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Little Gain Seen in Patent Filings

The number of applications rose less than 2% in fiscal 2002. Experts worry that business is showing diminished ability to dream up new ideas.

October 21, 2002|Jube Shiver Jr. | Times Staff Writer

WASHINGTON — The number of applications for U.S. patents is barely growing, raising concern that a falloff in innovation may hurt the nation's economy in general and California's high-tech sector in particular.

Patent applications -- a key predictor of compelling products in the pipeline -- had been growing at double-digit rates since the mid-1990s. But in fiscal 2002, which ended Sept. 30, the number of patent applications was about 350,000, less than a 2% increase over the roughly 345,000 applications filed in fiscal 2001.

Patents grant inventors special property rights that give them legal protection to profit from their ideas. A surge in patents helped fuel business productivity gains and rapid economic growth in the late 1990s, especially in the technology sector.

But now, experts worry that business is showing diminished ability to dream up new ideas -- and that could undermine the nation's already anemic economic recovery.

U.S. companies will increase research and development spending by just 3.2% this year, according to a study by the nonprofit research foundation Battelle Memorial Institute and R&D Magazine. In 2000, when the "new economy" was humming, businesses boosted their R&D budgets by 10.8%.

"There is not a lot of money floating around for R&D to spur innovation," said Rob Enderle, a technology analyst for Santa Clara research firm Giga Information Group. "That's why a lot of financial forecasts put the economic recovery as far out as 2004."

Experts don't believe that the country is on the verge of a long-term creative blackout. Rather, they say patent applications may simply be undergoing a periodic lull, returning to the patterns of the 1960s and 1970s when applications grew more slowly than the economy or the population as a whole.

There remains in the system a backlog of 420,000 patent applications from previous years.

Nevertheless, the meager growth in new applications worries James E. Rogan, a former Southern California congressman who now leads the U.S. Patent and Trademark Office.

"The slowdown concerns us," Rogan said. "We aren't sure why" it's happening.

Anecdotal evidence of lackluster innovation isn't hard to find.

The creative wave in Silicon Valley that produced the first commercial Web browsers and quantum leaps in computing seems to have petered out. As a result, many businesses and consumers have lost their enthusiasm for buying high-tech gadgets.

"Nothing is happening to the desktop computer, and people in the computer industry are flat-out freaking out," said Michael Erbschloe, a senior research analyst at Computer Economics Inc., a Carlsbad consulting firm.

"The computer you bought two or three years ago will do the same things you need done today," he said. "Until we can talk to PCs and have a voice interface -- that would be the next big breakthrough. But that's years, if not decades, off."

Similarly, the lack of big advances in cars is one reason drivers are less prone to trade in their vehicles.

Drivers now hold on to their cars an average of nine years, compared with 7.6 years in 1990, according to Ward's Communications, a publishing firm in Southfield, Mich.

Many compelling features -- such as power steering, climate control systems, catalytic converters and anti-lock brakes -- were conceived decades ago and haven't been matched by comparable breakthroughs in recent years, experts say.

"Engineers are now just tweaking stuff, like adding electronics" to existing mechanical functions, said Richard A. Lentinello, an automotive historian and executive editor of Hemmings Motor News in Bennington, Vt. "The whole idea of creating new engineering marvels has just gone downhill -- at least until we create a car that can levitate."

Many good ideas, of course, are never scrutinized by the patent office and are developed without formal legal protection. But patents underlie many of the country's most important industries, including software and pharmaceuticals.

IBM Corp., the leading recipient of U.S. patents since 1993, earned $1.5 billion in revenue last year from licensing its patents and other intellectual property.

"There is a broad sense now" that patents play "an important role in the economy," said John Lerner, an economist at Harvard Business School who studies the subject.

Patent applications began a steady, 15-year climb in the mid-1980s, when the federal courts allowed inventors to patent not only new products but also the processes for distributing and selling them.

Among the flood of so-called business method patents acquired in the wake of the court rulings were Amazon.com Inc.'s controversial "one-click" shopping system and Priceline.com Inc.'s patent for "reverse auctions" on the Web.

But after a public outcry that such inventions were simple variations of existing technology, the patent office has been subjecting business method applications to stricter scrutiny. The more extensive reviews have lengthened the already slow process of evaluating patent applications.

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