Intellectual Property and the U.S. Economy: Industries in Focus

In the post-Bilski/KSR/Prometheus regime patents are unquestionably a costlier and riskier investment. Statistics confirm this. Fifty percent of patent applications are abandoned these days, as opposed to only thirty-five percent in 2004. Paying more to prolong prosecution (via request for continued examination) restores the odds of success, but at a price. [USPTO statistics at] Even after the patent is awarded, of those subsequently litigated roughly 40% are declared invalid in court, many falling prey to the judicial shifts in patent law. Place all that against a backdrop of a relatively slow recovery from a relatively deep recession, and lingering cutbacks in research and development investment. A sage investor might have predicted a drop-off in patent filings, but just the opposite has happened. U.S. patent filings have increased steadily in recent years, and international patent filings have increased dramatically. Why? The Constitutional purpose of our patent system is to create incentives for innovation, and patent budgets have historically tracked R&D budgets. However, there are recent dynamics that disassociate the two. Patent trolling (by companies seeking only to profit from lawsuits) is on the rise. Reports estimate that there were five times as many patent trolling lawsuits in 2010 than in 2004. [Patent Freedom 2011] Defensive patent aggregation (to mitigate the risk of litigation from patent trolls) is on the rise. The number of U.S. patents granted to foreign companies and individuals is on the rise, exceeding the 50% mark in 2009 and continuing to date. [IFI Patent Intelligence]. Is the U.S. patent system broken? No, but she moves in mysterious ways and the statistics surely bear closer watching. The USPTO is beginning to take an active role in this, having established the Office of the Chief Economist in March 2010, and appointed Dr. Stuart Graham as its first Chief Economist. A few days ago the USPTO jointly released an ambitious report that directly or indirectly attributes forty million U.S. jobs to intellectual property: Intellectual Property and the U.S. Economy: Industries in Focus.  The report will convince you that the U.S. economy hinges on intellectual property. The only thing lacking is what to make of it? I’m already looking forward to the sequel.

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