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Patent Quality Nonsense


Patent Quality Nonsense

There has been a constant drumbeat of propaganda suggesting that the U.S. is issuing low quality patents.  The academic papers supporting this propaganda compare the issue rates of patents that were filed in the U.S. and in the EPO (European Patent Office) or JPO (Japanese patent office).  While a number of papers have pointed out  the methodolical problems with  these academic papers (see Patent Quality Myth ), the bigger question is whether they selected the correct metric in the first place.  This post suggests that other metrics are more appropriate measures of patent quality and do not suffer from imposing other countries’ goals on the U.S. patent system.  These metrics show that U.S. patent quality has been steadily increasing for over a fifty years and shows that perhaps the U.S. system is becoming an elitist system – much like Europe and Japan have practiced for years.

Probably the most important macroeconomic metric for patents is the amount of research and development (R&D) spent per patent.  As the chart below shows the amount of R&D spent per patent

has increased from around $1.2 Million per patent to around $4 Million per patent.  The chart shows the total amount of money spent on R&D by the U.S. according to the National Science Foundation and the number of patents issued to U.S. inventors per year according to the U.S. Patent and Trademark Office.  One potential limitation of the data is that the amount of money spent on R&D is probably more accurately reported by large corporations.  Small entrepreneurial start-ups expenditures are less likely to be  accurately recorded in these surveys.  This may account for part of the downward trend between 1985 and 2000.

How does this compare to other research?  According to a paper by the Federal Research Bank of San Francisco[1] real industrial R&D has been growing at 3.7% per year between 1953 and 2000, while the number of patents per capita has been growing at 1.7% per year over the same period.[2] See the chart below.

The paper notes that the number of citation received by the average patent has increased over the last couple of decades.  From 1975-1999 the number of citations per patent has increase by around 3.3% per year according to the paper.  This suggests that the value of the average patent has increased and that the “size of the technological change codified in the average patent is increasing.”

Another patent quality metric is the GDP per patent ratio.  An increasing amount of GDP per patent should indicate that the quality of patents is increasing, since the number of patents for a given amount of economic activity is decreasing.  The chart below shows that this is indeed the case.

This chart shows that the GDP per patent has increase from around $100M to around $180M over the last 60 years.  Note that the chart used GDP in chained 2005 dollars from the Department of Commerce.

As the U.S. transitions from an industrial economy to an information economy we would expect that the number of patents per worker to increase.  Indeed it seems likely that in an information society we can expect that the percentage of workers devoted to inventive activities will increase.  An information society is likely to have more of its GDP tied to inventive activities and patents.  As result, it would only be natural that the number of patents per worker would increase and the number of patents per dollar of GDP would increase.  There is no reason to suggest that the number or patents per dollar (inflation adjusted) spend on R&D would decrease in an information society, however that is what the data shows.  This is most likely result of the U.S. patent system increasing the threshold for obtaining a patent and becoming less friendly to independent inventors and small businesses.  This would mean that the U.S. patent system is becoming more like the European and Japanese patent systems.  Neither of these patent systems are friendly to independent inventors or small businesses.  This may not seem relevant, but numerous studies have shown that independent inventors and small business are much more likely to develop and patent important or significant inventions.  For instance, the paper “An Analysis of Small Business Patents by Industry and Firm Size” by the SBA, states that “small firm patents tend to be more significant than large firm patents, outperforming them in a number of categories including growth, citation impact, and originality.”[3]

Conclusion

The amount of R&D per issued US patent has increased around four fold or 3.7% per year over the last 50 years.  The number of citations per patent increase 3.3% per year over the 25 year period form 1975-1999.  These metrics suggest that the quality of patents issued by the USPTO (United States Patent and Trademark Office) have increased over the last 50 years, contrary to the results reported by other researchers.  In addition, the critics of US patent quality have selected to compare the US patent system to Europe’s and Japan’s, both of which have proven hostile to small entities.  Since small entities are key to the US’s technology innovation, it would be folly to compare our system to theirs.


[1] Wilson, Daniel, “Are We Running Out of New Ideas” A Look at Patents and R&D”, FRBSF Economic Letter, Number 2003-26, September 12, 2003.

[2] Note that the R&D per  patent chart uses total R&D expenditures while the FRBSF chart uses Industrial R&D.

[3] Anthony Brietzman and Diana Hicks, “An Analysis of Small Business Patents by Industry and Firm Size”,  Small Business Research Summary, No 335, November 2008.




3 Comments

  1. [...] Modest Proposal for Academic Economists In one of my earlier posts, Patent Quality Non-Sense , I pointed out that the R&D (Research and Development) per patent ratio, GDP per patent ratio, [...]

  2. [...] including GDP per patent, R&D spending per patents, and number of citations per patent.  See Patent Quality Nonsense and The Patent Quality Myth.  It is disappointing that the Economist repeats these diatribes [...]

  3. [...] per patent, GDP per patent, and number of citations per patent patent quality is increasing.  See http://hallingblog.com/2010/01/07/patent-quality-nonsense/ and [...]

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