Patently Obvious Innovation

Last week, the U.S. Patent and Trademark Office proposed a new three-track system to expedite filings rather than maintain the standard first-come, first-served basis. This move comes in response to the average review time soaring to nearly 35 months last year from an average of 27 months as recently as 2003.

This accelerated process marks an important step to defend national innovation leadership and promote economic growth. To see where the U.S. stands internationally, consider the results of last September’s report from the World International Patent Organization (WIPO) describing global patent filing trends.

Of course, the overarching story last fall was the fallout from the financial crisis: In 2008, there was zero growth in patent filings at the United States Patent and Trademark Office (USPTO), compared to 7.1 percent the year before. Similarly, filings through the Patent Cooperation Treaty (PCT), a system for recognizing patents internationally, increased by only 2.3 percent, compared to 5.9 percent the previous year.

Pressure From Asia

However, even in the economic slowdown, other metrics demonstrate that the USPTO is falling behind. The report estimated a USPTO backlog (pending applications) of over one million in 2007 and reported that the backlog is growing at a faster rate than in any other large patent office. This is not due strictly to an increase in submissions; between 2004 and 2007, the application volume increased by 8.5 percent, while the backlog increased by15.8 percent each year.

Global trends in innovation have increased the number of filings in Japan, Europe and the Republic of Korea as well. However, the Republic of Korea is defending its innovation strategy by actually reducing the pendency by about a third, even with its increased volume.

The growth in the Asian intellectual property portfolio is more striking when you consider that while the USPTO has historically issued the highest number of patents, for the first time it was surpassed by the Japan Patent Office. Furthermore, for the first time a Chinese company topped the list of industrial international PCT filings at 1,737 patents; the top United States company, Qualcomm, was eleventh in the total list of PCT filings, with 907 patents.

In addition, between 2003 and 2008, the relative proportion of PCT filings increased by more than 2 percent for China, Japan, and the Republic of Korea, while the share of filings by the United States decreased nearly 3 percent over the same period.

Universities Should Get Priority

Why does the patent process affect economic growth? The brightest outlook in the international patent landscape resides in American academic institutions; among these organizations, the United States held the top 11 slots, as well as five of the following nine. This is critical, because as universities continue to refine their models for technology transfer and commercialization, an accelerated patent filing process allows these organizations to continue to flow innovation into the marketplace and create more jobs.

We know these companies are critical to job growth from research like the November 2009 report from the Ewing Marion Kauffman Foundation showing that companies less than five years old created nearly two-thirds of new jobs in 2007

Here’s how the math works out: New companies create new jobs. New companies survive only by creating sustainable competitive advantage. One efficient source of advantage is through the exclusive rights granted through the patent system. Unfortunately, this only works if the patent office does not operate dysfunctionally.

The increased patent volume need not cripple the process, as shown by the Republic of Korea. And this process should be particularly accelerated at universities, where the United States still dominates innovation.

An efficient patent filing process is a key element in any national initiative encouraging innovation and creating jobs. However, it will only succeed if it is augmented with policies supporting efficient capital deployment and tax-advantaged hiring of talented personnel. If the U.S. doesn’t get the entire picture right, someone in Asia will.