forecast for the years 2015 to 2017. The anticipated accession of China, Japan, Republic of Korea, Russian Federation and the United States to the Hague System will have considerable impact from 2015 onwards, resulting in a possible jump in filings and income. The forecast of Hague registrations is based on multiple models, including autoregressive models, econometric models and transfer models. The autoregressive models are performed on registrations. The econometric models are based on actual GDP data and GDP forecasts released by the International Monetary Fund. The results by different models are further combined to control for the uncertainty arising from the correct model specification.

Chart 9. Hague Applications and Renewals








  1. In light of the anticipated accessions of several new member states from 2014 onwards, a transfer model was used to assess the impact of accession events on registrations. The model employs data on Paris-route “cross filings” between the existing Hague members and the new member states. In particular, transfer rates are estimates to calculate the additional filings from the existing members due to accessions. In addition, the average “transfer rates” of the existing Hague members are used to predict the filing potential from the new members. It is noted that the true “transfer rates” are country-specific. Using average transfer rates for new members is arguably the best approximation possible, but it introduces additional uncertainty to the forecast values. The current estimation is based on the following assumptions of the timing of accessions.








  1. The above numbers were added to the results from the autoregressive models. The applications will likely be in a range with certain probabilities. The following graph and table indicate the probabilistic distribution of the scenarios.

Application Probabilistic Distribution


Hague Registration Scenarios




Hague - Forecast of Demand for Renewals



  1. Different regression models are employed to forecast registration renewals. In addition to autoregressive models, use is made of the relationship between renewals and registrations with fiveyear lags as well as past renewals with fiveyear lags, since the registrations and renewals five years ago should contribute to the total renewals in the current year.

Chart 10. Hague Renewal Forecast




Renewal Probabilistic Distribution




Hague Renewal Scenarios



Expected Level of Hague Income



  1. The income generated by the Hague System is calculated based on the current fee schedule. The main components of this schedule are the basic fee and renewal fees. These two parts cover about 90 per cent of the income. Other fees are grouped as “Others”.

Chart 11. Expected Level of Hague Fee Income, by Source




* Forecast figures
Income Probabilistic Distribution


Hague Income Scenarios





  1. Income estimates for 2015 to 2017 in the table below are based on the expected numbers of international registrations and renewals. It should be noted that the income estimates given below are based on the assumption that no changes to the schedule of fees payable to the International Bureau under the Hague system will take place in the forthcoming years.

Table 18. Hague Total Fee Income and Average Fee







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