When asked, vast majority of businesses say IP is not important

Gabriel J. Michael / gmichael at gwu dot edu

This post is licensed CC-BY SA 3.0, and may be shared and reposted with attribution. Please include a link back to this page, which will contain the most up-to-date version.

Last year, the U.S. Patent and Trademark Office released a widely cited report entitled “Intellectual Property and the U.S. Economy: Industries in Focus.” This report played up the importance of IP, claiming “the entire U.S. economy relies on some form of IP,” and estimated that “IP-intensive industries” accounted for 40 million American jobs and 35% of the U.S. GDP in 2010.

While many pro-IP groups hailed the report as demonstrating the importance of IP to the American economy, the report was panned by critics who pointed out that the definition of “IP-intensive industries” was so broad as to be meaningless. Indeed, according to the report, the number one IP-intensive industry by employment in the United States was… grocery stores. Furthermore, although supporters of stricter IP regulation and enforcement continue to rely on the report to justify policies relating to copyrights and patents, the vast majority of the report’s purported economic benefits were attributed to trademarks.

USPTO’s report was released in March 2012, and received a lot of attention. Yet just one month prior, the National Science Foundation (NSF) released the findings of a survey on business use of intellectual property. While a few sites picked up on the NSF report last year, it received far less media attention than it deserved. Why? Perhaps because it turns out that if you actually ask, the vast majority of businesses report that intellectual property is not important to them.

Infojustice.org was among the few noting that the NSF’s findings directly contradict the USPTO report. The initial NSF report, published in February 2012, included data from 2008. However, it has recently been updated to include data from 2009 and 2010.

But wait – surely I’m making all this up. If “IP-intensive” industries account for 40 million jobs and 35% of GDP, intellectual property must be very important to businesses. What’s this “vast majority,” then?

  • In 2010, 87.2% of businesses reported that trademarks were “not important” to them.
  • 90.1% of businesses reported that copyrights were “not important” to them.
  • 96.2% of businesses reported that patents were “not important” to them.

If you still think I’m making these numbers up (and I wouldn’t blame you if you did), head on over to the NSF’s page describing the survey, results, and methodology. Note that these results are consistent across the three years of the survey, and the survey itself is a representative sample across the country.

According to the NSF, the Business Research and Development and Innovation Survey (BRDIS) “is an annual, nationally representative sample survey of approximately 43,000 companies, including companies in manufacturing and nonmanufacturing industries. The target population for BRDIS consists of all for-profit companies that have five or more employees and that perform R&D in the United States.”

If you examine the details, the survey results begin to make more sense. Larger companies tend to report intellectual property as being more important; businesses designated as especially “R&D active” also place more importance on various kinds of intellectual property.

Nevertheless, the results of this survey (now in its third year) are striking. Even when looking at a sector where one would expect heavy reliance on intellectual property, the results do not match expectations. For example, take one of the most copyright-dependent sectors we can imagine: “R&D active” software publishing. In 2010, 51.4% of respondents in this sector said copyright was “very important”; 34.6% said it was “somewhat important”; and 13.9% said it was “not important.” That is, only about half of respondents in a purportedly heavily copyright-dependent sector describe copyright as “very important” to their business.

In my mind, there are two ways of interpreting these data: either all the survey respondents are totally uninformed about what is going on in their businesses, or formal intellectual property protection is far less important to the vast majority of U.S. businesses than some would like us to believe.

Some additional highlights:

  • 61.7% of businesses manufacturing computer and electronic products report that patents are “not important” to them.
  • 96.3% of businesses with less than 500 employees report that patents are “not important” to them.
  • 45.6% of businesses with 25,000 or more employees report that patents are “not important” to them.
  • 53.6% of businesses classified in the information sector (NAICS code 51 – i.e., a sector we’d expect to rely heavily on copyright) report that copyrights are “not important” to them.
  • Overall, businesses report that trade secrets are the most important form of intellectual property protection, with 13.2% of businesses calling trade secrets “very important” or “somewhat important.” Trademarks are a close second, with copyrights and patents significantly farther behind. Trailing in last place is sui generis protection for semiconductor mask works, although that is no surprise.

The complete 2008-2010 BRDIS survey data can be downloaded here, or you can check out the individual tables referenced in this post right now: Utility Patents, Design Patents, Trademarks, Copyrights, Trade Secrets, Mask Works.

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About Gabriel

Ph.D. candidate in political science at GWU, eBay Policy Scholar, tech geek. Mechanically inclined. I study the politics of intellectual property law.
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31 Responses to When asked, vast majority of businesses say IP is not important

  1. Terry says:

    Yeah, and 31.5% felt Trade secrets were important. They were likely not asking in the context of business processes, store layout, product selection in a store, and so on. For trademarks, they were probably not asking in the context of trade dress.

    I know many small businesses that would be totally appalled at the idea of a competitor knowing how they did estimates, product pricing, or selection of products to carry in their stores, how they ran their back office, accounting, billing, and so on.

    If you give someone a legal sounding name for something that they ordinarily do, and they don’t think it applies to the thing they ordinarily do because of the name you picked, then you aren’t surveying what you think you are surveying.

    As an example: try waling up and down the isles in a small store filming what’s on the shelves, including pricing, and see how fast someone shows up.

    • langelgjm says:

      Not sure where you got that figure, but the survey reports that only 13.2% overall described trade secrets as “very important” or “somewhat important.” In 2010, that was the most important category of IP.

      You can take a look at the NSF’s survey instruments if you think they are problematic. But I would point out that if, as you suggest, businesses can’t identify the formal legal name of the relevant kind of IP protection, then that formal protection can’t be all that important to them, can it? Perhaps they are relying on informal protection. If that’s true, it’s an important finding.

      • Terry says:

        My Trade Secrets numbers are from the February 2012 numbers, rather than the 2010 numbers used in the article: http://www.nsf.gov/statistics/infbrief/nsf12307/

        Most trademark protection is automatic within a given state, unless you operate interstate, then it’s automatic nationally. Registering a trademark provides some additional statutory and international (via WIPO) protections and differences, but they aren’t enough to interest most businesses in pursuing them.

        I also still think that the concept of “Trade Secret” is inadequately explained by the original source survey materials, in such a way as to indicate that it would apply to business processes which are not already covered by process patents.

      • Gabriel says:

        Hi Terry,

        Those numbers are actually not from 2012, but from the 2008 version of this survey. The report you cite (and which I link to in my post) was written in 2012, but reports the 2008 data. The 2009 and 2010 data was just released in September 2013. I use the 2010 data (the most recent data) in my post.

        Also, the 31% number is for manufacturing industries only, a subset of the total sample.

        The same (in my opinion, problematic) logic applies to copyright as well – copyright protection is automatic, and while registering can convey important rights, the vast majority of copyrighted work is not registered.

        The question is, is it legitimate to argue that simply because works are covered by copyright, they benefit from copyright? Is this true even when the creators are not even aware that their works are copyrighted, or do not care?

        To assume that automatic protection is useful means making largely untestable assumptions about how people would behave in the absence of such protections.

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  4. Christopher Wait says:

    Interesting,…so if a survey is conducted asking citizens about some law for which most have little familiarity with, then that law is not important. …And I guess it follows that if such is true, that law shall be deemed as unnecessary? (I’m not sure what the conclusion is here in this article)

    So, if a survey is to be done of some reasonable subset of Americans asking them for example, say “How important to you is Second Degree Manslaughter?” Then since most of them are not really sure what 2nd degree manslaughter is, and thus might not indicate a resounding majority indication in the affirmative of the importance to them, then that law is unnecessary?

    So we as a people cannot rely on anyone else to watch over matters of importance for which we ourselves lack a firm grasp of? So, if I don’t personally understand a law then that law is unnecessary?

    It seems to me that you ask far too much of the general populace if that is the requirement. Sadly, we’re all far too busy, to achieve this ideal!

    • langelgjm says:

      I’m not sure why you’re implying that I would suggest eliminating IP laws. As I note in the post, the conclusion I draw is either 1) that the survey respondents are uniformly ignorant (although I suspect this is unlikely) or 2) that formal IP protection is not especially important to a majority of US businesses.

      That doesn’t mean we should get rid of IP laws. Similarly, securities regulations may not be directly relevant to many businesses, but are obviously important and necessary. The point of the post was to showcase some empirical data which indicate that the simplistic narrative that “IP is important for business” is inaccurate.

  5. dbhalling says:

    There are a number of errors in this post. First, IP is not a regulation, it is a property right.

    It is just nonsense to suggest that biggest economic benefit comes from trademarks. We know for a fact that all real per capita increases in wealth are due to increases in our level of technology, which means they are the subject of patents not trademarks.

    The problem with asking business owners is that they often do not know what affects their businesses. For instance, how many startups know that Sarbanes Oxley and weakening of our patent laws are why it is more difficult to get funding today than fifteen years ago? Very few, but it does not change the fact that this is why.

    The reason business cite Trade Secrets as important is because our patent system has become so cumbersome, expensive, and ineffective at protecting the rights of inventors, companies have turned to trade secrets. This is not a good sign for our economy. The Middle Ages were dominated by people using trade secrets to protect their ideas. Trade secrets prevent the sharing of knowledge that occurs with patents and this inhibits the growth in new technologies and therefore are economy. The AIA (America Invents Act) and the proposed Innovation Act are crony capitalist pieces of legislation (not patent law) designed to protect large corporations at the expense of startups and individual inventors. They have had their intended effect of entrench large corporations at the expense of property rights, startups, and our economy.

    • langelgjm says:

      Thanks for your comment. I’m not sure what errors you’re referring to. It’s quite commonplace to discuss the “regulation” of copyrights, trademarks, and patents, and to do so does not conflict with viewing them as property rights.

      The claim that trademarks provide the largest economic benefit is not my claim, but the USPTO’s. You may wish to examine their report “Intellectual Property and the U.S. Economy: Industries in Focus,” particularly Figure 1 on page 39 and Figure 5 on page 45, which attribute far more employment and value added to GDP to trademark-intensive industries than either copyright- or patent-intensive industries. What drives long-term increases in productivity and standards of living is a very different question. However, I’d note that it would be a mistake to attribute increases in “level of technology” to patents without any caveats.

      You seem to believe that one of my suggested conclusions is correct: that survey respondents are uniformly ignorant about the value of IP to their businesses. That is entirely possible, but is the counterclaim that we should create IP policy based on what we “know” to be best, rather than empirical evidence? I wrote this post because I was blown away both by the survey results and by the lack of attention the results have received. You may want to dismiss the results as being driven by ignorance, but it would be better if you could provide alternative empirical data.

      I don’t think we have data to suggest that more businesses are turning to trade secrets now than in the past. Obviously trade secret use is very hard to measure, but businesses have always relied on trade secrets. I’d also question the extent to which patents actually facilitate the sharing of knowledge, given that patents are usually drafted to disclose as little information as possible, and businesses and inventors often actively avoid reading patents because of willful infringement rules.

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  8. dbhalling says:

    My point was not what the report said, but that the report is clearly flawed on this issue.

    Actually patents are not drafted to disclose as little as possible and there is a statute(35 USC 112) on point to deal with that.

    The problem is not with willful infringement damages, it is the culture that finds it acceptable to ignore the rights of inventors. Companies that follow the purposeful ignorance policy should be treated as having willfully infringed patents that could have been found. If I build a office and do not do a title search and a survey and then build on someone else’s property, should I be given a pass – NO. I should be treated as failing to undertake reasonable due diligence and the law should consider that as increasing my culpability.

    • Terry says:

      All the major players in the software industry follow the “Willful Ignorance” policy; this includes Novell, Apple, IBM, and Google, to name a few employers I’ve had where it’s part of the employment agreement that you will follow such a policy.

      The Title Search example is an interesting one: if I do not perform a property line survey, and end up building a driveway six inches over the property line, and the neighbor does not act to make me stop this adverse use, then over a statutorily determined time, I establish a proscriptive lien, and gain rights to the use of that six inches. This same principle apples to a neighbor who habitually parks his car at the curb in front of my house, and one day decides to park a large RV there, obstructing my view (which the car did not).

      If we are to treat intellectual property as real property, it then follows that if I use a patent of yours, and you don’t stop me, then I have engaged in adverse use, and as a result, you can no longer prohibit my use of your patent.

      This is an area of parallels between IP and real property that most IP lawyers shy away from, for fear of precedent; most matters of this type end up with sealed settlements that are non-punative for past use, with an agreement on future use requiring payments (in my experience).

      • dbhalling says:

        Adverse possession. Perhaps, but if your neighbor does complain and you did not do a title search and survey, the court will hold that against you and if you hired a contractor, they are likely going to be liable to fix the problem.

        Yes, I am well aware of the purposeful ignorance (efficient infringement) and it is immoral and should be held against them. On top of that I believe it would make a great shareholder derivative lawsuit.

      • T says:

        I seriously disagree with your adverse use argument with regards to driveways and driveway easements. If I build the driveway up to the line I mow my lawn and the line they mow theirs, and the information only comes to light during a survey as they go to sell, it’s too late.

    • Gabriel says:

      The reason I linked to an article on the topic of disclosure was to indicate that in spite of the statutory requirement of disclosure, the reality is different:

      “the extent to which patent documents successfully teach the inner workings of cutting-edge technologies is quite limited. The information conveyed by many specifications is inadequate and, in practice, fails to reflect the legislative requirements of § 112. Indeed, a minority of patents do not convey meaningful information of any kind. Patents in the information technology (“IT”) industry are perhaps the worst offenders, being notorious for their vague language.” (Devlin, “The Misunderstood Function of Disclosure in Patent Law,” Harvard Journal of Law & Technology, Volume 23, Number 2, Spring 2010)

  9. dnk says:

    Ok, I am reading this as a non-lawyer, but actively involved in R&D, having experience managing IP portfolio’s within multi-billion dollar companies, have a number of patents myself, and have been involved with a number of patent trolls. Looking at the numbers and from my perspective the real issue is the cost, time and energy required to not only file for a patent, but also to defend. From my experience patents are useful only for large companies as trading chips, bragging rights for engineers, or for patent trolls as revenue generators. So at the end of the day they hold value only for lawyers. This is the reason that the majority of business respondents answered as they did. The patent system in the US is broken, in the past it was accessible and provided a modicum of protection for the inventor and helped drive innovation. Presently they are used to stifle innovation. Just my 0.02.

    • dbhalling says:

      dnk, interesting comments. You are certainly right that the patent system has become too cumbersome, too expensive, and too slow. As a result, it is much less effective than it should be. The America Invents Act (AIA) was designed to further increase the costs and burdens and make the system mainly work for large companies as it does in Europe. (There are almost no individual inventors in Europe). Since 2000 we have made a number of changes to HARMonize are patent system with the rest of the world and they have all resulted in the system you are complaining about.

      Patents still have some value for smaller companies though. You have to think of IP like a physical lock. You lock the doors to your car, but that does not stop someone from breaking the window. The same can be said about locking your house, safes, etc. What you are doing is trying to create a big enough barrier to entry that it slows down your competition and increases their costs enough to justify the expense of the patent and related legal work. For most small companies the goal is to increase the costs/uncertainty of a competitor enough that they will buy you out instead of compete with you.

    • John Smith says:

      I agree with your $0.02, dnk. I am a patent attorney turned entrepreneur. The patent system profits only lawyers. Most companies do not benefit. The general public does not benefit. Inventors do not benefit.

      I say, get rid of the patent system and let companies spend the money on something more profitable. The patent system is not helping innovation — except innovation in patent trolling — and it’s profiting only those who do not deserve a profit. Indeed, patents harm innovation more than they help, by giving a monopoly and stifling competition.

      To me, the results of this survey confirm that most companies would agree with me.

      • dbhalling says:

        What a bunch of nonsense. Those countries with the weakest patent systems do not invent, do not disseminate new technologies, have the lowest standard of living, and have the lowest economic freedom scores. Your point of view is absurd.

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  12. Dave R says:

    One historical note: The patent system was designed for industry, where “things” are the whole point. The fact that the old system is an absurdly bad fit in the post-industrial age is pretty much a given, and there is a tremendous amount of evidence out there for just how absurd the fit is – software patents as a class are a prime example – jamming software into the same “patent” box as a machine is a complete failure, and the number and expense of the legal messes made because of this are legion. The “feature patent” wars between Apple, Samsung, etc. are prime examples – if there was any real originality to the patents at issue, it wouldn’t be such a comedy, but in reality what they are fighting over has more to do with who has the bigger legal staff in order to create “patents” out of common knowledge and common practice, something that is expressly against the expressed intent of the body of patent law. A basic sanity check in the legal system would have thrown these exhorbitant wastes of money out on their collective rear end.

    I would assume that dbhalling has an interest in the continued existence of the patent system, and based on the level of knowledge expressed here, could easily be a patent lawyer/patent troll himself. The absurdity is the system itself in this post-industrial environment, but like everything else in the law, it is excruciatingly slow to change with the times, and perhaps this is justified. We as a society have not really decided what in the software world is of value and should be protected beyond the one or two years of its commercial life.

    Another absurdity of “the law” is the bought-and-paid-for extension of copyrights that has happened recently here in the US. While I suppose that the publishing industry, what is left of it, is entitled to fight for its life, they should not be allowed to create new roadblocks to the expansion of knowledge in that fight.

    • dbhalling says:

      Dave, unless you are against economic growth and want to go back to the dark ages you also have an interest in the patent system, just like you have an interest in a well functioning property system. As I explained above there are a number of problems with the patent system, but they have nothing to do with technology passing them by. And the biggest problem is lack of respect for property rights.

      • Dave R says:

        Property rights and software have nothing to do with each other, a point that is apparently quite lost on the legal “minds” that made the patent system what it is. This point is hammered home even further by the blizzard of legalese that is attached to any “purchased” software claiming that you don’t own the software and can’t hold the company (that charged you the outrageous price to “purchase” the software) liable for anything.

        The fact is that most software “patents” are mostly useless paper because the things they are claiming to patent are almost always already done in the open source world (usually done better, too) and are therefore already in the public domain; since there is no profit and considerable cost involved in challenging the patent’s validity, it never happens, and the patent system is full of worthless “patents” just waiting for some troll to come along and make life expensively difficult for an innocent third party.

        Another example of the mockery the patent system has become: Guaifenesein was cheap and readily available until Reckitt Benckiser patented it and put the screws to everyone else using it. That is NOT progress of ANY sort unless you are a lawyer for that company.

        A well functioning property system is fine where real items of property are concerned, but ideas are not property. The idea of “intellectual property” only makes sense to accountants and lawyers.

        When the patent system figures out how to keep bigger companies and better lawyers from being the only criterion for patent validity, then I might develop some respect for it, but until then it is an exxpensive bad joke and nothing more.

  13. dbhalling says:

    Property rights have as much to do with each other land and property rights. Software is just a way of wiring an electronic circuit, better known as a computer. logically you cannot be against software patents unless you are also against patents on electronics.

    I have already stated that our present patent system has gotten off track and become more about protecting big companies, in fact I wrote a book about it. But a correctly structured patent system is critical to startups and the software and biotech industries did not take off or get funded until it was clear that they could get patent protection. The macroeconomic facts are clear that countries with weak or nonexistent patents do not invent and they do not disseminate new technologies. Without property rights, large companies sit on old technologies. Only the threat of startups with new technologies forces them to invent new technologies of their own.

    • Dave R says:

      And I have stated that, as one who creates software and knows a little about the process, that the concept of “Intellectual Property” as applied to software is a complete oxymoron. In the marketplace, software is only as good as the latest update, and for it to remain of any worth to anyone, it needs to continue to evolve. The patent process, geared towards largely immutable “things,” cannot protect this evolution.

      To see software as “just a way of wiring an electronic circuit” is to show complete lack of comprehension of the entire area of software, both what it is, and how it is used. Where the computer’s wiring changes once or twice over the lifetime of the computer, the software changes constantly, even rewriting itself. The software changes states trillions of times over the lifetime of a modern computer. The analogy is so wrong on so many levels, but the most obvious one is that it overlooks the basic fact that software is NOT static, but constantly changing, and at a rate many orders of magnitude faster than anything else in the history of mankind outside of his own brain.

      There is also no such thing as “software technology” regardless of marketing hype – software is a distilled form of knowledge, and knowledge is a constantly increasing and changing thing; To call it property is to ignore the fact that once it is used, others will see it and immediately change and/or improve on it – this process is inexorable and unavoidable, just like musicians influence each other by being heard in public. Knowledge cannot be the exclusive property of anyone – to use it is to spread it.

      What devalues knowledge is not its spread, it is someone else doing better – making an addition or improvement – and there is nothing in patent law that can stop that. Where software patents have gotten incredibly out of hand is when lawyers try to apply a so-called patent to prevent the improved version from coming to market – an abuse that our legal system has done nothing about because it has no comprehension of the nature of what it is “protecting.”

  14. dbhalling says:

    You lack of understanding of computers is amazing. It is a fact that a computer is just a way of wiring and electronic circuit. It’s not magic, and all the code is just ways of changing the states of switches.

    If S/W changes so fast then patents are irrelevant and you are bitching about nothing. But the reality is that most S/W builds on other people’s inventions and you just don’t want to pay people for their work.

  15. ChicagoPatentAttorney says:

    Anyone who has bought a Wednesday newspaper for the grocery store advertisements and coupons knows that trademarks are extremely important to the business. Without them, the grocery store cannot identify the goods on sale to the consumer except for certain commodity goods (certain fresh fruits and and just about all vegetables). Consumers want to know if he price is for the store brand mac and cheese or Kraft. I bet all of those grocery stores indicated that trademarks were unimportant. Please note: they are not the holders of those trademarks. They only rely on the trademarks to identify goods to consumers.

    • Gabriel says:

      Sure, but the issue I have with USPTO’s report is their conclusion that since grocery stores rely on trademarks, we should attribute all the jobs and economic value added by grocery stores to trademarks. Grocery stores also rely on electricity, as does virtually every business in the country. Do we then attribute all economic activity to electricity?

      In USPTO’s report, IP “accounts” for 40 million jobs and 35% of GDP in the way that power and roads “account” for all jobs and 100% of GDP. In other words, those things are obviously important, but the numbers are almost meaningless.

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