When we talk about patents, timing undoubtedly matters. In case two inventors are working on the same invention, then the one who reaches the Patent Office first holds the upper hand. The best example of a patent race is – Elisha Gray and Alexander Graham Bell filing the Patent Application for the telephone on the same day. Bell received the patent, started a successful company, and is now synonymous with the telephone; on the other hand, only a few people remember Gray. For quite a while now, economists have been using patent races as a classic example of how firms innovate in a highly competitive environment. Let us now gain more valuable insight into the role of a patent race in the real world.
Winning the Patent Race
It is a matter of fact that yes – a patent office keeps the patent applications secret for sometime after they are filed. The same implies that two companies or firms may end up filing a patent application for the same innovation while not realizing that the other also filed. As per various reports and surveys conducted, a patent race has a significant impact on innovation both in terms of magnitude and direction. Winners, in this aspect, do 14% more follow-on innovation, and losers, in contrast, are near about three times as likely to abandon their innovation. The ones that keep going have to invent around and find some other technical paths to overcome or avoid the patent coverage of the winner.
If we consider the importance of winning a patent race, it won’t be surprising to learn that firms in highly contested technology areas (where a patent race is frequent) do more R&D and file many patent applications. Furthermore, they usually patent in smaller steps instead of waiting until bigger milestones are achieved.
Who all are running in the Patent Race?
The patent racing behavior is surprisingly frequent – with somewhere around 10-11% of all the patents becoming a part of the race. In a few technology areas, a patent race occurs even more frequently; for instance, 13% of the patents in communications are in a patent race and 16% in computing, while, in comparison, only 5% of the patents in biotechnology are there in a patent race. There are various reasons, which explain the frequency of patent racing in these areas. In general, the patents in communications and computing are considered weaker, in contrast to the ones in biotechnology. Moreover, companies in fields like biotechnology avoid entering a patent race by either collaborating with the competitors or researching the already existing areas to minimize the risk of paying for expensive medical trials. To be specific, they don’t wish to end up without patent coverage.
All the points mentioned above prove that a patent race is indeed prevalent in the real world and is crucial for innovation. Without any second thoughts, winning a patent race protects the innovators, which, in turn, enables them to take their research agenda to the next level. On the other hand, a patent race deflects the losers, causing them to do less follow-on work and having to ‘invent around’ the winners.