4 Signs the U.S. Position as Global Innovation Leader is Under Threat

June 7, 2018

1 Patents and VC funds are moving overseas

Did you know that patents often play an integral role in securing venture capital funding? In fact, a startup that holds a patent significantly increases its probability of securing VC funding1.

Financial Times Global Business Columnist Rana Foroohar echoed that sentiment in a recent column, writing:

“There is little doubt that strong IP protection is linked to stronger economic growth. A recent paper from the National Bureau of Economic Research found that holding a patent (and being able to defend it) increases the probability of securing venture capital funding by 53 per cent, start-up job growth by 36 per cent and start-up sales by 51 per cent.”

With the U.S. global share of VC funding falling from 81% in 2006 to 54% in 20172, it is getting harder and harder for American inventors to raise the capital they need to fund their innovation and bring their technological and scientific breakthroughs to market.

1 Startups aren’t starting up at the same rates

Not coincidentally, startup formation in the U.S. is at historically-low levels. While startup activity has picked up recently, we are still at well below the pre-Great Recession average, indicating continued drag in the start-up sector. The reasons are multi-faceted, but a weaker patent system and years of anti-IP narrative in Congress and the media have played a part. Patent policy experts Gene Quinn and Steve Brachmann of IP Watchdog described it this way:

“A careful look at how Google and others have so successfully lobbied over the past decade to weaken patent rights, making it harder for disruptive innovators to both obtain and keep patents, explains why tech startups find an ecosystem that has evolved to protect market incumbents at the expense of new companies with new ideas and innovations that cannot be patented.2” – Gene Quinn and Steve Brachmann of IP Watchdog

3 China is outpacing the U.S. and the World in filed patents

China's focus on innovation has been well documented and its efforts are paying off. Not only are its patent filings outpacing the U.S., but as the chart below from Innovation Alliance shows, China is also outpacing the world. The impact is quite simple: where innovation goes, investment follows. For the American inventor and the U.S. economy that represents a serious threat.

Innovation Allliance International Patent Applications in 2017

4 U.S. falls to 12th place in global ranking of patent system strength and 11th place in global innovation ranking

If that weren’t enough, perhaps the clearest sign of the U.S. slide has come in the form of two recent rankings. The Chamber of Commerce Global Innovation Policy Center now ranks the U.S. in 12th place for patent system strength in its International IP Index, falling behind countries like South Korea and Spain, and tied with Italy. And the latest Bloomberg Innovation Index now ranks the U.S. in 11th place for innovation, falling out of the top ten for the first time. These indicators translate into less confidence in U.S. innovators and investors, and less money and jobs flowing into the U.S. economy.

How you can help

Fixing the system starts at the Congressional level. The bipartisan STRONGER Patents Act, introduced in the Senate by Senators Chris Coons (D-DE) and Tom Cotton (R-AR) and in the House by Representatives Steve Stivers (R-OH) and Bill Foster (D-IL) provides a roadmap for starting to reverse this course and restoring our position as a global innovation leader.

Learn more about the legislation here.

Let your representatives know that you support The STRONGER Patents Act by sending them an email here and tweeting at them here.

Don’t forget to stay involved with Save The Inventor and receive patent news updates in 2018 by signing up for our email newsletter here.

1 USPTO Economic Working Paper, “The Bright Side of Patents,” December 2015

2 https://pitchbook.com/news/reports/4q-2017-pitchbook-nvca-venture-monitor

3 http://www.ipwatchdog.com/2018/02/15/american-entrepreneurship-languishe...