Despite R&D costs and legal expenses, it’s pretty surprising that 97% of all patents never made any money. Is technology patenting good enough to create economic value out of ideas through protection? Although we emphasize protection, it has little merit for ensuring economic value. Furthermore, the strength of technology patenting and protection has been eroding. Unless ideas are integrated into products and processes, no monetary value distills from patents. In addition, legal threats of patent infringement often slow down the Innovation race. Besides, contrary to common belief, ideas emerge in primitive form. Hence, protecting primitive ideas and rolling out products out of them do not lead to any economic benefit for the inventor. For example, Thomas Alva Edison’s Phonograph or Light bulb invention did not instantly create profitable revenue. Similarly, Kodak did not envision any commercial prospect upon patenting a digital camera.
For sure, ideas are at the core of economic value creation. This is our inherent, endless capability in creating growing Wealth from limited natural resources. To tap into it, as early as 500 BC, ancient Greece started practicing patenting to secure profit arising from ideas to inventors. Since then, a growing number of countries have been adopting and practicing patenting for giving protection to inventors. For leveraging wealth-creating out of ideas, founding principles of the Market Economy included patent rights, freedom of competition to profit from ideas, and ownership of capital. Unfortunately, despite its merits, protection itself has little merit to ensure profit to the inventor.
Besides, due to reinvention, patents become irrelevant. For example, reinvention of the light bulb by changing filament with LED has no relevance to Edison’s patent. Furthermore, the demand for creating a Flow of Ideas for enabling the great initial idea to create a willingness to pay has also been a limiting factor.
Primitive emergence of great ideas limits merits of technology patenting and protection:
Unlike Samuel Hopkins’ method of producing potash (potassium carbonate), perpetually, great ideas have been emerging in primitive form. Although the first patent issued by Congress, on April 10, 1970, secured profit from potash commercialization revenue to Mr. Hopkins, Thomas Alva Edison did not find any profit-making opportunity out of his Phonograph patent. Upon creating the buzz and receiving a patent on February 19, 1878, Edison’s magical invention kept gathering dust for almost ten years. This magical idea needed a flow of ideas for opening the door of profitable revenue. His light bulb faced a similar fate too. To create economic value out of this great idea, he had to set up a dedicated R&D center in 1899.
Similarly, Bell Lab’s electronic image capturing invention as 8×8 pixel matrix, in 1969, had no immediate profit-making potential from the rolling out innovations. After going through further advancement over five years, the first digital camera prototype developed by Kodak couldn’t also demonstrate a profit-making opportunity. Hence, upon getting the first patent for a digital camera, Kodak management kept it on the shelf to gather dust. Even the invention of the Transistor, the cellphone, and the computer emerged in primitive form. The list goes on. For example, the idea of the automobile, radio, television, microwave oven, Airplane, and many more emerged in primitive form. Hence, in many cases, upon securing patents, inventors suffered from a loss in the mission of taking them to market. Even some of them gave up the mission of commercialization altogether.
Examples of failing to profit from inventions:
For example, upon winning the Nobel Prize for the invention of the Transistor, Dr. Shockley embarked on the mission of commercialization of this great idea. Despite its vast latent potential, Dr. Shockley’s profit-making mission out of the invention ended in failure, and he took refuge in academia. Similarly, after getting a patent for the Airplane invention May 22, 1906, Wright’s brothers’ commercial adventure could not produce a profitable opportunity. Subsequently, after the death of Wilbur Wright, Orville Wright took a government job.
Evolution race kicks out inventor:
After securing the patents, inventors get the temptation to profit from them. Hence, often, they embark on rolling out innovations out of them. For example, upon getting a patent in 1956 for hard disk invention, IBM rolled out a commercial product in 1957. Soon after the invention, the race of releasing successive better versions began. Subsequently, in 1977, Toshiba entered the race. To Toshiba’s continued superior performance in making the advancement of increasing data density and other factors, IBM lost profit-making opportunity from hard disk. On the other hand, through the race of sustaining innovation, competitors start taking away the market share. For example, despite patent barriers and court battles, a dozen followers have been taking away Apple’s multi-touch-based smartphone market share.
Reinvention makes initial invention irrelevant:
Although technology patenting and protection help creates a profit-making blue ocean, it gets blown away by the wave of reinvention. Instead of incremental advancement of a great initial idea, reinvention emerges through the change of technology core. For example, Sony reinvented radio, television, and camera by changing the vacuum tube and film technology cores with solid-state devices. Similarly, Apple reinvented personal computers and smartphones, by changing the user interface technology core, in showing magical performance.
The change of the technology core makes the patent portfolio of the invention around the previous technology core irrelevant. For example, Nichia’s reinvention of the light bulb by changing the filament or fluorescence tube with an LED chip made the century-long patent build-up in the light bulb irrelevant. Similarly, Sony’s reinvention of the camera by changing the film with an electronic image sensor turned Kodak’s century-long patent build-up obsolete.
Profiting from technology patenting and protection demands winning in competition race:
The truth is that patents don’t make money. Ironically, inventors don’t think about how the product will get made out of the invention. Besides, the products must keep evolving for creating increasing Utility and sustaining in the market. The products out of the inventions must win the competition race. Hence, we need a winning strategy for the inventions.
The strategy for profiting from inventions has three major dimensions. It begins with the mission of adding complementary ideas for creating appeal to customers. Once the invention reaches a profit-making state, competition shows up. Hence, the second dimension of the strategy is of sustaining the race. The next one is about winning in the reinvention wave. All these three dimensions should be integrated together as a single strategy of creating and sustaining economic value from inventions. In its absence, any amount of technology patenting and protection runs the risk of failure.
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