The current decline in patent filings at the United States Patent and Trademark Office (“USPTO”) has been well documented on many prominent intellectual property blog sites. In fact, according to a recent Patently-O blog entry, “new patent filings are down 16% so far in 2009.” This post examines the variability in the number of application filings in the United States (“US”) and abroad, and discusses the relationship between the number of filings and innovation.
According to some, patent applications are declining in the US due to a combination of the following factors: (a) a reduction in potential returns to patent litigation; (b) a decrease in cash-on-hand due to the recession; (c) a decline in foreign investment due to the strong US dollar; and (d) a more stringent interpretation of patentability standards by the USPTO, making it more difficult to obtain a useful patent. However, to put the decline in perspective, a study by Richard Florida indicates that on a macro time scale, the recent decrease in patent applications is merely a blip in the steady growth that began in 1945. According to the study, which focused on USPTO filings, two patents were issued per 10 000 people in 1945, peaking at approximately six patents per 10 000 people in 2002, and falling to just above five patents per 10 000 people at the end of 2007.
In addition, applications were down in Korea by nine percent and were down in France by five percent. The United Kingdom, Denmark and Australia experienced similar declines in applications and have even laid-off patent office staff. Furthermore, the World Intellectual Property Organization reported that the filing of PCT applications is down five percent relative to last year at this time.
Whether the recent decrease in patent filings will have a positive or negative effect on innovation remains an open question. According to some, “patents have become a minefield that inhibit innovation.” For example, “many software patents are of poor quality and are difficult to interpret…[and are] made worse by the fact that patent boundaries are often vague: a patent can cover an invention the patent holder never conceived.” In addition, they postulate that a greater number of patent applications do not necessarily translate into higher quality issued patents. According to TechDirt:
“Considering the large number of bad patents that got through over the years, and the resulting flood of applications from others hoping to strike it rich by gaining monopolies on obvious ideas, it should be seen as a good thing that applications are finally dropping. If anything, we should be wondering why they’re not dropping more. Patents were supposed to be given out in the rarest of circumstances, when other incentives weren’t enough. Somewhere along the way, those who controlled the patent system seemed to forget this and lose their way.”
However, many others argue that the current decrease in application filings is a crisis. They contend that since the USPTO is funded by application fees, the decrease threatens the financial security of the USPTO, and thus, the entire US patent system. Further, they argue that obtaining a patent can be a launching pad for a start-up firm. This is because start-ups can use their patents to attract investors and protect their technology from larger companies.
As we head out of the current recession, history suggests that the number of patent applications will increase. However, whether this increase will translate into a greater number of high-quality inventions remains to be seen.