Innovation Is Alive And Well—Patenting Activity

After examining the evidence for U.S. innovation as shown by startups and venture capital, and by R&D spending, I want to look at patenting activity—new patent applications and new patent grants.  Particularly given accusations that the U.S. patent system has fallen behind other systems worldwide—accusations based on extremely questionable analysis—it’s worth looking at what patent activity can tell us about innovation.

Overall, patent activity is an inaccurate indicator of innovation and of future innovation—after all, an environment in which billions of incremental patents issued would quickly cease to show any innovation as patent hold-up ground inventive activities to a halt.  With that in mind, changes in new patent applications and grants likely do have some level of correlation to changes in the amount of innovative activity.

U.S. Patent Activity

It turns out, patent activity is strong.  FY2017 was the second highest year ever for U.S. patent applications, exceeded only by FY2016.  And more patents were issued than ever before.

But that could just be hiding drops in some areas by concomitant increases in other areas.  In order to make sure that isn’t happening, we can examine the number of applications by PTO tech center.  Each PTO tech center handles applications in one area of technology.  So, for example, Tech Center 1600 examines applications in Biotech and Organic areas of technology, while Tech Center 2600 examines applications in areas of technology relating to Communications.

Using the PTO’s PEDS system, Google’s BigQuery public patent data, and Google Sheets, it’s possible to roughly map the percentage of applications assigned to each tech center over the past few years.

Application Data By Tech Center (%)

This data shows minor declines in 2017 data for the art units dedicated to electrical and semiconductor technologies;computer architecture and info security; communications; e-commerce; and computer networks.  However, this is because an increasing percentage of applications relate to biotechnology; chemical and materials science; and mechanical devices.  Further, the 2017 data is incomplete in certain ways.  In particular, patent applications publish 18 months after the priority date.  However, if the patent is only filed in the United States, you can request non-publication, in which case it only publishes when it is granted.  Certain areas of technology—in particular biotech—are more likely to file foreign counterpart applications which prevent publication.  This may be leading to a skew in the 2017 data due to unpublished applications not being evenly distributed by area of technology.

Given the likely skew from unpublished applications, the data is clear—there is little to no technology-specific impact on patent applications.  The continued strong pace of applications and grants reflects continued innovation in the United States.

U.S. Patent Activity Impacts From § 101 And IPR

Changes in patent law might also create impacts that would be reflected by changes in patent activity.  After all, if (as some foes of patent reform allege) Alice or IPR have made U.S. patents valueless, or even less valuable, we’d expect to see a decline in patent activity.

But, as I showed above, patent activity is up post-Alice and post-AIA.  There have been more applications and grants than ever before.  What’s more, the percentage of applications that result in patent grants has remained roughly the same.  (This comports with my research, which showed that the Bilski-Myriad-Mayo-Alice § 101 cases impact a vanishingly small portion of applications.)

One way to show this is by examining the historical data provided in WIPO’s Intellectual Property Indicators Report for 2017.  An example is their comparison of outcomes in the USPTO from 2010-2012 (predominantly prior to the AIA and § 101 changes) and from 2014-2016 (after those changes).

Disposal % 2010-2012 and 2014-2016

In other words, the percentage of applications that are granted compared to the percentage rejected or abandoned has actually slightly increased after the AIA and the § 101 cases.  

The past few years have seen more patents, and even a slightly higher percentage of granted patents—the idea that people aren’t filing or receiving patents because of Alice or IPR just doesn’t hold water.

Number Of Applications Isn’t The End-All—USPTO vs. SIPO

As a side note, the sky-is-falling crowd frequently complains that China has overtaken the U.S. in number of applications filed at their patent office.  But that metric isn’t really meaningful.  

As I noted above, the number of patent applications is only loosely correlated to innovation—a world with billions of patents is likely a world where innovators can’t innovate.  Patents are exclusionary, not permissive.  Owning a patent doesn’t allow you to make something—it allows you to prevent someone else from making something.  So, if someone else owns a patent on a fork, it doesn’t matter if you patented a fork with four tines—you still can’t make your fork without their permission.  Their patent blocks your innovation.  This risk of innovating and not being able to benefit—the cost of blocking—decreases the incentives for innovation in environments that are overly permissive for patenting.  So simply comparing the number of patent applications between two systems tells us very little without looking at what kind of innovation those applications reflect and what kind of innovation is permitted in the patent environment that’s created.

What’s more, even the raw number of applications is somewhat misleading when it comes to understanding innovation.  China’s patent system is driven almost entirely by applications filed by Chinese residents that are not filed anywhere else in the world.  In contrast, there are actually more foreign-originated applications filed in the U.S. than applications from U.S. residents.  (It’s ironic that the same people who complain that the number of patent applications filed in China shows the U.S. falling behind also point to the U.S.’s standing in the Chamber of Commerce’s misleading patent system report—even though that same report claims that China’s patent system remains far behind the U.S. system.)

Patent Activity By Country

Companies across the world recognize that the U.S. patent system continues to deliver value to patent owners.  And activity in the U.S. patent system reflects the simple fact that the U.S. continues to be a leader in innovation.

Joshua Landau

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

 

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