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For innovators, patents aren’t always the answer – but that doesn’t mean they are less important

Findings of a recent working paper from the University of Lisbon’s School of Economics and Management suggest that only around 10% of key inventions are patented. Several IP-sceptic commentators have been quick to highlight the study as proof that patents do not play an important role in fostering innovation – but their assessment overlooks business realities.

In ‘Reassessing patent propensity: evidence from a data-set of R&D awards 1977-2004’, authors Roberto Fontana, Alessandro Nuvolari, Hiroshi Shimizu and Andrea Vezzulli analyse inventions that have been awarded prizes as part of R&D Magazine’s ‘R&D 100 Awards’ since 1977. According to the paper, the main criteria for assessment for inventions that receive an R&D 100 Award are “technological significance (ie, whether the product can be considered a major breakthrough from a technical point of view) [and] competitive significance (ie, how the performance of the product compares to rival solutions available on the market)”.

The authors searched patent office records for almost 3,000 inventions that have won R&D 100 Awards. They found that 90.9% of the winning inventions had not been patented. A further breakdown of the sample reveals that, of those inventions developed by non-corporate entities such as universities and public research organisations, 97.16% had not been patented; while corporates had a slightly higher propensity to patent their innovations, with 87.44% of their winning inventions lacking patent protection.

These figures are based on a fairly discrete sample. Nonetheless, it ought not to come as too much of a surprise that a vast number of important inventions are not patented, but are instead protected as trade secrets or are leveraged by business strategies such as lead times and time to market advantages. For example, an innovation protected as a trade secret can grant its owner competitive advantage in perpetuity, while a patented invention becomes public domain and can be copied as soon as the 20-year term of the patent concludes. Sometimes, the nature of the innovation and the possibility to get it to market swiftly may mean that brands and trademarks are far more important and effective in terms of creating value and gaining market share. Other innovations may simply not be patentable subject matter.

However, if an organisation wants to continue product development for an extended period of time around its invention, cooperate with a third party on R&D, generate added value through licensing, grant freedom to operate to strategic partners or pass on its innovation to downstream developers, patents have a crucial role to play. The question of whether or not to patent is one that can only be answered in specific circumstances, dependent on the strategic aims of the innovator.

In response to the Technical University of Lisbon paper, Stephan Kinsella of the Center for the Study of Innovative Freedom has said that an “obvious conclusion to be drawn from this study is that patents are not a significant driver of most innovation, if 90% of important inventions are never patented in the first place”; while Techdirt’s Mike Masnick suggested that the paper raises “considerable questions concerning those who argue that our patent policy is necessary to encourage innovation”. But the fact that most innovations are not patented does not mean that patent protection is redundant, and it does not mean that all innovators should be denied the chance of obtaining patent protection.

Ultimately, patents and other forms of IP protection are tools that enable their owners to further their wider strategic objectives; they are not ends in and of themselves. And patents are just one of the options in the IP toolbox. Just as you wouldn’t normally use a spanner to hammer in a nail, patents are not the always the best solution for protecting innovation and maximising its value. But in many situations, they are the best tool to do the job.

Jack Ellis
IAM Magazine
06 December 2013

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RE: For innovators, patents aren’t always the answer – but that doesn’t mean they are less important

90% of the important inventions are never patented! LOL R&D Magazine 100? LOL. The data is flawed is so many ways one does not know where to begin. Discrete! When are some smart people going to take a proper look at this using meaningful data?

Nicholas White, Tangible IP on 08 Dec 2013 @ 15:21

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