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Do Patents Really Stifle Innovation?

Despite all the warnings that the flood of new patents and patent litigation in America is stifling innovation, the evidence suggests that increased patent activity (and the associated increase in patent litigation) has always been a reflection of increased innovation activity, not a hindrance to innovation.

Look back in history and you'll see that the United States has witnessed several upsurges of patent activity very similar to today's. The first one occurred in the 1880s, during the time of Alexander Graham Bell and Thomas Edison, when the average number of new patents issued each year jumped 56 percent, to about 20,000 annually, compared with the 12,000 patents issued yearly the previous decade. This patent boom corresponded, of course, with rapid advances in the emerging steam, railroad, telegraph, telephone, and electric power industries that signaled the industrialization of the U.S. economy.

The next big increase in patent issuances began around 1902 and lasted until 1916 or so, when the number of patents granted doubled from 20,000 per year to around 40,000 annually. This was the period of the newborn automobile and aircraft industries' most rapid early-stage growth.

Patenting levels then remained relatively stable at about 40,000 per year until around 1960 or so, when the revolution in plastics and other synthetic materials along with boom-time growth in the aerospace and computer industries pushed patenting levels to 60,000 per year. And there they remained until the early-1980s, when new patent grants jumped to about 75,000 per year as the personal computer and other emerging high-tech industries of Silicon Valley began to power the whole of the American economy.

That level of patent activity steadily increased over the next decade to 120,000 or so patents issued annually. Then, in 1998, new patent issuances again exploded by almost 33 percent and have continued to grow slowly but steadily ever since to about 180,000 each year as the dot-com boom and then the emergence of Web 2.0 businesses began to power economic activity.

The point is, whenever the United States has undergone a major industrial renaissance during which technology advances led not only to the birth of new industries but to the reshaping of existing ones, patenting levels have risen dramatically. It is precisely such an economy-transforming renaissance that we are witnessing today.

To be sure, there are many problems with the quality of software patents being issued today. Almost half cite no non-patent prior art, which is a real tip-off that the inventions being patented may not be as novel and non-obvious as claimed. And the emergence of "patent trolls" who buy up patents for the sole purpose of extorting (er, excuse me, "litigating") licensing fees from companies they claim are infringers is also a problem.

But the number of patent lawsuits declined 10 percent last year. And the patent office is coming under increased pressure to reform its clearly-inadequate examination proceedures -- not the first time in its history that the USPTO has had to adjust to new technology and new challenges.

The point is, there is no evidence that, taken as a whole, the economy is suffering from any patent-induced slowing in innovation activity. Everywhere I look, at least, invention and the birth of new companies and industries appears to be going ganbusters.


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