Most new patents are filed in Asia, and the most innovative youngsters come from there, too. In Europe, Liechtenstein and Switzerland come out on top. Still, Europe as a whole is in decline.

Every March, the Geneva-based World Intellectual Property Organization (WIPO) announces the latest global ranking that measures nations’ future brainpower. It looks at the intellectual potential of children under the age of 15 as a proxy to predict a nation’s future productivity and innovative drive.

Bad news for the west: 85 percent of all children under the age of 15 with the potential for the very highest intellectual achievements live in East Asia in 2020. Achievements include filing patents that meet the high standards of the Patent Cooperation Treaty (PCT).

Liechtenstein and Switzerland are Europe’s patent frontrunners

Already today, China, Japan, and South Korea score 80 percent, with 8 of the top 10 companies in terms of patents. However, among the top 50 most successful patents, they manage “only” 62 percent with 31 so far. According to the WIPO ranking, that might change in the future as Asia’s youth rises to the challenge.

Bright spots for the future of Europe are Switzerland and Liechtenstein – ironically, both not part of the European Union. With just over 10 percent of Germany’s population (84 million), the Swiss (population 8.7 million) manage a good 26 percent of Germany’s PCTs (4,883 to 18,643). Liechtenstein manages only 1.4 percent (250) of German PCTs but also has only 0.05 percent of the German population. In terms of patents per million inhabitants, the two Alpine countries are even well ahead of Japan and South Korea, which are represented nine times among the twenty companies with the most patents.

Liechtenstein and Switzerland also surpass the high-tech country Israel. That said, Israel remains the world champion in terms of unicorns per million inhabitants – twelve of these startups with a valuation of at least one billion dollars operate there, while Switzerland has five with almost the same population. Austria has one, and Germany sixteen, but Germany is almost ten times larger.

Once a global innovation powerhouse, Germany hasn’t lost all of its shine yet, but it is in decline. A  comparison with South Korea (60 percent of the German population) shows that development: In 1994, the ratio of PCTs was 4,294 to 190 for Germany. In 2020, it was 20,060 to 18,643 for South Korea. Quite a catch-up! From 1994 to 2000, Germany has consistently been in second place in the world rankings behind the USA. In 2020, not a single German company remained in the top ten.

What to do?

European countries will have to attract talent from East Asia. Among Europe’s model countries for such an immigration policy, Liechtenstein and Switzerland are at the forefront.

The other way is building up our own talents. More investment in education is needed, more incentives for young founders, innovators, and startups. Of course, all of that is easier said than done. It’s not like nobody knew more investments in these areas are needed, but it’s still not happening enough. In Asia, on the other hand, it’s easier for innovators to work around regulations, taxes are lower, cost of labor is lower.

On the other hand, patent protection is weaker in Asia, which makes it harder for innovators to enjoy the fruits of their labor once they brought a new technology to market. That’s a strength Europe must leverage to attract talent from Asia. At the very least, we have a more robust and reliable legal framework, even though that comes at the cost of flexibility.

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