INNOVATION SUFFERS WITH EXPLOSIVE GROWTH OF PATENT APPLICATIONS
The rising number of patents may actually be stifling innovation as the number of companies using their patents to block the applications of other firms has risen dramatically over the last 20 years. That is the central finding of new research by Georg von Graevenitz and colleagues, presented at the Royal Economic Society’s 2011 annual conference.
The study, which looks at patents in the European Union and the United States, finds that:
· Too many ‘weak’ patents – those without sufficient inventive progress – are being granted because patent offices cannot scrutinise the patent filings in detail.
· This leads to a rise in the number of ‘patent thickets’ – in which patent holders are waiting on other patents to be processed to bring new products to market.
· Patent thickets are on the rise particularly in complex technologies, such as semiconductors or telecommunications, where innovation depends on access to multiple patented inventions.
· The number of companies using patent thickets to block other companies from receiving patents has increased dramatically over the past 25 years, particularly in information and communication technologies.
The authors conclude:
‘Innovation is essential to the success of modern economy and patent offices are integral to fostering innovation. There is a desperate need for policy measures to help patent offices deal with the increasing number of applications.’
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Patent applications have been growing strongly at the United States Patent Office and at the European Patent Office in recent decades. While patents are usually taken as indicators of innovation, recent growth in applications may be too much of a good thing.
This paper confirms that ‘patent thickets’ – in which patent owners depend strongly on each other’s patents to bring new products to the market – are becoming more widespread and dense. It introduces a new measure of patent thickets and shows that patent thickets contribute significantly to firms’ incentives to patent, which leads to further growth of patent thickets.
A rising number of patent applications is often viewed as an indication of more innovation. But the recent increase in the number of patent applications (see Figure 1) is causing concern. The Economist (‘The spluttering innovation machine’, 17 March 2011) argues that America’s patent system has turned into a system that may hamper innovation in the long run. The strong increase in demand for patents has led to unprecedented backlogs of patent applications.
Moreover, there are fears that weak patents – without sufficient inventive progress – are being granted because patent offices cannot scrutinise patent filings in detail. This gives rise to patent thickets – sets of overlapping patents with uncertain validity and scope.
Also, firms see benefits in applying for more weak patents in an arms race for ever larger patent portfolios. Research suggests that patent thickets arise particularly in ‘complex’ technologies, such as semiconductors or telecommunications, where innovation in the marketplace depends on access to multiple patented inventions.
Patent offices and legislators on both sides of the Atlantic have recently begun to react to some of these problems. Their reforms have sometimes been controversial, particularly among patent attorneys – arguably the group that has profited considerably from the surge in patent filings.
Empirical studies show that patenting has been growing most quickly in technologies thought to be ‘complex’. But it has not yet been possible to measure complexity of a technology precisely. Nor has it been possible to compare how extensive patent thickets have become in different technologies.
This paper introduces a new metric – the ‘triples’ measure – to measure the extent of complexity. The measure captures how frequently triads of firms (triples) occur in which each of the three firms blocks the patents of the two other firms.
Such triples arise much more frequently in technologies considered ‘complex’ such as information and communication technologies, than in technologies such as pharmaceuticals (see Figure 2). In most technologies deemed ‘complex’, the triples count increased by a factor of two between 1987 and 2002.
The paper also demonstrates that patent thickets are an important driver of firms’ patenting incentives. A dynamic panel data model of firm level patent applications shows that increasing the number of ‘triples’ that exist in a technology by one is associated with a statistically significant increase in the level of patenting of 5%. In most complex technologies the increase in the number of triples over the period under study can be measured in the tens.
The descriptive finding of sustained increases in the triples measure suggests that the complexity of many technologies is growing. The study concludes that there is a strong need for policy measures that help patent offices to deal with the increasing number of patent applications.
ENDS
‘Incidence and Growth of Patent Thickets – The Impact of Technological Opportunities and Complexity’ by Georg von Graevenitz, Stefan Wagner and Dietmar Harhoff
Contact:
Georg von Graevenitz
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Telephone: +49 151 5372 3742
Figure 1
Source: own calculations based on data obtained from WIPO.
http://www.wipo.int/ipstats/en/statistics/patents/
Figure 2
Source: own calculations based on EPO patent data.