Patents, the Lifeblood of Innovation

By Gene Quinn
April 28, 2011

Gene Quinn, at University of New Mexico, April 21, 2011

Patents are indeed the lifeblood of innovation. Of course, without innovation nothing else happens, or matters, but there is definitely a symbiotic relationship between innovation and patents. The innovation that we say we most want is that innovation that is cutting edge, not just an improvement upon what already exists; paradigm shifting innovation or technologies that could be characterized as disruptive in nature. It is with paradigm shifting, disruptive innovation that we see leaps forward. Those leaps forward lead to the formation of new start-up companies and frequently to the birth of entire new industries. It is with this type of highly desirable innovation that we see enormous job growth, which the U.S. economy could use right about now. Unfortunately, this type of innovation does not come cheap.

One week ago I was in New Mexico at the University of New Mexico (UNM) to deliver the keynote speech at the 8th Annual Creative Awards Reception, which recognizes researchers and scientists at UNM who have obtained patents in the previous year.  The event is sponsored by STC.UNM, a non-profit founded in 1995 by the Regents of UNM to protect and transfer faculty inventions to the commercial marketplace. My speech was entitled “Patents, the Lifeblood of Innovation.” My speech is provided courtesy of STC.UNM at the bottom of this page, followed by my PowerPoint presentation. For more on my day at UNM, technology transfer at UNM and some of the top UNM researchers see University of New Mexico Honors Innovators.

As I was preparing my speech I received an advance copy of the book Great Again: Revitalizing America’s Entrepreneurial Leadership, which is written by Hank Nothhaft, who has been the CEO of several highly successful high-tech start-up companies, and David Kline, the acclaimed author of Rembrandts in the Attic: Unlocking the Hidden Value of Patents. Simply stated, Great Again is one of those books that everyone in the industry should read, and one that Members of Congress and their staff’s should read twice! Realistically, I would be happy if Members of Congress just read the Introduction. I suspect most of those who are seriously interested in fixing the U.S. economy would be so captured by the Introduction that they would read the rest. Great Again tells a sad tale of how we managed to get a “recovery” without jobs and no signs of innovations on the horizon that will meaningfully change that. Best, however, it offers real solutions.

Great Again lays everything out right there and assembles the pieces as if putting together a jigsaw puzzle. There is discussion of the state of venture capital today, why more start-ups are not getting funded, the problems of the Patent Office, what losing manufacturing has done to drain our domestic intellectual property development, how myopic immigration policy effectively keeps out the best and brightest who America has always sought to attract and how taxes and regulation create one of the most unfavorable business climates in the world.

According to Steve Wozniak, who is quoted in Great Again, Apple could not receive funding from venture capital firms today because it would be too risky and the people involved didn’t have a strong enough track record. Amazing! One of the co-founders of Home Depot provided the same opinion. If these giant companies couldn’t get funded today we have enormous issues and without a comprehensive and coherent national innovation policy there is little that we will be able to do to turn the tide.

But why care about venture capitalists? They provide the funding that is essential for start-ups to get off the ground. Without funding most start-up companies simply could not exist, particularly those developing those innovations that we all say we want, and the ones that the Supreme Court would deem beyond the scope of “common sense” and worthy of the mantle of an issued patent. Discoveries that lead to scientific breakthroughs that lead to engineering feats that turn discoveries and breakthroughs into reality takes time; a lot of time. A lot of time spent researching, discovering and engineering means a lot of money. Just look at the path we are taking with respect to various clean, green, alternative energy technologies. It isn’t like we don’t know what we are looking for, or what the holy grail is. It will just take decades to get there. Similarly in the life saving technology areas, such as biotechnologies, companies can easily spent a decade sucking in money and not being profitable. Without funding that which society, our leaders in DC and the Judges wearing the black robes all want cannot come into being, period!

Gene Quinn shaking hands with UNM President, Dr. David J. Schmidly. Looking on is Joe Cecchi, Dean of Engineering.

Venture capitalists love patents. 76% of venture backed entrepreneurs indicated that existence of patents was an important factor in VC investment decisions. 60% for software companies; 73% for biotech companies; and 85% for medical device companies (85%). So it doesn’t matter what industry you are in, significant percentages of VCs place a premium on patents when making funding decisions. You can not like that reality, but it is the reality known to everyone involved in the high-tech start-up world.

It only makes sense that VCs would put such a high premium on patents. The patent grant provides to the owner of the grant the right to exclude others from making, using, selling, offering for sale or importing in the U.S. anything that would infringe one or more of the claims contained in the patent. The patent right is an exclusionary right, which by its very nature means the owner of the patent has a competitive advantage. Without a competitive advantage capital intense start-ups cannot be justified from an economic standpoint, at least as far as investors are concerned.

As I tell all my clients who want my opinion regarding whether to move forward with a patent, you need to have an definable advantage over and above what is presently available in the marketplace such that consumers will be willing to pay a premium for your good or service. If you have that then moving forward to protect and insulate your turf makes all the sense in the world. If you don’t protect your turf, as well as claim alternatives and variations that competitors would want to employ, then you will soon find yourself with numerous competitors and no advantage. In fact, you will have a disadvantage because you will have paid for all the research and development that others simply copied. That means they will be able to offer a lower price point because they don’t have to recoup research and development costs. So they will compete with you, with your technology and at a lower price point. No VC on the planet would invest in a business that will be at a competitive disadvantage.

But why care about venture capitalists? Because most job growth for start-up companies comes after an initial public offering (IPO), and 60% of start-ups that undertake an IPO are venture backed firms. According to the National Venture Capital Association job growth at VC-backed firms is 1.6% versus .2% at non-VC-backed firms, making VC backed firms roughly 800 times more productive at creating jobs. According to the National Venture Capital Association, since 1970 VCs have invested roughly $500 billion in more than 27,000 start-ups, employing 12 million people today and contributing $3 trillion to the US economy, which is 21% of total US GDP. These last two sentences I took from Great Again. You really need to read that book!

Indeed, Nothhaft, who sometimes writes guest articles for IPWatchdog.com, once wrote in an article published on IPWatchdog.com:

[E]very patent is associated with somewhere between 3 and 10 new jobs. In my previous company Danger, which had 100 issued and pending patents, the number was 4 jobs per patent and patent application.

See Start-up Reality.

So patents are critical to job creation because they offer the competitive advantage necessary to justify the speculative investment, which can frequently be enormous, in early stage high-tech start-up companies. If we want cutting edge innovation, if we want sustained job growth, if we want high paying technology jobs we absolutely must fix the United States Patent and Trademark Office. That means adequately funding the USPTO and Congress not using it as a piggy-bank; diverting user fees for other purposes. The USPTO could be 100% self sufficient, funded only by those who seek a service, but instead they are deprived of adequate funds because Congress can’t help but use the USPTO as a revenue generator.

We must also make America competitive for companies, lower corporate tax rates and provide incentives to companies for doing high-tech manufacturing here in the United States.

What we really need is for everyone in the industry to get engaged. My message over and over again at the University of New Mexico was that innovators are rockstars, and rockstars get what they want. When I interviewed Senator Birch Bayh (ret.) he told me the way to get patent legislation passed is get Universities engaged because Members of Congress listen to Universities. With all the incubated companies that are growing out of University developed technology there are a lot of people with a vested interest who have the ability to make a difference. Universities and start-up technology based companies can make a difference. So it is time to make that difference and be heard.


STC.UNM 8th Annual Creative Awards Ceremony from STC.UNM on Vimeo.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 20 Comments comments.

  1. Manus Cooney April 28, 2011 8:51 pm

    If you are intrigued by Quinn’s post here, watch the video of his speech in New Mexico. I share his concern about the PTO’s funding and totally agree about the need to read Great Again and Congress needs to act on it. Good stuff.

  2. eb April 29, 2011 11:15 am

    Great speech at the University of New Mexico. I recommend that if you are involved with the industry to watch that video. Although it says that it is over an hour long, Gene’s speech is only about 25 min long. Quinn clearly states the problems involved with filing a Patent at the USPTO. Definitely worth the watch.

  3. Stan E. Delo April 30, 2011 4:51 pm

    Hello Gene-
    A very inspirational talk that you gave at the U of NM, and very well done to keep some sort of sense of humor present during this current mess. I sincerely hope that you are right about the poison pills included in the House versin of the America Invents Act. i think the title of the bill was invented by a corporate patent attorney. Just say No to the House America Invents Act of 2011 please! They don’t seem to realize what they are doing, and the language incluuded in the bill is all goofed up, as reported very succinctly by Kevin Noonan, and a while back by Donald Zuhn as well.

    Somewhat sad when our Senators and perhaps our Rpresentatives as well don’t seem to get it at all. They probably won’t miss us too much until we are gone, when it will be way too late to try to *fix* what they they have ineptly implemented. It will probably take about 10 years to *fix* things if they goof it up by passing the current version of the America Invents act..

    Best regards,
    Stan~

  4. New Here May 3, 2011 11:37 am

    @Gene

    I wish to say at the start I enjoyed the video.

    On the subject of prior user rights Gene, I argue with your point on disclosure, the point you made is taking the average individual that happens to be a business owner of some sort, that has an idea they develop for their business without disclosure, and is somehow making it a “trade secret”, is ridiculous.

    How ridiculous is shown in the fact that many of those that patent aren’t publishing disclosures about their developments in the early stages to their competitors in the same marketplace, not before any patent application is filed. The disclosure you mention by law applies to those that want patents and not those with just ideas they so develop, regardless if an idea is that of an individual or a business.

    The “rights” part of “prior user rights” is the more important point about constitutionally when talking about the law Gene, and patents do not change the rights of anyone in the U.S. Your point about prior user rights seems to suggest that patent rights because of the disclosure required by law, somehow the law should allow an unintentional patent’er that happens upon the same idea to take the work of others, others without the required disclosure as patent holders.

    If so Gene, again ridiculous, that the public or private business owners should be subject to laws (patent) when no such law applies that states any idea within the private walls of a home garage or business, is by law to follow disclosure.

    Thanks.

  5. Gene Quinn May 3, 2011 12:12 pm

    New-

    You say: “Your point about prior user rights seems to suggest that patent rights because of the disclosure required by law, somehow the law should allow an unintentional patent’er that happens upon the same idea to take the work of others, others without the required disclosure as patent holders.”

    I’m not sure I’m following you. What do you mean by an “unintentional patenter”?

    -Gene

  6. New Here May 3, 2011 1:09 pm

    @Gene
    “I’m not sure I’m following you. What do you mean by an “unintentional patenter”? ”

    Meaning some that patents that didn’t patent, knowing the idea was also the idea of someone else at the time when they patent it.

    Thanks.

  7. Blind Dogma May 3, 2011 1:42 pm

    New Here,

    You are back with more of the same.

    Without meaning to sound condenscending, why do you bother posting that which cannot be understood?

    And please do not run to Gene asking him to referee or ban you – what is needed is for you to compose your message so that others can understand it. I recommend a sentence diagramming class and some discipline to keep one thought only per sentence. Once you have mastered that, then you can graduate to comparative sentences with more than one concept.

  8. Blind Dogma May 3, 2011 1:43 pm

    By the way New Here – I told you so.

  9. New here May 3, 2011 1:46 pm

    @BD

    Nice try, I will not argue this again with you, it is a waste of time and space on this blog.

    Thanks.

  10. Blind Dogma May 3, 2011 3:05 pm

    it is a waste of time and space on this blog.

    Unfortunately, so are your comments. No need to argue that as I think we both agree that your desire to be lazy overrides your desire to compose your thoughts so that others may understand them. Don’t get me wrong – I am sure that you have thoughts worth hearing. It is that belief though that makes your approach so maddening. I just do not understand your refusal to take your responsibility to communicate seriously.

    But I thought that you were definite (this time) that you were not coming back?

  11. New Here May 3, 2011 9:14 pm

    @BD

    I find it odd that someone with any free time would spend some of it to return to IPWatchdog to do nothing more then have me give a piggy-back ride, at the same time trash every thread I comment on.

    Most people from my experience will agree or not with someone’s opinion, being understood or not for any reason, will ignore it if some failure to covey a thought is realized and spend their time on better things.

    Goodnight.
    In future, expect to see me because I will comment on topics selectively. Until required not to.
    Thanks.

  12. Blind Dogma May 3, 2011 9:28 pm

    In future, expect to see me because I will comment on topics selectively. Until required not to

    So then, I was correct – you are changing your avowed stance of never coming back (again)?

    Perhaps there is hope that you will also change your penchant for spewing mindless dribble.

    One can always hope.

  13. Stan E. Delo May 4, 2011 1:08 am

    BD-
    Dribble is an interesting way to look at it, but drivel seems a little more
    like the truth to me. You will need to get a bit more coherent and
    convincing to cut very much ice hereabouts New Here. I would suggest that
    you change your anonymous moniker and try to start all over again. I refuse
    to debate or argue with you, and it takes two to argue, so it looks as if
    you will have to just debate with yourself I suppose, much like the practice
    that Bobby engages in from time to time. That’s why IBM or whomever invented
    the *delete* key. I am surprised that Gene puts up with your nonsense, as in
    you calling his opinions ridiculous at least twice in a single post. You are
    making a fool of yourself, but you don’t seem to understand that you are
    doing so, and seem to lack the writing or verbal skills to even try to
    explain your curious views.

    Personally I have little regard for those that would endeavor to tell
    extremely experienced patent attorneys like BD and Gene that they are wrong,
    and have nearly nothing but their *opinion* to back it up with. I would
    recommend a hearty quaff of Lysergic Lime or two in your case, which might
    keep you distracted from posting here for a few days, months, or years.

    Hasta la vista,
    Stan~

  14. New Here May 4, 2011 10:39 am

    @Stan

    I do now, as I have in the past offer my full cooperation with any decision having to do with a request for me not to comment on IPWatchdog.

    Some reasonable effort must be made to deter potential undesirables in public accessable places made available without access restrictions. Stores, Gas Stations, and even Hamberger places along with blogs that are made available to the public without restrictions, will need to post signs about policy giving an opportunity to comply. This blog is open to anyone and not just me, giving access to it without any restriction on availability to comment.

    Your questionable suggestions if I understand you correctly: First, is to engage in a deception changing my moniker to comment on IPWatchdog. The second is that I use drugs for reason you’ve given ?

    My comment regarding Gene’s article, I do not call Gene’s opinions ridiculous. The comment is about disclosure and my argument is only about that. Read it again and see the common thread throughout the comment is “disclosure”.

    Thanks.

  15. Blind Dogma May 4, 2011 12:21 pm

    I do now, as I have in the past offer my full cooperation with any decision having to do with a request for me not to comment on IPWatchdog.

    That’s just it New Here – you keep going back to this “please ban me” mantra. No one wants to ban you – we just want you to take some care and present your opinion in an intelligent manner so that first, it makes sense, and second we can intelligently comment back. Any “banning” called for is a ban against lazy and unintelligent postings (by anybody). It just so happens that almost all of your postings fall into the category of posts that would be “banned.”

    Once again you fall into the habit of which our last discussion more than simply captures, it predicted exactly what you are doing (yet again).

    You seem to think that because you can post irresponsibly, that it is advantageous to do so.

    It is not.

    Please go back to any number of my posts on this subject and actually read the comments. I am sure that others beside myself would love to see your comments and understand your position, but your choice of how you present those comments (which responsibility for the clarity thereof falls only to you) is what we are actually trying to bring to your attention. It is not a matter of whether we agree or disagree with you – most times we simply cannot tell.

    No one is calling for an outright ban of you (except you) – what we are a calling for is that you take some due (and reasonable) care in how you post. That really is not too much to ask, is it?

  16. New Here May 5, 2011 10:12 am

    “You seem to think that because you can post irresponsibly, that it is advantageous to do so.

    It is not.”

    @BD

    This is a strange twist BD when I have just about went as far as to beg to be banned from IPWatchdog ! The “post irresponsibly” has been your song and dance here with every comment I make. In your comment above you have failed to make it clear what is advantageous about posting irresponsibly. Thereby not making a complete point but rather just some open ended suggestion as I will guess it is to be some help to me.

    A side point on my mantra as you’ve called it, is without argument to accept being banned if my posting was so undesirable and unacceptable. That is as fair as anyone can be regardless if you and the others believe it or not.

    My silence will be no indication of inactivity on my part. The U.S. is a Country of laws that I believe in and working through the law can make change that has lasting meaning. Whatever I may lack being able to effectively write my thoughts doesn’t mean I lack the knowledge of where I may find those able to do a better job for me. This is most important when such writings will be going to members of U.S. Government in support of change(s) presently on the table or those that will be considered in the future.

    Make no mistake about the meaning of silence, I will not be banning myself. I think it is better to focus time on more productive and important things then just commenting on a blog. I have always enjoyed reading IPWatchdog and will continue with the option to comment open to me as it is.

    Thanks.

  17. Blind Dogma May 5, 2011 12:01 pm

    The “post irresponsibly” has been your song and dance here with every comment I make.

    As to “my song and dance” for every comment you make – I specifically addressed this:
    Any “banning” called for is a ban against lazy and unintelligent postings (by anybody). It just so happens that almost all of your postings fall into the category of posts that would be “banned.”

    As to “In your comment above you have failed to make it clear what is advantageous about posting irresponsibly.“, you have completely misread what I wrote. I should not be surprised that your laziness in writing also infects your care and diligence in reading. My sentence structure follows the rule sof grammar – set up so that people can communicate.

    I am calling you out for continuing to write irresponsibly.

    You, not I.

    I am telling you that doing so is not advantageous. You, for some reason must think it to be so, because you refuse to change.

    You also do not seem to understand, even though I have carefully pointed out, that this is an open forum and Gene does not have the duty to police the forum for posts that are unintelligible. Gene does police the posts for blatant misrepresentations of law and unfounded attacks – for which I and others are grateful.

    Are you even aware that I have pointed out your repeating cycle?
    Are you even aware that your posts do not make sense?
    Do you enjoy speaking only to hear yourself?

    You claim that “Whatever I may lack being able to effectively write my thoughts doesn’t mean I lack the knowledge of where I may find those able to do a better job for me. This is most important when such writings will be going to members of U.S. Government in support of change(s) presently on the table or those that will be considered in the future.

    You are dead wrong. Do you understand why?

    What is most important is that your message can be understood. Even if you have the best contacts in the world, even if you have a personal audience with every member of the congress and senate, but you cannot articulate your message in an intelligible manner – which you refuse to do here – your audience will not can not act on what you have knowledge of, but cannot express. The readers here (and ANY audience you may have) cannot even reach the point of determining whether or not you “lack the knowledge” because you cannot be understood in the first instance.

    I have told you plainly. Compose what you write in single idea sentences. Use proper grammar and construction in your sentences. Think about your reader.

    Why do you refuse to do these very reasonable things? Why would you choose to be silent rather than share (in a manner that could be understood) your knowledge. You have a light but you refuse to remove the bushel that blocks the light from reaching anyone else.

  18. Thinker vs Doer May 9, 2011 2:12 am

    Thinker applied for a patent without actual reduction-to-practice of a carbon sequestration machine. The application of course was invisible to Doer for many years. Because Doer had no idea that Thinker’s patent was lurking, Doer made significant investment in organization and capacity in his own carbon sequestration machine. Doer did everything to produce and sell his machine without any “teaching” from Thinker. When Thinker’s patent grant issued, Doer’s substantial investment was rendered useless by an injunction against Doer obtained by Thinker. Thinker never did manufacture a machine based on the patent.

    Doer didn’t feel any better after his lawyer gave him a book called “The History of Patents”.

  19. Gene Quinn May 9, 2011 11:36 am

    Thinker vs Doer-

    Perhaps Doer should have applied for a patent.

    -Gene

  20. New Here May 9, 2011 7:37 pm

    Re:#18

    That is I guess called some form of “innovation” and the current patent system supports and accepts it blind to where IP really has come from. I agree the public does need to hear it from the patent community, why it works the way it does. Giving them an opportunity to understand it better, why IP isn’t IP and not all are respected.

    The responsibility for this falls on the patent system in the U.S., lawmakers moving slow but much hope that they will have laws changed that all IP is respected — and I mean not just that which is patented.

    Thanks.