EU memo: correlation between innovation and patent numbers

A memo issued by the EU Commission this week says

"Intellectual Property Rights (IPR) at the heart of the Commission’s job and growth initiative

There is a very close link between IPR and the competitiveness of the EU economy. A proper, affordable IPR system is important to foster innovation...

The European Innovation Scoreboard 2005 provides empirical evidence that a lower level of patenting to a large extent accounts for the difference in innovation performance between EU countries and to the innovation gap between Europe, the US and Japan."

If you dig further into the figures, however, it is difficult to get a clear indication of how they are measuring innovation. It seems to be some sort of composite indicator which is taken as the average of ten other indicators five of which are related to something called "Application" and five of which are associated with intellectual property:

Under "application" the indicators listed are
1 Employment in high-tech services (% of total workforce)
2 Exports of high technology products as a share of total exports
3 Sales of new-to-market products (% of total turnover)
4 Sales of new-to-firm not new-to-market products (% of total turnover)
5 Employment in medium-high and high-tech manufacturing (% of total workforce)

Under "Intellectual property" the indicators listed are
1 EPO patents per million population
2 USPTO patents per million population
3 Triadic patent families per million population
4 New community trademarks per million population
5 New community designs per million population

It's hardly surprising that there is a correlation between numbers of patents and innovation, if the way you measure innovation is by counting the number of patents. Something else that is slightly suspicious about the data is that IBM don't feature at all in the table listing the top 25 applicants to the European Patent Office, measured by the number of patent applcations filed.