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PATENTS AND TRADEMARKS

A New Study on Patents Confirms the Obvious: Big Businesses Have the Upper Hand

A new study shows a precipitous drop in patent grants over the years. That's bad news for you.
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If you're hoping to get a patent for a new product or service, the odds are looking increasingly stacked against you.

A Supreme Court decision from June, in a case called Alice Corp.v. CLS International, all but ensures big businesses will get patent precedence over you.  

A new study from New York University paints an equally stark picture of greenlit patents for the period it examined, 1996 to 2005. Specifically, the paper which is uninspiringly entitled What is the Probability of Receiving a U.S. Patent?, suggests it's getting more difficult for small companies to get patents, while large companies have both the financial resources and time to wait out the lengthy and costly approval process.

"Applications filed by large firms are more likely to emerge as patents than those filed by small firms," the paper, written by Deepak Hegde, an assistant professor of management and organizations at New York University's Stern School, says. (His co-authors were Alan Marco and Michael Carley, both of the U.S. Patent and Trademark Office at the time of the study.)

The research, slated for publication this winter in the Yale Journal of Law and Technology, reported a total approval rate of 55.8 percent for the 2.1 million patents it followed over the decade it examined. But approval rates were nearly cut in half, to 40 percent in 2005 from 70 percent in 1996. 

Over that period, drug and medical patents fared the worst. Their approval rate decreased to just 23 percent in 2005, from 64 percent in 1996. Electrical and Electronic patents fared the best, with approvals dropping to 54 percent from 75 percent over the same time period.

Part of the decrease for both sectors can be attributed to the increasing number of patents in the medical and technology fields, but changes in the patent granting process over that decade at the U.S. Patent and Trademark Office also may be a factor, Hegde said in an interview with Inc.

"There's been a lot of scrutiny of the decisions of the patent office, and a lot of complaints by scholars and patent experts that [the USPTO was] giving away patents too easily," Hegde says.  

Economic conditions also play a role, as patent applicants tend to abandon the process during bad economic times. Patent filing fees alone can run into the multiple thousands of dollars. 

The findings come at a time when the legal environment for patents has been fraught. Patent trolls, or shell companies who buy up questionable or soon-to-expire patent rights in order to sue small companies on allegedly trivial grounds, were given a boost when the Senate shelved a bill this spring that would have reined them in. 

Meanwhile the costs of patent litigation are taking their toll on innovation. A study from MIT's Sloan School in May found that businesses paid between $4 billion and $19 billion in direct costs due to patent litigation between 2004 and 2012. More troubling still, it found venture capital investment might have been $8 billion higher over the same time period, except for the frequency of litigation.

Last updated: Jul 25, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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