Dude, Where is My Patent?

I guess this is a sad day for American scholars, scientists and technologists…and pretty much the rest of the crew: American residents are no longer granted with the majority of USPTO patents. Indeed, ending fiscal year 2009, non-residents of the USA will own 50.7% of patents granted by the USPTO. You can see from the picture on the right that that this was pretty much coming since ‘06.

How did that happen?

Taking into account that Americans consume close to 25% of world production and that they have a trade deficit, this is definitely not good news. Of course, a deeper study of patent assignees might show greater involvement of American firms in obtaining USPTO patents. This will most likely be the case since American firms are still very active in terms of innovation. However, what this means is that US firms have already started a wave of off-shoring research and development activities. Now this would be the case, this would be even worse news than just having a bad output of US-resident patents for a year or two.

Why off-shoring of R&D is bas for US economy

Innovation is what gives competitive advantage to nations. And for nations to innovate, public policies should be in place to encourage firms to invest in local research and development capabilities. If this kind of policies are not in place, then firms might be tempted, in the same way they are for production operations, to off-shore R&D somewhere where it is cheaper. The problem here is that unlike off-shoring of production operation that have negative effects in trade deficit, off-shoring R&D has a negative effect on innovation capabilities and therefore on the competitive edge of a country.

In other words, American firms are doing the most stupid thing of training other countries in becoming more competitive and are at the same time losing their own competitive edge. I guess this a good example of how being greedy can sometimes be a more expensive approach. Of course, the effect of this kind of policy will no be felt until a certain while. Therefore, my American friends can relax for the time being.