Number Of Companies Using The Patent System Is 'Surprisingly Small'
from the just-the-facts dept
One of the common mantras is that patents are indispensable, particularly for smaller companies, in order to prevent inventions being appropriated. If that is true, then presumably innovative companies are patenting like mad in order to protect their inventions. But is that really the case? Since the necessity of patents is so "obviously" true, like so many other dogmas in the area of intellectual monopolies, people rarely look at the data to see whether it is. However, there is some research in this area, such as this 2012 paper from the UK, which explored the extent of patenting by companies over the last decade or so (pdf). Here are the main results:
One of the most puzzling findings in the empirical analysis of firms' patenting behaviour is the low proportion of patenting firms in the population of registered companies. Our investigation of this phenomenon in the UK finds that only 1.6% of all registered firms in the UK patent and that even among those that are engaged in some broadly defined form of R&D, only around 4% have applied for a UK or European patent during our period of analysis (1998-2006).
Perhaps famously "inventive" high-technology sectors employ them more than traditional markets? Or maybe this is just a UK thing? Well, yes, but only to a certain extent:
In our data, even in high-tech manufacturing sectors, which arguably produce the most patentable inventions, the share of patenting firms
in the UK does not surpass 10% . Restricting the high-tech sector to R&D-doing firms that also innovate, the share of patenting firms increases only to 16%.
Findings for the US are similar: Balasubramanian and Sivadasan (2011) find that only 5.5% of US manufacturing firms own a patent. Moreover, shares of patenting firms differ dramatically across sectors -- even within the manufacturing industry; for example in the UK, manufacturing of chemicals and chemical products has a share of around 10% of patenting firms whereas publishing and printing has a share of only around 1%. This suggests that (a) some firms
do not automatically patent all of their patentable inventions, (b) some firms avoid the patent system altogether, either because of its cost or because patenting is perceived to yield no additional benefit, and (c) some innovations involve inventions that are not patentable.
The rest of the paper explores the data in detail, and seeks to come up with some explanations as to why patents are not used as a matter of course. As you might expect, there's no simple answer; instead, it seems to be due to a complex mix of factors. But what is not in doubt is the fact that companies making things -- that is, those who aren't patent trolls -- do not regard patents as indispensable as some proponents would have us believe.
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Filed Under: innovation, patents, r&d, studies, usage
Reader Comments
The First Word
“You have to be a big company
to game that system effectively.Subscribe: RSS
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You have to be a big company
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Also patents are useless without the will and means to back them up. If you can't credibly employ the threat if litigation you can't enforce it. Small businesses do not have that sort of disposable cash to devote to litigation. Selling patents is also not as easy as making a product. Making a product you at least have control over-succeed or fail. Licensing is completely dependent on the will of others to play.
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Re:
A patent can take 3+ years to get granted, so a small business is investing now in hopes of reaping some reward in the (distant) future.
Most small businesses do not have that luxury. They are concerned with their financials in the next month, 2 months, maybe 6 months. It is rare to know with high certainty you'll be solvent in 3+ years down the road so making the investment is difficult.
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Just as important:
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Patent Experience
My father had 32 patents because the company he worked for believed in them (he didn't) but he collaborated with the process because only after a patent was granted was he permitted to write a paper about the research results (he was an organic chemist). To my knowledge none of them ever required litigation.
The one small company I know of that had a good solid patent had it infringed by a very large and prosperous company to which they were to supply their technology. In a law suit that dragged on for years and cost a fortune, they eventually lost in East Texas. Davids don't stand a chance against Goliaths.
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Correction.
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Re: Correction.
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Odd
This is the phrase that struck me, because it seems so blindly obvious here:
Not all companies are creators.
How many patents do you think your corner shop has? How many do you think the local trucking company has, the taxi company, or the guy running the shoe store in the mall?
The real question should be patents in regards to companies who create products, not all companies. Do you honestly think that even 10% of the registered companies are in fact creators of products and not just resellers, transporters, retailers, repackagers, importers, distributors, and the like?
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Re: The real question should be patents in regards to companies who create products
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Re: Odd
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Re: Re: Odd
Supermarkets are very IP intensive. Barcodes, nearfield scanners, the technology that runs the cash registers, tracks inventory, decides on shelf placement... it's pretty endless. There is a lot of technology at work to make a modern supermarket run and get you the goods fresh and at low prices.
It isn't that they sell technology, they are selling the benefits of technology. Think of it as TaaS, technology as a service.
That said, most supermarkets don't have much to patent themselves, they are mostly end users.
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We as a society have been giving IP extremists a free pass when it comes to proving this. So far there is plenty of evidence that patents harm technological advancement and little to no evidence that they help it. Yet the IP extremists on this very board often show themselves to be very dishonest and too lazy to even read the article before posting their nonsense. Perhaps it's time we take away the free pass we have given them. We should require them to provide hard evidence that patents are needed for various technological advancements and to provide reasonable criteria by which we can reliably determine which technological advancements should be granted patents and which ones shouldn't in order for those advancements to exist.
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Re: Re: Re: Re: Re: Odd
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Grocery Stores Are Not Driven by Technology, to Whatever, #12
What a computerized logistic system does an especially good job of is keeping track of a hundred different kinds of sugar-frosted cereal, all identical in taste, but each with the image of a different cartoon character on the box. When IP industry promoters say that supermarkets are IP intensive, they are referring to the cartoon characters. The theory is that there are supposed to be all these intimate tie-ins with Hollywood. I think you would find in practice that the different kinds of sugar-frosted flakes tend to get caught in price wars. People don't go to one store or another store, because of which kind of sugar-frosted flakes the store has, with which cartoon character. Even if you take a child grocery-shopping, out-of-sight is out-of-mind at that age. This has nothing much to do with how successful grocery stores brand themselves.
There are choices and trade-offs, of course. For example, do you cater to someone who wants to resupply his pantry and refrigerator, or to someone who wants to buy a picnic basket instead of going to a restaurant for lunch? Do you cater to people who are essentially concerned with feeding themselves, or to people who want to show off their hospitality? How does the customer feel about eating something he never ate before? I know some traditional small family grocery stores which do very well without barcode scanners, because they have picked the right answers to the foregoing questions and designed their limited stock around them.
I walked into a Middle-Eastern grocery store, and instead of asking for a particular kind of cheese, I asked the proprietor if he had some cheese "with personality." He understood exactly what I meant, and sold me some Bulgarian sheep cheese, and something he called "Spanish Cheese," made by a firm in Dearborn, Michigan, labeled in Arabic, and tasting somewhere between Feta cheese and Monterey Jack, good to top a salad with. The store wasn't very big. The refrigerator section was the size of a closet. The dairy section consisted approximately of those two cheeses, plus some butter, yogurt, etc. But, again, Selection.
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Re: Grocery Stores Are Not Driven by Technology, to Whatever, #12
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Re: Re: Grocery Stores Are Not Driven by Technology, to Whatever, #12
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Re: Grocery Stores Are Not Driven by Technology, to Whatever, #12
https://www.techdirt.com/articles/20110909/04304315878/dailydirt-faster-food-faster.shtml#c104
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Re: Re: Grocery Stores Are Not Driven by Technology, to Whatever, #12
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Re: Re: Re: Re: Grocery Stores Are Not Driven by Technology, to Whatever, #12
The classic black-market transaction of this sort involved a teenager getting the town drunk to buy a bottle of whiskey for him. But that worked on the presupposition that the town drunk could buy all the booze he could pay for. The teenager had money, but not an adult ID card. If there was a Scandinavian-style alcohol rationing system, this would not work, because the drunk, having used up his quota, could not easily get more.
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Re: Odd
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Re: Re: Odd
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John
you would no more file a patent in the UK than plant vegetables in sand on the beach - its extremely expensive, and doesn't result in very much for the effort. The judicial system there costs many multiples of ours to enforce, and, guess what, they have "loser pays" which means most small companies are dissuaded from ever enforcing their rights
if anything the UK experience proves once and for all that the "loser pays" suggestion for the US would do nothing more than make patents even less accessible to small companies - you know, like Whatsapp which just saw Apple "borrow" a bunch of features with impunity because they have zero protection from the rest of the world continuing to steal their ideas
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Re: John
As opposed to the US, which doesn't have 'loser pays', and has an incredibly lucrative patent trolling 'business', where companies who produce nothing, but hold a bunch of patents due to buying them from every source they can find, send down shakedown notices to companies, knowing full well that a good number of them know that even if they don't believe they're infringing, it's still cheaper to settle than fight it out in court?
Oh yeah, the current US system is very friendly to small companies and start-ups. /s
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Re: Re: John
It's like invent help paying people for patents. Those people that are being paid are going to be disproportionately in favor of patents. Doesn't mean that inventors and innovators as a whole like patents but the ones that inventhelp 'helps' or represents or whatever are going to have a higher propensity to think patents are good.
So his anecdotal opinion and the anecdotal and potentially bias opinion of those he represents really means nothing.
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Re: John
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