Intellectual Property Protection and Innovation in Switzerland

The present study has been elaborated as part of the report “Research and Innovation in Switzerland 2020”.

Executive Summary
This Report discusses the intellectual property (IP) system in Switzerland, and how it sustains innovation. It focuses on one type of IP, namely patents, and considers all types of economic actors in Switzerland, notably multinational enterprises (MNEs), small and medium-sized enterprises (SMEs), startups and universities. The Report takes a policy perspective. Patent policy is a key component of innovation policy, which is concerned with the set of government interventions that help economic actors create, develop, transfer, and commercialize innovations. As understood in this Report, innovation is a new or improved product or process that differs significantly from the unit’s previous products or processes and that has been made available to potential users or brought into use by the unit. There are many different ways in which innovation policy can encourage innovative activities, including, e.g., research & development (R&D) grants and subsidies. Other policy areas than innovation policy are equally important for sustaining innovation, e.g. education policy.

This Report gathers insights from three main sources. First, it surveys the law and economic literatures on intellectual property. Second, it relies on empirical evidence on the state of patenting in Switzerland. Third, it collects the views of selected local economic actors on the Swiss patent system. Some of the key findings are as follows.

The literature review has highlighted that in core fields such as pharmaceuticals, a strong case can be made that the patent system encourages innovation and ultimately promotes social welfare. However, one should always keep in mind that the beneficial effects of the patent system in one industry do not necessarily translate to other industries. Furthermore, some well-documented failures of the patent system are the result of abusive patenting strategies by some actors. The use of patents evolves with technologies, which calls for continuously adapting and fine-tuning the patent system to limit the effect of such strategies.

The quantitative analysis provides three main insights. First, patenting is overall a rare event. It is low at the extensive margin (few firms file for patents), but high at the intensive margin (when firms file for patents, they usually file many). Second, the R&D process of Swiss companies is highly globalized, and many companies have developed their inventions abroad. Overall, a quarter of inventions by Swiss MNEs are made in Switzerland (25.28 percent) and the European Union (27.11 percent) each. Two-thirds of inventions are made in OECD countries (67.80 percent), which includes Switzerland and the most advanced European countries. Third, as a result of the globalization of R&D, few inventions made in Switzerland are actually filed at the Swiss patent office as priority filings. Swiss applicants often file patents at the European Patent Office (EPO), to later validate their patents in Switzerland.

In general, our interviewees have a favorable opinion of the patent system, even though we have heard common complaints related to its cost, complexity and slow speed. Interview partners have mixed opinions on whether the Swiss Federal Intellectual Property Office (IPI) should start offering substantive examination. Other aspects of IP law such as a research exemption matter for sustaining innovation. Interview partners seemed to believe that the Swiss patent system strikes the right balance. Finally, the establishment of the Swiss Federal Patent Court was seen as a welcome development.