Patents are being abandoned at historically high rates, pointing to a lack of confidence in the future.
An updated analysis by BlueIron shows that the COVID crisis has markedly affected business’s IP strategy. A previous analysis done in March is here.
The abandonment rate has shot up since COVID started, especially for Small Entities, which are companies of less than 500 people. As reported in March, the abandonment rate nearly doubled, but in July, the trend has continued with abandonments nearly tripling. For Small Entities, the abandonment rate has gone from 11.7% to 31%. For Large Entities, the abandonment rate has doubled from about 6.5% to 13%.
Abandonments are pending patent applications where the applicant has decided to quit prosecution. The USPTO examiner has issued a rejection and the applicant has refused to respond, letting the patent go abandoned rather than invest more money in it. The average number of rejections for US patents is about 4.2 per patent, but the allowance rate is about 80%. This means that if you are persistent with the Patent Office, you are highly likely to get your patent.
Patents are 20 year assets and are typically are not affected by short term market swings. A similar study during the 2008 recession showed patent abandonment rate being very steady:
However, the COVID crisis has changed things dramatically.
The USPTO abandonment rate is at a historic high, and it has never risen so fast. The big question: why?
Is confidence at an all time low?
Patents represent a company’s confidence in the future. Companies get patents because they believe that their innovation will be successful in the market and that competitors will eventually copy them.
A company’s investment in IP protection reflects two types of confidence: confidence in the quality and value of their innovations and confidence that they will be successful in the marketplace.
Due to the COVID crisis, that confidence seems to have been shaken to the core.
Certainly, companies are taking a very hard look at expenses and IP costs are one way to conserve cash during lean times. But we did not see this in the 2008 recession: things kept moving forward at the normal pace.
Because patents are 20 year assets that typically take 2-4 years to get, the decision to abandon patents reflects a lack of confidence in the long term – the likes of which we have never seen before.
Notes about the data:
The data were collected from AcclaimIP.com. Patents from universities, non-profit organizations, and independent inventors (unassigned patents) are excluded. Small entities are companies with less than 500 employees. The “abandonment rate” is the number of responses to Office actions responded to within the statutory period (6 months) divided by the total number of Office actions. Data are for US-companies only.