1

Busana Pierre R&D in Multinationals Trekels Bruno M.Cincera

“Assessing the Foreign Control of Production of Technology: The Case of a Small Open Economy”

Cincera M., B. van Pottelsberge, R. Veugelers (2005)

The case of Dupont

2

GENERAL INTRODUCTION 3

SECTION 1: SUMMARY OF THE STUDIED ARTICLE 4

INTRODUCTION 4 INWARD R&D-FDI: FOREIGN OWNERSHIP OF PATENTS INVENTED IN BELGIUM 5 OUTWARDS R&D-FDI: BELGIAN OWNERSHIP OF PATENTS INVENTED ABROAD 5 CONCLUSION AND MAIN FINDINGS 7 CRITICS 8

SECTION 2: DUPONT’S PROFILE 9

INTRODUCTION 9 HISTORY 9 STRUCTURE 10 RESEARCH AND DEVELOPMENT AT DUPONT 11 FACTS & FIGURES 11 R&D STRATEGY 12

SECTION 3: THE DUPONT’S CONTROL OF PRODUCTION TECHNOLOGY IN BELGIUM 14

INTRODUCTION 14 PATENT STRATEGY OF DUPONT 14 DUPONT’S PRESENCE IN BELGIUM 16 DUPONT’S OWNERSHIP OF PATENTS INVENTED IN BELGIUM 16 GENERAL FOREIGN OWNERSHIP OF PATENTS INVENTED IN BELGIUM 17 DUPONT’S OWNERSHIP OF BELGIAN INVENTIONS 17 CONCLUSION 21

SECTION 4: DEEPER ANALYSIS AND LINK WITH OTHER ARTICLES 22

1ST ARTICLE: NEW CONCEPTS AND TRENDS IN INTERNATIONAL R&D ORGANIZATION 22 2ND ARTICLE: DECENTRALISED R&D AND STRATEGIC COMPETITIVENESS: GLOBALISED APPROACHES TO GENERATION AND USE OF TECHNOLOGY IN MNE’S. 23

SECTION 5: GENERAL CONCLUSION 24

BIBLIOGRAPHY: 25

APPENDIX 27

APPENDIX1: PATENT SCORECARD™ 27 APPENDIX 2: PATENTING BY GEOGRAPHIC REGION (STATE AND COUNTRY), BREAKOUT BY ORGANIZATION 27

3

General Introduction

The purpose of this report is to analyse the titled article, “Assessing the Foreign

Control of Production of Technology: The Case of a Small Open Economy” written in 2005 by M. Cincera, B. van Pottelsberghe and R. Veugelers, in order to apply its developed concepts to the multinational, technology intensive corporation: DuPont.

MNE’s1 like DuPont play an ineluctable role in the actual trend of R&D internationalisation because of their intensive R&D strategies and the impact on host countries research capabilities through their location decisions. Knowing the importance of R&D performed by MNE’s, our paper aims to quantify the impact of DuPont on R&D internationalisation in the Belgian context with a similar approach of the one used in the studied article.

The paper is structured as follows: Section 1 presents a summary of the studied article in order to understand the

key concepts used to assess R&D internationalisation; Section 2 introduce DuPont, a multinational technology-intensive corporation

which has subsidiaries in Belgium, to understand the profile of a key player in the R&D internationalisation process;

Section 3 analyses the application of the studied article’s ideas to DuPont in order to assess the impact of this company on Belgian R&D spillovers;

Section 4 presents an deeper analysis of R&D at DuPont in the light of two other given articles;

Section 5 presents our concluding remarks.

1 MNE = Multi National Enterprise

4

Section 1: Summary of the studied article

Introduction

International R&D activities, following the internationalisation of production, have grown significantly over the past 15 years and this article aims to measure this trend for the case of Belgium. For that, the authors analyse two main dimensions of internationalisation with two improved indicators based on EPO (European Patent Data) and USPTO (US Patent and Trademark Office) patent data between 1978 and 2001. The first dimension (reflected by the SHIA2) represents the extent to which patents invented in Belgium are assigned to firms based abroad (inward R&D-FDI). The second one (measured by SHAI3) is the extent to which domestic firms control foreign inventions (outward R&D-FDI). The approach of the authors allows an improvement of existing indicators of internationalisation:

The existing literature typically uses information included in patent data, regarding only the country of residence of the applicant (or assignee) and of the inventor. This method provides an incomplete insight into the ownership of patent invention because there is no information about the ownership structure of the Belgian assignees. Thus previous indicators consider as “Belgian” the assignees which are based in Belgium BUT the country of residence of a firm is not automatically related to the nationality of the firm. For instance if a company, controlled by foreign multinationals (MNE’s), apply itself for a patent, it will be considered by current literature as a “local” assignee, whereas it should be considered as foreign controlled. This article provide thus a more relevant approach by the identification of Belgian applicants which are affiliates of foreign firms located in Belgium (for inward R&D-FDI) or the Belgian based firms with affiliate abroad (for outward R&D-FDI). The results suggest that taking into account the nationality of ownership of the firm changes substantially the measured degree of internationalisation.

2 SHIA is the share of patents invented by the residents of a given country and controlled by foreign researchers in the country’s total domestic invention 3 SHAI represents the number of patents invented by foreign researchers and controlled by residents of country with regards to the number of patents controlled by resident

5

Inward R&D-FDI: Foreign ownership of patents invented in Belgium

47%43%% of foreign ownership

3,6715,300Belgian inventor and foreign assignee

7,87112,301Belgian inventor

USPTOEPO

47%43%% of foreign ownership

3,6715,300Belgian inventor and foreign assignee

7,87112,301Belgian inventor

USPTOEPO

Number of patent data applied or invented in Belgium

With identification of nationality of ownership of patented invention

77,1%70%% of foreign ownership

5,1868,616Foreign ownership (direct and indirect[1])

7,87112,301Belgian inventor

USPTOEPO

77,1%70%% of foreign ownership

5,1868,616Foreign ownership (direct and indirect[1])

7,87112,301Belgian inventor

USPTOEPO

With the method based on information in patent data, there are about 40% of patent applications invented in Belgium which are applied for a foreign firm outside Belgium. This level of internationalisation is quiet high (one of the highest for the OECD member countries). However if the patents applied for by Belgian subsidiaries of MNE’s are added to those that are directly controlled by foreign firms, the picture is even more striking : the ratio of domestic patented inventions made by foreign firms reaches a share of 70%. This share of patents invented in Belgium and owned by foreign companies has increased over the past 20 years.

The extent of cross-border ownership varies across broad technological areas4 : the highest levels of foreign ownership are in the fields of Electrical Engineering, Instruments and Chemicals and Pharmaceutics. In each of these fields, almost 80% of all patents with Belgian inventor are owned, directly or indirectly, by foreign assignees. The geographical origin of assignees that applied for patents in Belgium is principally the US (50%) in all technological areas, except “Electrical engineering” which is more controlled by firms based in France.

Outwards R&D-FDI: Belgian ownership of patents invented abroad

As shown in the following table, a share of 26% of patents applied for by Belgian

applicants is at least partially5 invented abroad. This share is significant but less pervasive

4 Electrical Engineering; Instruments; Chemicals and Pharmaceutics; Process Engineering and Mechanical Engineering 5 Partially means that patents are at least one foreign inventor

6

than the share of patents invented in Belgium and applied by foreign applicants (see below). This level shows an increase over the past 20 years.

EPO USPTO Belgian assignee 8,954 4,623 Belgian assignee and foreign inventor

2,364 788

The group of Belgian assignees applying for a patent is a heterogeneous group of firm

in term of ownership and can be split in three main subgroups: the local Belgian firms, Belgian multinational companies and Belgian subsidiaries of foreign multinationals. About the half of EPO patents invented abroad and with Belgian assignee is controlled by the subgroup of Belgian subsidiaries of foreign multinationals following by the Belgian local firms with a share of about 30% and the Belgian MNE’s with subsidiaries abroad. With USPTO patent data, local firms have a smaller share than Belgian MNE’s: that means that local innovative firms find more easily their way to file a patent application at the EPO than at the USPTO.

The analyse of variation across the technological areas for SHAI shows a reverse picture in comparison with this of SHIA indicator: for instance, Belgian patent applications in the field of mechanical engineering (about 35%), chemicals and pharmaceuticals (30%) and process engineering (25%) tend to have at least one foreign inventor whereas mechanical engineering and process engineering have a lower SHIA indicator that reflect that Belgium has a stronger advantage in these fields than in the others.

6 That represents Belgian uni/res as assignee and Belgian state institution as assignee

EPO USPTO Belgian assignee and foreign inventor

2,364 788

Belgian local assignee 780 88 Belgian MNE assignee 323 105 Belgian subsidiary of foreign MNE as assignee

1,192 485

others6 62 32

Number of patent data applied or invented in Belgium

Measuring the Belgian ownership of patents invented abroad

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SHAI indicator

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The major origin of the foreign inventions controlled by firms based in Belgium is Germany and it is followed by the US, France and Great Britain.

Conclusion and main findings

The approach of the authors allows an improvement of existing indicators of R&D internationalisation. Indeed, taking into account the nationality of ownership of the firm provides a more relevant approach than the typical literature to analyse the R&D internationalisation process.

All these results are in accordance with those of a small open economy: indeed, relatively more knowledge generated by Belgian inventor’s flows out of Belgium towards foreign ownership of this technology, than knowledge generated by foreign inventors is owned by Belgian assignees. In other words, SHIA (indicator that reflects the extent to which foreign firms control domestic inventions or inward R&D-FDI) is higher than SHAI (which reflects the extent to which domestic control foreign invention or outward R&D-FDI).

SHIA > SHAI

However the analyse shows that the share of patents invented abroad and with Belgian applicants has grown over the past 20 years, especially for the subgroup of Belgian MNE with subsidiaries abroad.

8

Critics

According to us, the first weakness of this article is the author’s choice of the time period used to measure the R&D internationalisation process. Indeed, this article was written in 2005 but used patent data for the time period from 1978 to 2001. This article doesn’t provide information for the period between 2001 and 2005 with the rapid growth of the R&D international activities; the situation could have changed significantly from the studied interval. The second element we noticed is that the authors based their studies only on patent data. As the authors said, there are some limits associated with the use of patent data7. We think that it should be relevant to confirm their results with other indicators used to compute the R&D internationalisation: for example the R&D expenditures across countries or patent citation data.

7 Weakness of patent data according to the authors of the studied article:

Not all innovative activity is captured (not all inventions are patented or patentable, not all patents lead to innovations and not all inventions are based on patented inventions.

Patented inventions differ greatly in quality, in the magnitude of inventive output associated with them (Griliches, 1990; Lanjouw and Schankerman, 1999).

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Section 2: DuPont’s profile

Introduction

DuPont is a science-based products and services company. Founded in 1802, DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Operating in more than 70 countries, DuPont offers a wide range of innovative products and services for markets including agriculture and food; building and construction; communications; and transportation.

DuPont is a key player in the R&D internationalisation process. Indeed, the R&D

performed by large technology intensive international firms is pivotal in discussing about the R&D internationalisation because:

They are, on average, significantly more R&D intensive than local firms; They account for close to half of global R&D expenditure8; They have the potential to have major impact on host countries research capabilities

through their location decisions. It is thus interesting to focus on the profile of DuPont. For that, we will firstly present briefly its history and its structure and secondly its R&D strategy.

History

Founded in 1802 by Eleuthère Irénée du Pont, the original E.I. du Pont de Nemours and Company met a rapid growth. At this time, America needed quality black powder and E.I. du Pont organized an efficient means to supply that need. By 1815 DuPont's facilities grew steadily and its share value had almost quintupled.

DuPont's strategy of expansion during the 19th century was primarily one of horizontal integration that is the company expanded production of gunpowder by building or acquiring new plants.

DuPont also diversified, creating along with competitor Laflin & Rand, the Repauno Chemical Company, a dynamite subsidiary. Like many 19th century businesses, DuPont had

8 UNCTAD 2005

10

grown beyond the capacity of any single entrepreneur or family to manage properly. The three du Pont cousins who inherited the company launched it into a new era of professional management.

In July 1902, they established two laboratories, the Eastern Lab and the Experimental Station, reflecting an increasing commitment to research. The Eastern Laboratory was the first industrial chemical research lab established in the United States. The opening of the Experimental Station helped define the company's dual approach to research: applied research aimed directly at new or improved products, such as Eastern conducted, and the Experimental Station's basic or fundamental research aimed at new knowledge.

DuPont's product lines were diversified beyond explosives into the broader field of chemistry through several acquisitions. It was just after World War I that DuPont management made one of its most fateful strategic decisions, investing the immense amount of capital made in the explosives market to shift the company almost entirely into emerging consumer and high technology markets including plastics, dyes, paints and artificial fabrics.

In 1921, to ensure that DuPont's newly diversified operations remained profitable, the management undertook a fundamental restructuring of DuPont's organization. It dismantled the system of centralized decision-making at the top of the management pyramid. Instead, DuPont was organized as a line-and-staff system with 10 industrial departments under the direct control of their own general managers, each with their own sales, research and support functions.

This management structure served DuPont well through decades of crisis and opportunity including the Great Depression, the Second World War, and the prosperous 1950s. Effective allocation of resources was a continuous challenge, especially since the phenomenal success of nylon ensured that much of DuPont's available capital would flow into basic research and development.

Structure

In its current structure, DuPont has seven segments. Five of these segments constitute the company’s growth platforms: Agriculture & Nutrition, Coatings & Color Technologies, Electronic & Communication Technologies, Performance Materials, and Safety & Protection. The two other segments are The Pharmaceuticals segment and Textiles & Interiors. Each of these segments is divided in specific businesses as shown in the organigram bellow.

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Research and Development at DuPont Facts & Figures

Globally, DuPont has more than 75 R&D facilities with over 40 in the United States and more than 35 in 11 other nations. The highest concentration of U.S Research Centers is in the Wilmington, Delaware area where we can find several large research centers. Among these, the Experimental Station laboratories engage in investigative and applied research, the Chestnut Run laboratories focus on applications research, and the Stine-Haskell Research Center conducts agricultural product research and toxicological research to ensure the safe manufacture, handling and use of products.

Other major research locations in the United States include Marschall Lab in Pennsylvania and Troy Lab in Michigan, both dedicated to coatings research; Pioneer research facilities in Iowa; The Solae Company facilities in Missouri; polymer research facilities in Virginia; and electronic technology research facilities in Research Triangle Park in North Carolina.

DuPont Chemical

DuPont Advanced Fiber

DuPont Titanium

Technologies

DuPont Performance

Coatins

DuPont Surfaces

DuPont Safety Resources

DuPont Personnal

DuPont Nonwovens

DuPont

DuPont Electronic &

Communication Technologies

DuPont

Performance Materials

DuPont Coating

& Color Technologies

DuPont Safety and Protection

DuPont

Agriculture & Nutrition

DuPont Displays

DuPont Electronic

Technologies

DuPont Engineering

Polymers

DuPont Performance

DuPont Packaging and

Industrial Polymers

DuPont Teijin Films

Pioneer Hi-Bred International

DuPont Crop Protection

DuPont Nutrition &

Health

DuPont Qualicon

DuPont Fluoroproducts

DuPont Imaging

Technologies

DuPont Chemical

DuPont Advanced Fiber

Organigram of the five growth platforms

12

Dupont, in line with the company’s global interests, runs a number of additional research and development facilities outside the United States in countries such as Belgium, Canada, France, Germany, Japan, Luxembourg, Mexico, the Netherlands, Spain, and Switzerland. Consistent with plans announced in late 2003, the company has built a new development facility in China in 2006 dedicated to high-tech and research organizations and expects to complete the Dupont Knowledge Center in India until 2008. DuPont invests an average of $1.3 billion annually on global research and development in a diverse range of technologies for many markets including agriculture, automotive, construction, electronics, chemicals and industrial materials. Today, DuPont has more than 5000 scientists and engineers around the world.

In the past three years, DuPont launched more than 3,000 new products or new product variations. New products impact significantly DuPont’s revenues. Products launched in the past five years accounted for 36% of total revenues in 2007, up from 24% in 2001. Total sales from new products introduced in the past five years doubled to more than $10 billion compared with 2003.9

R&D Strategy The company’s philosophy is based on three main ideas:

- Putting Science to Work: Science capabilities are the competitive advantage of all the company’s business. The company is not focused on a single blockbuster innovation, but seeks growth by generating dozens of new products each year. Market driven innovation, which relies on the needs of the customer and market opportunities, has been the main strategy of the company’s research efforts.

- Going Where the Growth Is: DuPont is looking for significant growth opportunities

by increasing its presence in emerging markets and extending its presence into new applications, products, brands and market position.

- Power of One DuPont: DuPont’s strategy is to increase productivity, capabilities and

customers, with a single entity focus in order to create wider opportunities for the numerous business units across the entire company.

9 Uma Chowdhry, DuPont’s chief science and technology officer, Chemical & Engineering News, 02/2008

13

The objectives of the company’s R&D programs are to create new technologies, processes and business opportunities in relevant fields, as well as to improve existing products and processes. Each segment of the company funds R&D activities that support its business missions. The corporate research laboratories are responsible for conducting research programs aligned with corporate strategy as provided by the growth platforms. All R&D activities are administered by senior R&D management to guarantee consistency with the business and corporate strategy.

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Section 3: the DuPont’s control of production technology in Belgium

Introduction

The goal of this part of our report is to highlight the key ideas of the studied article and to apply them to DuPont in order to assess its impact on R&D internationalisation for the case of Belgium. For that, we will firstly introduce the DuPont’s patent strategy in order to have a clear vision of the drivers of its patent data (used in the studied article to quantify R&D internationalisation). Secondly, we will focus on the Belgian DuPont’s subsidiaries and their activities in Belgium. Finally we will try to quantify the impact of DuPont R&D in the trend of R&D internationalisation for the case of Belgium.

Patent strategy of DuPont

Patent data are used in the studied article to quantify R&D internationalisation and we will use the same method to assess the impact of DuPont on the R&D internationalisation for the case of Belgium. It is thus interesting to focus our attention on the patent strategy of DuPont in order to have a clear vision on the drivers of DuPont’s patent data. “Science is at core of DuPont. The best way we can protect our science is trough a strong intellectual property strategy”

-Uma Chowdhry10-

DuPont believes that its patents provide it with an important competitive advantage. The company owns many patents, which expire from time to time, covering many products, processes and product uses. These patents protect many aspects of the company’s significant research programs and the goods and services it sells. The actual protection afforded by these patents varies across countries and depends upon the scope of the coverage of each individual patent as well as the availability of legal remedies in each country.

In 2007, the patents filings of DuPont increased by 7% in comparison with the figures of 2006 and the number of patent granted by USPTO11 increase by 17%. The total of DuPont’s patents granted in 2007 was 597 patents (the highest number for a company since 1992). 10 DuPont Senior Vice President and Chief Science & Technology Officer 11 Majority of DuPont’s patents is granted by USPTO

15

In March 2008 DuPont has achieved top rankings in science and patent strength according to several surveys published by The Patent Board™12 and Nature Biotechnology13. DuPont was honoured for its efforts in both Chemistry and Biotechnology. The Patent Board™, the leading independent provider of best practices research for patent analysis and intellectual property investment across 17 global industries, has nominated DuPont as the No. 1 in the chemical industry for the past quarter14(see figure on the right). Moreover, the scientific journal Nature Biotechnology named DuPont as the organization with the most U.S. biotechnology patents issued in its annual listing.

These recognitions demonstrate that strategy of DuPont based on strong intellectual property is well performing: DuPont is leading the chemical industry in creating new science and protecting it in a way that ensures company brings value to its customers. The integrated approach of DuPont to science and technology is fruitful.

As confirmed by Chowdhry15 “We are at a unique moment in history where huge

business opportunities are inherent in global trends related to population growth; increasing living standards that demand solutions for more and better food; renewable materials; safety and security; energy efficiency and alternative energy; and connectivity. Our strong R&D pipeline is fully aligned to capitalize on these opportunities. Also, our integrated approach to developing market-driven solutions using biology, chemistry, and materials science will continue to deliver sustainable growth.”

12 The Patent Board™ produces a Patent Scorecard™ that ranks companies on patent quality, technological strength and breadth of impact. It tracks the U.S. patent portfolios of more than 2500 of the world’s top technology firms. For further explanation see Annexe 1. 13 Nature Biotechnology publishes an annual data page with analysis of the biotechnology patent landscape. The December 2007 edition includes the journal’s patent analysis for 2006, which recognizes DuPont and its Pioneer Hi-Bred business with having 161 U.S. biotechnology patents issued, placing DuPont first among organizations such as the University of California, Genentech and the U.S. government 14 For the 13 weeks quarter ending the first January 15 DuPont Senior Vice President and Chief Science & Technology Officer

Patent Scorecard ranks corporation in Chemical industry

Mitsubishi Chemical Holdings5

BASF Group4

Rohm and Haas Co3

3M Co2

DuPont1

CompanyRank

Mitsubishi Chemical Holdings5

BASF Group4

Rohm and Haas Co3

3M Co2

DuPont1

CompanyRank

Compiled with data through 1/1/2008

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DuPont’s presence in Belgium

In accordance with its strategy focused on science and intellectual property, the Belgian DuPont’s subsidiaries serve as a bridge from pure science to the application of science specific to a customer or market need. DuPont had subsidiaries in Belgium since 1958. DuPont Mechelen heads a network of satellite Belgian technologies centers:

DuPont Performance Coatings (Malines) which is the biggest car repair enamels producer in the world. Being the world leader in the field of color research, development and introduction of new technologies, it provides car repair products characterized by color accuracy, high repair quality, business efficiency and profitability.

DuPont Fluoroproducts (Malines) products different amorphous fluoropolymers such as Teflon ®16, Rynite ®, Crastin ®, Zytel ® in Hytrel ®.

DuPont Vespel ® (Malines), offers advanced resolutions for various industries such as car and semiconductors industry.

DuPont Powder Coating (Heusden-Zolder) has five divisions within the business, Automotive, Vehicle Refinish, Industrial, Powder, Ink Jet - Speciality Coatings.

DuPont’s subsidiaries are specialised in R&D, processing and testing. DuPont has no single motive for locating R&D in Belgium since both product adaptation and learning from Belgian markets keep pace with access to skilled researchers. With these subsidiaries DuPont has a channel for accessing Belgian technology spillovers.

Dupont’s ownership of patents invented in Belgium

The goal of this section is to quantify the impact of DuPont R&D in the trend of R&D internationalisation for the case of Belgium. For that we will use USPTO17 patent data from 2002 to 2006 and indicators developed by M. Cincera, B. van Pottelsberghe and R. Veugelers18in their article. As explain in the studied article, the improved indicators will consider patents applied by Belgian DuPont subsidiaries as foreign controlled. Indeed while the existing literature considers as “Belgian” the assignees which are based in Belgium (for example the Belgian DuPont’s subsidiaries will be considered as a local assignee), the approach of the authors takes into account the ownership structure of the Belgian assignee.

16 Industrial products made with Teflon® fluoropolymer resins have exceptional resistance to high temperatures, chemical reaction, corrosion, and stress-cracking. 17 Reminder: the majority of DuPont’s patents is granted by USPTO 18 the authors of the studied article

17

First of all, we will analyse the general foreign ownership of patents invented in Belgium from 2002 to 2006 to have a more recent picture of inward R&D-FDI. After that we will focus our attention on Dupont’s ownership.

General foreign ownership of patents invented in Belgium

Our empirical analysis will be performed for the utility patents19 originated in Belgium and granted by USPTO during the time period extending from January 1 to December 31 of each year. The measure of the extent to which inventions with one or more Belgian inventor are controlled by foreign researchers (inward R&D-FDI) is given in the following table. It reveals the contributions of foreign firms to Belgian patent activities20.

USPTO 2002-2006 Belgian inventor 3100 Belgian inventor and foreign assignee (directly and indirectly controlled)

1905

61,45%

Sources: USPTO Database: Patenting By Geographic Region (State and Country), Breakout by Organization

This table shows that 1905 out of 3100 USPTO patents with at least one Belgian inventor, granted between 2002 and 2006, are directly and indirectly (through a Belgian subsidiary of a foreign multinational company) controlled by foreign assignee. In comparison with the article, the share of patents invented in Belgium and owned (directly and indirectly) by foreign companies decrease by about 20%. Indeed, this share has decreased from about 77% for the time period analysed by the authors (between 1978 and 1999) to 61,45% for the period between 2002 and 2006. However the international ownership of Belgian inventions stays at a very high level.

DuPont’s ownership of Belgian inventions

We aim to quantify the impact of its international R&D activities for the case of Belgium. For that, we analyse the number of patents granted by USPTO to DuPont in Belgium and their evolution between 2002 and 2006.

As explain in the previous sections, DuPont’s global strategy is focused on intellectual properties: its patents represent a competitive advantage. Hence, DuPont applies for a great number of patents each year. For instance, USPTO granted 597 patents for DuPont in 2007.

19 utility patents (i.e., patents for inventions) 20 For details of the calculation: see annexe 2

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The number of patents which at least one Belgian inventor and owned by DuPont is given in the following table.

2002 2003 2004 2005 2006 Total Total number of DuPont's patents granted by USPTO

312 340 330 251 371 1595

DuPont’s originated from USA 260 269 277 221 328 1355

DuPont’s patents originated from all other countries

52 71 53 30 43 240

DuPont’s patents originated from Belgium 0 6 1 1 1 9

Sources: USPTO data base: Patenting By Geographic Region (Belgium), Breakout by Organization

The geographic pattern turns out to be relatively stable over time: the most of DuPont’s patents are originated from the US. Indeed, about 85% of the patents granted by USPTO emerge from the US. These results are in accordance with the fact that there is the highest concentration of the DuPont’s R&D centers in the US.

For the period between 2002 and 2006, DuPont is granted by USPTO for 9 patents originated from Belgium. That means that Dupont owns these nine patents (with at least one Belgian inventor) through its Belgian subsidiaries. With the approach of the studied article, these patents should be considered as foreign controlled for the Belgian point of view due to the nationality of company. This share is very low in comparison with the total number of DuPont’s patent, but we don’t have to forget that DuPont is a MNE’s which operate in more than 70 countries and its presence in Belgium is limited. However, in 2003, DuPont’s patent originated from Belgium reach a peak of 6 patents: that represents about 10% of its patents from all other countries than the US.

DuPont has thus an impact on the degree of internationalisation of R&D in Belgium. Indeed, with its ownership of patent with at least one Belgian inventor, DuPont increase the SHIA indicator (indicator that reflects the extent to which foreign firms control domestic inventions or inward R&D-FDI)

We will now compare this impact with the impact of other multinational companies. The following table presents the list of the 20 organizations (national and international corporations, universities, government agencies, businesses, and other organizations) that receive the most utility patents with at least one Belgian inventor during time period extending from 2002 to 2006.

19

2002 2003 2004 2005 2006 total

1 AGFA-GEVAERT N.V. 77 60 61 40 58 296

2

INTERUNIVERSITAIR MICRO-

ELEKTRONICA CENTRUM (IMEC

VZW) 23 44 29 25 27 148

3 ALCATEL 17 19 33 36 34 139

4 ~Individually Owned Patent 36 26 25 20 26 133

5 PROCTER + GAMBLE COMPANY 29 25 31 20 16 121

6 COLGATE-PALMOLIVE COMPANY 41 30 7 5 3 86

7 JANSSEN PHARMACEUTICA N.V. 23 21 11 11 14 80

8 SOLVAY (SOCIETE ANONYME) 19 14 18 13 14 78

9

EXXONMOBIL CHEMICAL

PATENTS INC. 13 12 16 15 16 72

10

KONINKLIJKE PHILIPS

ELECTRONICS N.V. 4 12 11 11 20 58

11

GOODYEAR TIRE + RUBBER

COMPANY 13 13 5 10 8 49

12

SMITHKLINE BEECHAM

BIOLOGICALS (S.A.) 6 10 17 6 9 48

13 N. V. INNOGENETICS S.A. 7 16 8 6 7 44

14 FINA RESEARCH S.A. 21 14 1 3 0 39

15

LUDWIG INSTITUTE FOR CANCER

RESEARCH 14 10 5 3 7 39

16 N.V. BEKAERT S.A. 9 3 5 9 10 36

17 N. V. MICHEL VAN DE WIELE 10 2 7 4 12 35

18 U.C.B. SOCIETE ANONYME 14 4 7 4 4 33

19 CNH AMERICA LLC 0 0 2 16 12 30

20 ROBERT BOSCH GMBH 2 7 11 4 2 26

51

E. I. DU PONT DE NEMOURS AND

COMPANY 0 6 1 1 1 9

Sources: USPTO data bases: Patenting by Geographic Region (Belgium), Breakout by Organization

20

As we can see, DuPont stands at the 51 position with 9 patent granted by USPTO in Belgium. If we compare with other organisations the impact of DuPont on internationalisation of Belgian R&D is very moderate (but significant). Indeed, several organizations receive more than 10 times the number of DuPont’s patents; they have thus a greater impact on Belgian R&D.

It is interesting to trace the nationality of these organizations. If we take into account the nationality for this sample of organizations (see the following table), we can show that Belgian organizations own the bulk of patents with at least one Belgian inventor granted by the USPTO between 2002 and 2006. The table also shows that the US is the largest foreign owner of patents invented in Belgium and that Belgium main neighbours have a significant importance. We can explain this trend by the geographical distance and the sharing of common language21.

0

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800

Belgium France USA Netherlands Germany

Nationality of the 20 bigest producers of patents in Belgium

Sources: USPTO data bases: Patenting by Geographic Region (Belgium), Breakout by Organization

Remark: If we take into consideration only organizations that receive 5 or more utility patents during the time period from 2002 to 2006, we keep 98 different organizations that represent about 77%22 of all patents granted by USPTO with inventors based in Belgium. These figures reflect a relatively high concentration of innovations, as limited amount of organizations represent the majority of patents granted by USPTO. That reflects that Belgian innovation

21 For more information, see Guellec, D. and B. van Pottelsberghe (2001), “The internationalization of technology analysed with patent data”, Research Policy, vol. 30, n°8 22 source: USPTO data base

21

system is dominated by large firms perform for the most of R&D and apply for a majority of patents.

Conclusion

Our results suggest that DuPont, as a science-based products and services company, plays an ineluctable role in the R&D internationalisation trend because of its intensive R&D strategy and its impact on host countries research capabilities through its location decisions. Indeed, with a total of 597 patents granted in 2007, DuPont achieves top rankings in science and patent strength in both Chemistry and Biotechnological fields.

In Belgium DuPont has an impact on the degree of internationalisation of R&D. Indeed, with its ownership of patents with at least one Belgian inventor, DuPont increases the SHIA indicator23 for Belgium. In comparison with other organisations the impact of DuPont on internationalisation of Belgian R&D is very moderate (but significant): several organizations own 10 times more Belgian patents granted by USPTO (between 2002 and 2006) than DuPont and have thus a greater impact on Belgian R&D.

The fact of taking into account the nationality of the 20 organisations which produce the most of patents with at least one Belgian inventor shows that Belgian organizations own the bulk of these patents and that the US is the largest foreign owner of them.

23 It reflects the extent to which foreign firms control (directly or indirectly) domestic inventions or inward R&D-FDI

22

Section 4: Deeper analysis and link with other articles

We found interesting to compare our case to other given articles which seemed to be relevant with our analysis of DuPont. Internationalization of DuPont’s R&D is a key factor of its success and the organization of this internationalization presents a lot of interesting aspects that we can analysed through different perspectives. We have selected the following articles:

- Gassman O., M. von Zedtwitz (1999), New Concepts and Trends in International R&D Organization, Research Policy, 28(2-3), 31-50.

- Pearce R. (1999), Decentralised R&D and Strategic Competitiveness: Globalised

Approaches to Generation and Use of Technology in Multinational Enterprises (MNE’s), Research Policy, 28(2-3), 157-78.

1st article: New Concepts and Trends in International R&D Organization The article notices the recent (80’s) phenomenon of R&D internationalization. Technology-based companies initiate this trend by outsourcing research centers abroad in order to benefit from local spillovers. Despite the fact that firms based in small countries tended to be more internationalized, increased competition and attractiveness of emerging markets forced most R&D intensive countries to look for a new global R&D strategy. The study highlights five category of international R&D organization regarding to the dispersion of R&D activities and the degree of cooperation between individual R&D units. The case of DuPont fit precisely in one of the five typical forms of international R&D organization, which is the integrated R&D network characterized by a structure of highly dispersed R&D, several competence centers and an orientation of a synergic integration of international R&D units. DuPont’s R&D philosophy is fully oriented towards internationalization. Efforts are made to bring its technology capabilities closer to marketplaces in order to meet the needs of customers and to better access the commercialization process. DuPont operates in an

23

environment of increasing technological strength and must be present everywhere relevant knowledge can be gained through the implementation of multiples large specialized research facilities abroad.

2nd article: Decentralised R&D and Strategic Competitiveness: Globalised approaches to Generation and Use of Technology in MNE’s.

The paper stressed the fact that the decentralization of R&D facilities answers most of the time to medium and long term strategic orientations of MNE’s.

The function of decentralized R&D centers has fundamentally evolved is the past decades. Initially they were assuming only a role of implementer of the home technology and products. Nowadays the R&D facilities as used as value creator for the whole company and create new products and technologies directly adapted to new markets.

DuPont R&D organization is going beyond this centrifugal view by building a knowledge network trough its numerous R&D facilities around the world. The most recent DuPont’s R&D large investments were dedicated to complete new research facilities in the most promising emerging markets: China and India. Firstly Dupont gains an access to new markets (Going Where the Growth is) but secondly, through transfer of knowledge DuPont will benefits from the technological progress made in foreign environments. Today, DuPont is clearly focusing on synergies among its different departments and locations, combining its strengths in chemistry and materials science and emerging technologies such as nanotechnology and biotechnology.

24

Section 5: General Conclusion

The ultimate objective of this paper was to apply the main concepts of an R&D specialised article24 to a multinational, technology intensive corporation in order to understand the impact of MNE’s on R&D internationalisation process. More precisely we analysed the impact of DuPont on R&D internationalisation for the case of Belgium, using patent data (USPTO patent data from 2002 to 2006) and taking into account the nationality of the ownership of the firm (cfr article’s improved indicators). Our results suggest that DuPont, as a science-based products and services company, plays an ineluctable role in the R&D internationalisation trend because of its intensive R&D strategy and its impact on host countries research capabilities through its location decisions. Indeed, with a total of 597 patents granted in 2007, DuPont achieves top rankings in science and patent strength in both Chemistry and Biotechnological fields.

If we consider the Belgian subsidiaries of foreign MNE’s as “foreign control” over the USPTO patents invented in Belgium, the ratio of domestic patented inventions controlled by foreign firms reaches a level of 61% for the time period between 2002 and 2006. This total level of foreign ownership (direct or indirect) of patented invention made in Belgium has decreased by about 20% over the past 10 years.

In Belgium DuPont has an impact on the degree of internationalisation of R&D. Indeed, with its ownership of patent with at least one Belgian inventor, DuPont increase the SHIA indicator25 for Belgium. In comparison with other organisations the impact of DuPont on internationalisation of Belgian R&D is very moderate (but still significant): several organizations own 10 times more Belgian patents granted by USPTO (between 2002 and 2006) than DuPont and have thus a greater impact on Belgian R&D. The fact of taking into account the nationality of the 20 organisations which produce the most of patents with at least one Belgian inventor shows that Belgian organizations own the bulk of these patents and that the US is the largest foreign owner of them.

We completed our analysis by confronting DuPont’s R&D organization with findings from other articles. We conclude that DuPont’s policy about R&D fully integrates the increasing trends of R&D internationalization process. Indeed, DuPont’s research facilities are largely decentralized in order to maximize the benefits of foreign spillovers in terms of knowledge and access to new markets.

24 “Assessing the Foreign Control of Production of Technology: The Case of a Small Open Economy” written by M. Cincera, B. van Pottelsberghe and R. Veugelers 25 It reflects the extent to which foreign firms control (directly or indirectly) domestic inventions or inward R&D-FDI

25

Bibliography:

Papers

Arora, Ashish Ralph Landau and Nathan Rosenberg, (eds). (2000). “Chemicals and Long-Term Economic Growth: Insights from the Chemical Industry”.

Arthur D. Little and R. Vleugelers (November 2005) “Internationalisation of R&D in the UK: a review of the evidence”

Chandler, Alfred D. (1971). Pierre S.” Du Pont and the making of the modern corporation. “

Chandler, Alfred D. (1969).” Strategy and Structure: Chapters in the History of the American Industrial Enterprise.”

Cincera M., Van Pottelsberghe and R.Veugelers (2005), “Assessing the foreign control of production of technology: the case of a small open economy”, Discussion Paper Series

Cukier Kenneth: The Economist "Intellectual property is the next asset class. Companies are creating a market says Eric Gillespie.”

du Pont, B.G. (1920). E.I. du Pont de Nemours and Company: A History 1802-1902. Boston and New York: Houghton Mifflin Company. - (Kessinger Publishing Rare Reprint. ISBN 1-4179-1685-0).

DuPont E.I.de Nemours and co (March 02, 2005) “Annual report which provides a comprehensive overview of the company for the past year”

Finnegan, Henderson, Farabow, Garrett & Dunner University/research institution, Government, Business

Gassman O., M. von Zedtwitz (1999), New Concepts and Trends in International R&D Organization, Research Policy, 28(2-3), 31-50.

Guellec, D. and B. van Pottelsberghe (2001), “The internationalization of technology analysed with patent data”, Research Policy, vol. 30, n°8

Haynes, Williams (1983). American chemical industry. Hounshell, David A. and Smith, John Kenly, JR (1988). Science and Corporate

Strategy: Du Pont R and D, 1902-1980. Cambridge and New York: Cambridge University Press. ISBN 0-521-32767-9.

Kinnane, Adrian (2002). DuPont: From the Banks of the Brandywine to Miracles of Science. Willimington: E.I. du Pont de Nemours and Company. ISBN 0-8018-7059-3.

Ndiaye, Pap A. (trans. 2007). Nylon and Bombs: DuPont and the March of Modern America

26

Oldach Scott and Nick Stabinsky of Patent Board™ (May 01, 2008) “Why Use Patent Analytics?”

Pearce R. (1999), Decentralised R&D and Strategic Competitiveness: Globalised Approaches to Generation and Use of Technology in Multinational Enterprises (MNEs), Research Policy, 28(2-3), 157-78.

Wilmington, Del, USA, 12 March 2008 :”The Patent Board(TM) and Nature Biotechnology Rank DuPont No. 1 Innovator in Chemical Industry and No. 1 in Biotech Patents”

Web

http://www.uspto.gov/

http://v3.espacenet.com/eclasearch?AB=belgium

http://www2.dupont.com

http://www.chemindustry.com/category/88.html

http://www.dupontpowder.be/fr/index_fr.html

http://www.euroscreen.com

http://heritage.dupont.com

http://www.wikipedia.com

http://www.rdmag.com

27

Appendix

Appendix1: Patent Scorecard™ The Patent Board’s metrics reflect varying aspects of innovation, speed, strength and relevancy. The Patent Scorecard is published each month and the indicators are calculated based on a rolling 12-month calendar. Patent Portfolio Indicators

Quality Quantity Science Speed Technology Strength™: ranking measure to indicate an overall strength of the company’s patent portfolio holdings with a combined measure of quality and quantity. Industry Impact™: indicates the extent to which others are building upon a portfolio of issued US utility patents as compared to a total set of patents.

Patents Granted: a count of patents granted during the period under analysis.

Science Strength™: ranking measure to indicate how much a company uses science in building its patent portfolio with a combined measure of science and quantity. Research Intensity™: tracks a indicates the extent to which a portfolio includes patents with above average Science Linkage.

Innovation Cycle Time™: indicates whether a patent or patent portfolio is building off newer or older inventions (art).

DuPont scored high points on Technology Strength(TM), Science Strength(TM) and Patent Count(TM), according to the Patent Board(TM). Technology Strength(TM) is a measure of the overall strength of the company’s patent portfolio holdings based on a combined indication of quality and quantity. Science Strength(TM) indicates how much a company uses science in building its patent portfolio based on a combined measure of science and quantity. DuPont leads the competition by over 800 percent in Science Strength(TM) at 8,894.3 points, with BASF Group in second place with 1,062.3 points and 3M Co. in third with 909 points.

Appendix 2: Patenting By Geographic Region (State and Country), Breakout by Organization The identification of Belgian subsidiaries of foreign MNE’s represents a contribution to the existing literature measuring inward R&D-FDI through patent information so we analyse

28

the nationality of companies that apply for patents in Belgium. The foreign companies are coloured in orange.

2002 2003 2004 2005 2006 total

AGFA-GEVAERT N.V. 77 60 61 40 58 296

INTERUNIVERSITAIR MICRO-

ELEKTRONICA CENTRUM

(IMEC VZW) 23 44 29 25 27 148

ALCATEL 17 19 33 36 34 139

~Individually Owned Patent 36 26 25 20 26 133

PROCTER + GAMBLE

COMPANY 29 25 31 20 16 121

COLGATE-PALMOLIVE

COMPANY 41 30 7 5 3 86

JANSSEN PHARMACEUTICA

N.V. 23 21 11 11 14 80

SOLVAY (SOCIETE ANONYME) 19 14 18 13 14 78

EXXONMOBIL CHEMICAL

PATENTS INC. 13 12 16 15 16 72

KONINKLIJKE PHILIPS

ELECTRONICS N.V. 4 12 11 11 20 58

GOODYEAR TIRE + RUBBER

COMPANY 13 13 5 10 8 49

SMITHKLINE BEECHAM

BIOLOGICALS (S.A.) 6 10 17 6 9 48

N. V. INNOGENETICS S.A. 7 16 8 6 7 44

FINA RESEARCH S.A. 21 14 1 3 0 39

LUDWIG INSTITUTE FOR

CANCER RESEARCH 14 10 5 3 7 39

N.V. BEKAERT S.A. 9 3 5 9 10 36

N. V. MICHEL VAN DE WIELE 10 2 7 4 12 35

U.C.B. SOCIETE ANONYME 14 4 7 4 4 33

CNH AMERICA LLC 0 0 2 16 12 30

ROBERT BOSCH GMBH 2 7 11 4 2 26

BARCO N.V. 5 1 4 4 11 25

GLAVERBEL 4 3 2 8 7 24

PICANOL N.V. 4 3 3 7 6 23

29

TYCO ELECTRONICS

RAYCHEM N.V. 4 3 4 6 5 22

ATOFINA RESEARCH, S.A. 0 3 9 8 1 21

SIEMENS

AKTIENGESELLSCHAFT 2 7 8 2 2 21

SOLVAY POLYOLEFINS

EUROPE -- BELGIUM (SOCIETE

ANONYME 9 5 1 3 2 20

NATIONAL SEMICONDUCTOR

CORPORATION 4 5 5 1 4 19

TENNECO AUTOMOTIVE

OPERATING COMPANY INC. 1 0 2 9 7 19

BAXTER INTERNATIONAL INC. 3 4 0 2 9 18

HUNTSMAN INTERNATIONAL

LLC 2 5 6 5 0 18

IMPERIAL CHEMICAL

INDUSTRIES PLC 8 4 3 3 0 18

THIN FILM ELECTRONICS ASA 3 4 7 4 0 18

NEW HOLLAND NORTH

AMERICA, INC. 8 6 1 0 1 16

BAYER BIOSCIENCE N.V. 1 1 4 4 5 15

UNIVERSITE CATHOLIQUE DE

LOUVAIN 2 2 3 5 3 15

3M INNOVATIVE PROPERTIES

COMPANY 7 1 0 2 4 14

AKZO NOBEL NV 4 4 4 1 1 14

ATLAS COPCO AIRPOWER,

NAAMLOZE VENNOOTSCHAP 5 1 3 1 3 13

VLAAMS INTERUNIVERSITAIR

INSTITUUT VOOR

BIOTECHNOLOGIE (VIB) VZW 1 0 6 2 4 13

COCA-COLA COMPANY 5 3 1 1 2 12

MILLIKEN & COMPANY 5 4 0 0 3 12

OWENS CORNING

COMPOSITES SPRL 2 2 1 2 4 11

SONY EUROPA B.V. 3 0 5 3 0 11

UNIVERSITE DE LIEGE 3 3 2 2 1 11

30

BASF AKTIENGESELLSCHAFT 1 1 2 2 4 10

CERESTAR HOLDING BV 5 0 1 1 3 10

CF TECHNOLOGIES, INC. 1 3 4 2 0 10

FINA TECHNOLOGY, INC. 0 2 3 1 4 10

HERAEUS ELECTRO-NITE

INTERNATIONAL N.V. 1 2 3 2 2 10

E. I. DU PONT DE NEMOURS

AND COMPANY 0 6 1 1 1 9

FIRMA G.B. BOUCHERIE,

NAAMLOZE VENNOOTSCHAP 4 0 3 2 0 9

MEDTRONIC INC. 1 1 1 2 4 9

MELEXIS N.V. 3 1 2 2 1 9

UNIVERSITEIT GENT 1 1 1 3 3 9

XEIKON INTERNATIONAL N.V. 0 5 0 3 1 9

BROADCOM CORPORATION 2 1 1 1 3 8

DOW CORNING S.A. 2 4 1 1 0 8

EUROSCREEN S.A. 0 0 2 3 3 8

K.U. LEUVEN RESEARCH &

DEVELOPMENT 1 2 1 2 2 8

KRATON POLYMERS US LLC 3 1 1 1 2 8

TECHSPACE AERO S.A. 0 4 1 0 3 8

UNILIN BEHEER BV,

BESLOTEN VENNOOTSCHAP 1 0 2 3 2 8

AGILENT TECHNOLOGIES,

INC. 1 0 2 3 1 7

AVENTIS CROPSCIENCE N.V. 6 1 0 0 0 7

FLOORING INDUSTRIES, LTD. 0 0 1 3 3 7

GENERAL ELECTRIC

COMPANY 0 2 2 0 3 7

ION BEAM APPLICATIONS

SOCIETE ANONYME 1 0 3 2 1 7

MANIA BARCO N.V. 6 1 0 0 0 7

TIBOTEC BVBA 0 1 1 3 2 7

TYCO ELECTRONICS

LOGISTICS AG 1 2 1 3 0 7

VLAAMS INTERUNIVERSITAIR

INSTITUUT VOOR 3 2 2 0 0 7

31

BIOTECHNOLOGIE

WARNER-LAMBERT COMPANY 0 1 1 1 4 7

XEIKON NV 4 3 0 0 0 7

ASML NETHERLANDS B.V. 0 0 1 1 4 6

DSM N.V. 3 3 0 0 0 6

FRAMATOME CONNECTORS

INTERNATIONAL S.A. 3 3 0 0 0 6

NEXANS 1 2 2 0 1 6

PURATOS NAAMLOZE

VENNOOTSHCAP 2 2 2 0 0 6

TOYOTA JIDOSHA K.K. 2 1 1 1 1 6

ADVANCED ELASTOMER

SYSTEMS, L.P. 2 1 1 0 1 5

BAYER

AKTIENGESELLSCHAFT 1 1 3 0 0 5

CONTINENTAL TEVES AG &

CO., OHG 1 1 1 1 1 5

DELPHI TECHNOLOGIES, INC. 2 0 1 0 2 5

EMC CORPORATION 0 0 1 3 1 5

FCI 0 1 1 1 2 5

FRAUNHOFER-

GESELLSCHAFT ZUR

FOERDERUNG DER

ANGEWANDTEN FORSCHUNG

E.V. 2 0 1 1 1 5

Kemin Pharma Europe B.V.B.A. 0 0 0 0 5 5

L'AIR LIQUIDE, SOCIETE

ANONYME A DIRECTOIRE ET

CONSEIL DE SURVEILLANCE

POUR L'ETUDE ET

L'EXPLOITATION DES

PROCEDES GEORGES

CLAUDE 1 3 0 0 1 5

RECHERCHE ET

DEVELOPPEMENT DU

GROUPE COCKERILL SAMBRE 3 1 0 1 0 5

ROSE RESEARCH, L.L.C. 5 0 0 0 0 5

32

SIDMAR N.V. 3 2 0 0 0 5

SURFACE SPECIALTIES, S.A. 0 0 0 1 4 5

TEXACO INC. 3 0 2 0 0 5

TOTAL PETROCHEMICALS

RESEARCH FELUY 0 0 0 0 5 5

UNIVERSITE LIBRE DE

BRUXELLES 0 2 1 0 2 5

VESUVIUS CRUCIBLE

COMPANY 1 2 2 0 0 5

VLAAMSE INSTELLING VOOR

TECHNOLOGISCH

ONDERZOEK (VITO) 2 3 0 0 0 5

number of patent by Organisation 558 491 457 403 467 2376

total number of patent 722 622 612 519 625 3100