Does patent slump mean innovation retreat?
Innovation may be continuing during the slump, as I reported earlier, but there is some contrary evidence in an AP report titled “Is the recession suffocating American innovation?” The article states, “Americans haven’t stopped dreaming up newfangled gizmos or sketching engineering marvels on the back of cocktail napkins. But tight credit and business cutbacks have slowed the pace of getting the latest US innovations to market. Venture capital investments have plummeted. Lenders aren’t lining up to fund business startups. New patent applications are down at the US Patent and Trademark Office, creating a budget crisis at the agency, which depends on money from fees to keep operating.”
The article acknowledges that “…companies that spend the most on innovation have resisted the temptation to raid their research and development budgets. They’re opting to ride out the recession with an eye to future sales, according to Booz & Co., which surveys the world’s 1000 largest, publicly traded, corporate research and development spenders.”
The article quotes Matthew Sampson, an intellectual property lawyer at McDonnell Boehnen Hulbert & Berghoff in Chicago, as saying that patent work usually lags during downturns.
If there is any good news, it may be that patent trolls are in retreat and fewer abusive patents may be granted to people who have no intention to developing a product. Former Intel CEO Andy Grove alluded to thia point recently. Bloomberg paraphrases him as saying that “Patents have evolved to a point where they often aren’t developed into products, and instead are instruments traded by speculators looking for the highest possible profit…Similar to financial derivatives, the link between patents and the products they protect is getting more tenuous.” Grove added, “You should not grant a monopoly to people who don’t produce. Patents have become derivatives of the invention and have a life of their own.”
Regardless of patent considerations, innovation remains necessary. The AP article quotes Scott Anthony, president of Innosight, a management and innovation consulting company in Watertown, MA, as saying, “Some people say, ‘I cannot afford to innovate.’ What they are really doing is sowing the seeds of their own destruction.”
Update (5/7/09): Read Ron Wilson’s account (”Patents: fixable, or the next weapons of financial destruction?“) of a panel disucssion on patents held last evening and sponsored by the Commonwealth Club of Silicon Valley. Panelists included Steve Perlman, founder and CEO of invention-factory Rearden, David Simon, chief patent counsel at Intel, and Ronald Yin, partner at law practice DLA Piper.
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