Patents: a help or hindrance?

Without access to easy to use analysis tools, patents are becoming an expensive hindrance to many small companies, says Mick McLean, Head of Economics and Public Policy at Scientific Generics.

Having been involved with innovation and patenting at the Generics Group since 1989, I’ve increasingly come to the view that patents have become an expensive hindrance to many small companies. Lotteries are viewed by many as a tax on the stupid. While I would stop short of suggesting the same is true of patents, they are headed in much the same direction. But unlike lotteries, in which the chance of reward has never come close to matching the price of a ticket, patents have become markedly less useful to small companies as the number of filings has increased dramatically in recent years.

Scientific Generics is an unusual technology and management consulting company in that as well as normal client work we also develop our own original products, which are then licensed to generate cash. Patenting is therefore a core business activity. Over the last decade the company has filed over 1,700 patents and patent applications. Even with careful regular culling of our portfolio the maintenance of the current collection of about 50 patent families costs around £250,000 a year.

Scientific Generics is patent “savvy”. We understand the system and work it to our advantage. We have generated a respectable income (more than costs) from patented inventions over the years. Even so, it is surprising how few patents actually make money: certainly fewer than one in a hundred.

Not only that, some of our most rewarding licensing deals have involved ideas with the weakest patent protection.

Strategic purposes

We have also found that a great many patents in fields in which we try to innovate have been filed by big corporations for defensive or strategic purposes – in other words, to make things difficult for the competition.  Taking out a patent without thinking hard about it is a bit like buying a lottery ticket – it is highly unlikely to repay the investment involved.

Scientific Generics’ intimate experience of the patent system has convinced us that it does not serve the smaller innovative company. We made this point strongly in our recent submission to the Gowers’ Commission, which is taking a fresh look at the IP landscape in the UK.

Our view is backed up by objective evidence: recent surveys of small UK firms suggests both that the protection offered by the patent system is of little relevance for innovation in small companies, and that information from the patent system is of even less use.

Many of the difficulties faced by the smaller innovative company stem from the ever-increasing volume of patents. In 2000 some 826,572 new patents were filed. Although growth halted during the recent high tech crash, the underlying trend has resumed and more than a million new patents are likely to be filed in 2006.

Faced by this complexity and volume of information, it is only the very large organisations – those which can afford to invest in dedicated specialist resources to create and manage IP – that can “play the system” effectively. In our experience it is hard for a small firm lacking in-house specialists to get a clear view of what is already protected and to find relevant information from patent databases.

Patent analysis – a key tool

As stated in our submission to the Gowers Commission, we believe that Government policy should include helping smaller companies to use patent analysis tools of the sort we have devised. These tools help inventors to navigate patent databases and identify and target "white space" for innovation in the thickets of obstructive patents thrown up by the big firms.

While patents are potentially a rich source of technological data, their sheer abundance can make it difficult to locate nuggets of information. In our experience it is productive for inventors to read ten to twenty key patents relevant to their inventions before filing patents of their own (or deciding not to).

This begs the question of how to find the key patents and be sure the selection is correct  Patent analysis tools address this key issue.

One spin-off from this work for Scientific Generics has been the discovery that patents are an excellent leading indicator. By looking at current patterns of patenting it is possible to get a view of the products and technologies that will be in common use in 10 to 15 years’ time.

There are sufficient vested interests in the current patent system to deter radical reform. But even if that were not the case, any change would necessarily be very slow because of the essentially international nature of the system. This also means that there are few ways in which national patent offices can, legitimately support local inventors.  

It would be possible for the UK Patent Office (and its counterparts) to provide patent analysis tools to all applicants. This would inevitably provide a home advantage, since the vast majority of inventors will naturally file patents through their home patent office.  

Good analysis tools could help UK inventors and boost the level of innovation. Given the critical role of product innovation in sustaining a post-industrial knowledge-based economy, any state investment in helping UK inventors to get a better deal from the patents system would be money well spent.