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