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Why Fewer Patent Applications Are Being Filed

By Amanda G. Ciccatelli

Over the next few years, the most interesting intellectual property trend to watch will be what happens with new patent applications. The number of utility patent applications filed in the United States declined in 2015 (compared with 2014) and again in 2017 (compared with 2016).

If the downward slide continues, will this be due to smarter filing strategies, or will it be because less emphasis is being put on patents? Will it be because more emphasis is being placed on trade secrets? Is it because of an unfavorable climate in the United States for certain types of inventions?

Filings in other parts of the world are on the rise at a time when U.S. utility applications are either stagnant or in decline. Could it be because patent applicants are moving elsewhere?

As stated by Erik Reeves, CTO of Anaqua, “What we will begin to see over the next few years is a counter trend to the massive patenting acceleration we saw from the 90’s to now, with varying regional timing,” he explained. “We will see some leveling off in patent applications around the world as patentees make smarter, more informed decisions when it comes to filing and renewals; and as there is increasingly a move from quantity to quality. It’s a trend that may well lead in years to come to a decrease in the overall number of new patents filed annually, together with an increase in the number of patents that can lapse.”

According to Reeves, there is a “portfolio effect” at play that complicates this calculus, but there is certainly a growing focus on quality over quantity and better stewardship overall of resources directed towards R&D and IP development. While the USPTO patenting statistics for 2017 showed a 5 percent increase in patent grants over 2016, there were 7,000 fewer applications published, continuing the slowing trend in patent applications seen in the US in recent years.

Internationally, the emergence of huge economies such as China on the IP scene in recent years has led to a significant global increase in patent applications, with China now well established at the top of the list of the world’s leading patent filers. In fact, as economies move from importing innovation to developing home-grown innovation, there is a natural tendency to cast a wide net to protect that innovation. “This can lead to something of a ‘patent for patent’s sake’ approach and a focus on quantity rather than quality,” Reeves said. “You could also see a bit of the ‘race to become an IP player’ here in some economies that haven’t historically been big IP players – much like we see in corporate IP governance in certain technology areas, you need a certain warchest of IP to “get in the game.”

However, Reeves says that over time, as more countries embrace modern IP management and analytics, the value of a more strategic approach to patent filing and renewals becomes apparent – and this tends to lead to a gradual switch in focus from quantity to quality. So, if the downward slide continues, is this due to smarter filing strategies, or is it a larger issue with less emphasis put on patents?

“Only time will tell, but the trend we identified last year of patentees making more informed filing and renewal decisions backed by insights gained from big data analytics, is still holding true,” he explained. “Going forward, we believe organizational focus will be on smaller, higher quality patent portfolios to better protect products, provide a good defensive stance, and maximize monetization potential via sales and licensing.”

He thinks we will also see a bigger focus on aligning IP with corporate strategy and product portfolio management. There are several ways to monetize or leverage IP assets, but at the end of the day, patents are there to maximize the ROI of R&D investment – the area where this has highest potential is in products. As cross-functional teams of IP legal experts, licensing professionals, product managers, and engineering/R&D coordinate better, we’ll see more alignment of product and IP roadmaps – leading to stronger alignment of IP strategy and product life-cycle management.

“The backbone of much of this is increasingly data, analytics, and decision support tools armed with AI – I think the potential for economic growth is potentially huge here,” he said. “I think we will see some of these innovations paired with emergent technologies that require a different way of thinking about IP because of either their foundational characteristics or the speed of innovation.”

Big data analytics and AI are transforming the IP industry – as smart analytics provide intelligence on the markets, competitor activity, etc. at a fraction of the time of traditional research methods. This is helping IP professionals make faster, more informed decisions and develop strategies that are better aligned with and more effective in supporting the broader business goals. In this way, they are underlining the critical importance to organizations of ensuring they have the right IP assets in place and a business-led approach to managing those assets. In fact, through big data analytics, there are vast amounts of information available now to help IP practitioners.

“Taken in isolation, data points can add limited value. It’s when such intelligence is assembled and delivered in an easily consumed format at the right time, that it has a direct and hugely beneficial impact on an IP organization and its internal or external clients,” Reeves explained. “Business executives, attorneys, practitioners, portfolio managers all gain from timely access to actionable intelligence. This applies to every stage in the innovation and IP lifecycles – as well as to many broader business decisions relevant to a company’s product strategy and market competitiveness.”

In today’s world, there is a balance to be struck between the protection of patent assets and the expense of maintaining portfolios that might be bloated with patents that are now of little or no value to an organization. For most IP professionals, their role involves a combination of innovation management and cost management. The patent process can be very expensive, son on a fixed annual budget, money spent on renewals is money not spent protecting new ideas. While, it is key to ensure that valuable IP assets are protected, the depth of research and evaluation of markets, competitors and patentability that analytics bring enables a more informed, strategic and cost-effective view of decisions.

According to Reeves, for patent-holding organizations, a key to success in protecting IP assets is how well they know themselves. The better that IP professionals know their own business, the better able they are to identify and protect the business against competitor threats. He said, “The bigger the portfolio, the harder it is to keep track and to truly know what you have… and why.”

“A major benefit of taking a more focused approach is that it allows for improved patent-product mapping, providing a clearer view of which patents protect which products or range of products,” he added. “That may seem obvious, but it can become complicated, especially where various products and their components are protected by multiple patents (and the reverse).”

Overall, by tracking patents and the products they protect, IP professionals have better information for making decisions. The intelligence gained through mapping and big data analytics will help determine which patents have most value to the business and should be kept; which may have value to other organizations and represent potential licensing or sale opportunities; and which have little or no value and can be abandoned.