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Patents are the most important indicator of a company’s powers of innovation

In 2016, the European Patent Office (EPO) granted a record number of patents. The USA submitted the most applications by far (40,076). Germany is placed second (25,086), while the Netherlands and Belgium occupy seventh (6,889) and twelfth (2,186) place respectively. But what does a patent say about a company’s powers of innovation?

1. Avoid becoming fixated
A few years ago, a sharp decline could be seen in the number of ‘Dutch’ patent applications. As patents are an important criterion in compiling various innovation indices, that also affected the Netherlands’ position in a range of rankings. Research showed that the decline in the number of patent applications was predominantly caused by the fact that one applicant shifted his business activity to one side, which in turn resulted in a temporary dip in the number of applications. Did that company become less innovative? Did the Netherlands become less innovative as a result? Of course not. Patents may indeed indicate a great deal about a company’s power of innovation, but we should not be fixated on them. And we should pay close attention to the story behind the figures. As a great philosopher once said: you only see it when you get it.

Paul H.M. van Beukering
Cluster Leader of Knowledge Protection and Utilisation
Ministry of Economic Affairs and Climate Policy
DG Business and Innovation

2. Proudly found elsewhere
We use our powers of innovation to help companies that develop medical devices to improve devices that have already been approved and marketed. We do this by combining our technology (and IP) with theirs. This enables them to extend the life cycle of their products, and to opt for the much more economical 520(k) route instead of the long route of premarket approval. This only requires a company to demonstrate that a new device is ‘practically identical’ to an existing one, legally marketed device in terms of safety and efficacy. In this way, patients gain access to an improved medical device, and suppliers of medical devices are able to innovate without having to spend too much time on R&D. Such innovation-driven companies are realising that, in order to continue to operate in a highly innovative market, they should no longer have the mindset of ‘not invented here’ but rather ‘proudly found elsewhere’.

Donato Di Biase
Chief Business Officer |
Materiomics B.V.

3. Potentially a waste of money
Patents have little to say about a company’s level of innovation and many patented inventions never make any money. Inventors often apply for patents as is customary, without having carried out an adequate market analysis beforehand. A company may have a patent, but it cannot market the patented invention without a licence from the owner of the underlying technology. And if that owner is a competitor, they may refuse a licence. A patent could be a waste of money. Many successful inventions are not patented because applying for a patent implies that the invention will be published. It may be better to keep the invention secret, particularly if an invention is a process that is difficult to reverse-engineer: Coca-Cola has never patented its formula!

Helen Gubby
Senior lecturer RSM
Dept. Business-Society Management
Erasmus University Rotterdam

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