State of Innovation

Patents and Innovation Economics

Only 2% of Patents Ever Pay Off

I often hear something like ‘only 2% of patents every pay off’ or are commercialized.  This comment is quoted as if it is gospel and often is said in a snide or cynical way.  This comment came to my mind as I was preparing a list of patents and associated products for one of my clients.  This client has seven or eight patents and every single patent covers a product my client is producing and selling.  While I certainly have clients that have filed for patents that are not licensed or being practiced, these are the exception not the rule.  The economist Jacob Schmookler in his 1966 book Invention and Economic Growth, investigates this issue and his survey showed that over 50% of patents are commercialized.  Economists Lamoreaux and Sokoloff investigated the rate at which independent inventors were able to sell their patents around 1900 and at that time it was around 30%.  Clearly, the myth that only 2% of patents are ever commercially successful is without basis in fact.

I believe this myth about the success rate of patents is part of an attempt to devalue patents and inventors in general.  Large companies that do not want to pay for using other people’s inventions (patents) use this myth to paint inventors who sue them as crackpots.  In addition, these companies use this myth to pay their employee inventors less.  The anti-patent crowd has an interest in perpetuating this myth, because it demonstrates that patents are economically unimportant.  However, the evidence shows that patents are successful financially at a much higher rate than the myth suggests and this shows the importance of patents and inventors to our economy.

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March 8, 2012 - Posted by | -How to, Patents | , , , ,

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