We’re Measuring the Wrong Things
by Jackie Hutter
Few things infuriate me more than supposed experts who make statements along the lines of “patents are critical to innovation.” I have avoided stating my views widely in this forum because I didn’t want to get into a contest of one upmanship with my patent lawyer peers. However, in the last couple of weeks, several pieces of information have hit my radar screen that make this seem like the right time to go public with my views.
Let my position be very clear: we create a false dichotomy when saying “innovation is not possible without patents.” The issue is much more complex and nuanced than this: in a particular instance, patents may be critical to innovation, but they might also be only slightly important or–likely in the majority of situations–they might be wholly irrelevant to innovation. (I talk more about this in this recent interview in Innovation Management Magazine.) Unfortunately, where you stand also depends on where you sit, and sitting behind a desk writing or examining patents may color your belief that patents are the cure for America’s innovation ills. (The cynic would likely note that relying on a patent practitioner or the Commissioner of the US Patent Office for an assessment of whether we need more patents is akin to “putting the fox in charge of guarding the hen house, but I digress. . . .”)
Building equivalency between the number of patents issued is now generally accepted by business analysts to be an improper measure of innovation quality or likely success at the business level–although this is a fairly recent realization that was pushed by outside forces, not by those who generally were incentivized on the basis of patent quanitity, e.g., scientists, engineers and corporate and law firm patent practitioners. In other words, external forces increasingly dictate that corporate success, in the form of market value etc., be measured by output in the form of profits and the like, not by inputs in the form of number of patents filed and/or issued. A similar transformation has not made it into the public discourse about what our patent system means and how it can function more effectively, however.
As noted above, I have been thinking about this subject for quite some time, but I was motivated to put these thoughts down recently when Saul Kaplan had a great post here on Blogging Innovation entitled “Measuring Innovation Outcomes.” In this post he compares the listings of “most innovative cities” and poses the question: “if New York, Boston and San Francisco are the most innovative cities, why are the poverty rates of these cities among the highest, educational attainment levels so low, and the overall quality of life in these cities so poor?” He, like me, would be on the side of equating innovation success with economic opportunity and related enhancements resulting from such supposed innovation powerhouses. But we don’t really see this happening. Saul goes on to state:
- Maybe the ranking is really more about invention than innovation. Maybe we are too focused on measuring the inputs of innovation and not the outputs. I believe far too much attention and resource is focused on the inputs versus the outputs of innovation. There are more ideas and new technologies than we could ever use or implement. There are too many inventions stuck in the garage or lab and concepts stuck on the whiteboard. We need to get more ideas and solutions off of the white board and in to the real world. The imperative is more real world experimentation. We need to try more stuff to see what works and is scalable. We have the inputs for innovation at our disposal. Our focus needs to shift to the outputs. It isn’t an innovation until value is delivered. Innovation should be measured based on outcomes. Are there proof points that the solution works in the real world and at scale? We need to invest more in platforms and tools to enable new model and system level experiments. We need to invest in and organize safe zones where we can try new approaches in the real world designed around the end user.
Saul is absolutely right. From my vantage point as an IP Strategist–as opposed to someone who is incentivized to acquire patents–I define innovation as “profitable invention.” Patents matter only if the underlying invention will result in profits for the patent owner, and only then can we equate a patent with innovation. Unless an inventor or corporation is seeking a patent for the sheer “joy” of having the government seal of approval on their ingenuity, whether an invention is patentable is wholly irrelevant unless that invention also can create value for its owner. Indeed, all a patent means is that the covered invention meets the government requirements for patentability. So, rather than measuring the number of patents filed and issued, we should be measuring how many innovations in the marketplace are covered by patents. This would be a better measurement of what patents really mean to modern business success.
In this regard, a recent flurry of reports have commented on Twitter’s “no patent strategy.” This Techdirt article provides a good overview of the discussion. No one would dispute that Twitter is not innovative (although not yet profitable), but if they have no patents, this strategy would seem to be counter-intuitive based upon conventional wisdom. So how can this be? Well, not getting patent is a patent strategy if you do this for articulated business reasons. The problem is that few business leaders know how to decide when a patent is or is not important to business success and innovation, and those with the largest megaphones–patent experts and those leading the patent system–announce that “patents are critical to innovation.” As a result, entrepreneurs and corporations alike expend time and money on obtaining patent protection–resources that may be limited–and even precious–in many cases. Under this prevailing view, companies like Twitter seem more the exception than the rule.
When it comes to successful innovation–that is, profitable inventions – I believe that companies like Twitter are actually far more the rule. How can they not be when 90% or more of patents do not cover a product or service that is in the marketplace? (Some experts have told me that the number is closer to 97 %.) But if entrepreneurs and corporations really understood the low probability is that the patent(s) upon which they are spending scarce resources on today will bolster their ultimate business success, there would be far less business for patent attorneys and agents, as well as those who work for and on behalf of the US Patent Office. So, of course, patent experts must necessarily conflate patent input with innovation outcomes.
Along the same lines of the lack of alignment between measurement of inputs vs outputs, NPR’s Marketplace recently reported on a study that showed that being in a business incubator actually made it less likely that a business would be successful in the long term. State and local governments have spent countless millions in recent years on business incubators with the expectation that successful businesses would be more likely to result from such support. But, now we see the intended result is what is least likely to happen. This is akin to treating an illness with a medication that is more likely to kill the patient. By putting the emphasis on organizational inputs–here money and institutional effort in (typically with attendant bureaucracies quickly springing to life)–as opposed to measuring successful outputs, we are able to convince ourselves that we are doing something positive. If we are doing something, that means we are helping, right? NOT! But, try changing the conventional wisdom on this: our politicians and institutions have way too much invested in their existing belief systems, and their constituents do not possess the information needed to change the nature of the conversation.
Returning to Saul Kaplan’s post in innovation measurement:
- We have bought in to a national invention narrative and haven’t been successful at replacing it with a compelling innovation story. Inputs are not as dependent on messy collaboration across silos and organizations as outputs. Inputs are easier to measure than outputs. Most importantly we are wired to focus on inputs and uncomfortable being held accountable.
At the end of the day, the number of patents obtained in a particular locale or by a specific corporation means absolutely nothing, unless there is a strategy associated with the number. But numbers alone are an input that is easy to measure, and leads us to engage in magical thinking about entrepreneurs, corporations and countries: look how innovative we are! (More on the fallacy of this viewpoint from my friend Neil Wilkof.) While I would like to predict that we will get smarter about this, I strongly believe that this paradigm will prevail for the foreseeable future. My pessimistic viewpoint results if only because the number of patent attorneys and agents has increased tenfold in recent years, and these professionals have their livelihoods invested in the status quo. In addition, a strong majority of these practitioners possess the political capital to make their opinions known to those who write the checks for the business incubators and who issue press releases about how innovative their states or cities are.
Ok, off my soapbox now. I need to edit a patent application for a start-up energy company where strong protection is the end-all, be-all for ultimate success. In short, the amount of effort we input into the patenting process will be exponentially proportional to the value of the innovation in the marketplace. The difference between our company’s patent strategy and that of most others is that we know the difference. I wish we were the rule, rather than the exception.
Jackie Hutter is Chief IP Strategist and Founder of The Hutter Group: IP Business Strategy, a consultancy that assists innovation-driven organizations, entrepreneurs and investment professionals in identifying opportunities to identify, capture and maximize value from intellectual property and other intangible assets.