By Marshall Phelps, Microsoft Corporate Vice President for IP Policy and Strategy
IAM Magazine, April/May 2008
Editor’s Note, May 13, 2008 - This article originally appeared in issue 29 of Intellectual Asset Management magazine, published by Globe White Page Ltd, London, UK.
America has always thrived because of its entrepreneurial spirit. And nothing embodied this spirit more than the independent inventor, an iconic figure who symbolises the best of Yankee ingenuity and our frontier, problem-solving spirit. But for nearly a century now, independent inventors have for the most part been marginalised as a force in American industrial development by the dominance of in-house corporate R&D.
That may be about to change. There are industrial and technological forces at work today that may soon propel independent inventors once again to the centre stage of America’s great economic success story. But to appreciate what the independent inventor’s surprising comeback might mean for this nation, one first has to go back to the future, as it were, and understand the central role they once played in American industrial growth.
Although most people don’t realise it, the founders of our country very deliberately set out to construct a patent system that could stimulate the inventive genius of the common man. They rejected the elitism of the British patent system, which charged exorbitant patent fees equal to 10 times the annual per capita income of its citizens, and instead reduced US patent fees to a level that even ordinary workers and farmers could afford. Administrative procedures were also simplified. And through other means as well – including allowing anyone applying for a patent by mail to do so postage free – the patent system encouraged innovation on a very broad scale.
The results were immediate and dramatic. As Thomas Jefferson put it, the new American patent system “has given a spring to invention beyond my conception”. Only 13 years after the first patent law was enacted by Congress, the United States had already surpassed Britain – the acknowledged leader in the industrial revolution – in the number of new inventions patented. By 1860, the number of new inventions patented in the US was an astonishing seven times the number in Britain.
The reason for this dramatic surge in American innovation, of course, was that by design the American patent system encouraged a much broader range of creative individuals to take part in inventive activity than was the case in Britain and other Old World countries. Whereas most British inventors came from privileged backgrounds, the vast majority of America’s inventors came from humble beginnings – farmers, factory workers, carpenters and other artisans, mostly.
Indeed, of the 160 “great inventors” of the 19th century, over 70% had only a primary or secondary school education. Half had little or no formal schooling at all. And many of the most famous names in American invention – men such as Matthias Baldwin (the locomotive), George Eastman (roll film), Elias Howe (the sewing machine) and Thomas Edison (the electric light and the phonograph) – quit school at an early age to support their families.
But the American patent system did not simply encourage the masses to participate in inventive activity. It made it economically feasible for them to do so. By granting the country’s many inventors secure property rights to their discoveries for a limited time, the patent system enabled the formation of a large and stable marketplace for technology in which these inventors could license their patents and thereby make a full-time career of innovation.
Or as Abraham Lincoln (himself a patentee) noted, the brilliance of the US patent system was that it “added the fuel of interest to the fire of genius”.
And that’s how the world’s very first national market for technology was born. Fuelled by innovation and embracing the entrepreneurial spirit, it enabled independent inventors to post announcements of their patented discoveries in publications such as scientific American that were expressly founded for the purpose of disseminating information about the technology market. Companies would then license patented inventions from this market and use them in their own product development.
In those days, even the largest corporations thought it unnecessary and inefficient to employ an in-house staff of inventors and engineers. In 1894, for example, American Bell Telephone Company’s R&D department licensed 73 patents from outside inventors versus developing only 12 inventions from its own employees.
It was this independent inventors’ market created by our democratised patent system, combined with the entrepreneurial drive of the American people, that really powered our industrial growth in the 19th century and made us the “arsenal of democracy” in the 20th.
By the 1920s or so, the growing cost and complexity of technology development forced most corporate R&D departments to begin hiring full-time professional staffs of in-house inventors rather than getting their product technologies from the independent inventors’ market. And over the next 85 years, as this process intensified, independent inventors were marginalized as a central player in national innovation.
Ironically, the ever-increasing cost and complexity of technology are now having the opposite effect. As technology innovation becomes ever-more diversified and heterogeneous, a greater share of innovation is taking place away from the centralised R&D labs of large firms in outside networks of innovators, including small firms and independent inventors.
Indeed, few if any companies today – even the largest ones – can hold all the pieces of even their own product technology in their own hands anymore. And so firms are discovering that they simply must collaborate with others if they want to survive and prosper in this increasingly decentralised and multi-polar world.
At Microsoft, which has the largest annual R&D investment of any software firm in the world – US$7 billion annually – we spend nearly US$400 million annually on sharing innovation through collaborative licensing agreements aimed at bringing great ideas to customers. We provide access to the fruits of our research and innovation as well as tap into the innovation of others through licensing agreements based on mutual respect for IP and with an ultimate focus on working together to deliver creative customer solutions.
To date, we have signed more than 475 technology collaboration and licensing agreements with companies of all sizes, industries and geographies to accelerate the infusion of new innovation into the IT ecosystem. We have even created an IP Ventures programme to put the technologies developed at Microsoft Research into the hands of independent inventors and entrepreneurs to help create new innovations and stimulate economic development. Moreover, we have also expanded our collaborative projects with top universities to ensure that cutting-edge research and innovation can thrive in an environment immune from the pressures or demands for immediate commercial application.
The truth is that even we can’t go it alone anymore, and we want to work with anyone and everyone we can to help create new breakthrough products and tap new market opportunities.
This opens a very large door for independent inventors. Could today’s new trend of collaborative or open Innovation, along with the ubiquity of the internet, give birth once again to an independent inventors’ technology market (albeit in new form) as a major force in US innovation and economic development?
It’s still too soon to tell. But there are more than a few of us in corporate America who would welcome the return of America’s independent inventors to the forefront of innovation.