September 2010 issue that 19% of the companies ranked in the magazine’s “Inc 500″ list hold patents. This is reported on page 188 of the print magazine as a part of the CEO survey. On page 126, it is reported that the CEO survey component of the Inc. 500 list comprises data drawn from 304 responses to an online survey of the CEOs of the companies listed in Inc. 500. This post looks at what the 19% figure means and what questions it leaves open.

Inc. lists the criteria used to determine whether a company qualified for consideration in the list. The list ranks companies based on revenue growth from 2006 through 2009. To qualify, the companies had to be generating revenue by June 30, 2008, they had to be U.S.-based, privately held, and for profit. The companies could not be subsidiaries or divisions of other companies.

A number of reasons may explain why more of the companies do not hold patents. First, business operating in some sectors find more value in patents and therefore seek patent protection more than business in other other sectors. Advertising and marketing companies had more companies represented in the list than any other type of business. It is likely business in advertising and marketing, generally, seek patent protection less than say telecommunication companies. According to the graph on page 111 about 24 of the INC 500 companies were in the telecommunications sector, whereas about 60 companies were in advertising and marketing.

Next, patents are expensive to obtain. To qualify for the list, a company must be independent and not a subsidiary or division of another company. It is likely reasonable to guess that independent startup companies, at young as 3 years old, are likely to have less funds available for patent protection. See my post: Pay for a Software Patent Application or a Software Engineer?

INC. does not report the percentage of companies on the list that have a patent application pending at the U.S Patent and Trademark Office (USPTO). According to the USPTO, the average pendency of a patent application is 34.6 months based on FY 2009 statistics. That means from the date a patent application is filed it take, on average, about 3 years for the government to issue a patent on that application. Therefore it is possible that some subset of the companies on the INC 500 list might have patent applications presently pending.

Last the survey related to the INC report does not assess other types of Intellectual Property such as trademark registrations.

I am not sure that we can draw any conclusions from the 19% reported in INC. Many factors influence a companies decision to seek patent protection. Further the long patent application pendency period leaves the possibility companies that do not presently have a patent could have a patent application currently pending.

• Microsoft Puts C#, CLI Under No-Lawsuit Umbrella [TechNewsWorld] –
  "Microsoft stated Tuesday that it will not pursue legal action against open source software developers using C# and CLI programming languages. This will likely make some developers much more confident in using the technologies. However, the promise does not include the non-ECMA parts of Mono . . ."

• Start-up Entrepreneurs & CEO’s: If Your Goal is Investment or Acquisition, You are Probably Patenting the Wrong Things [IP Asset Maximizer Blog] -
  “The great majority of patent seekers (including those at otherwise sophisticated large companies) believe that patents are best used to keep others off their ‘technology lawns’.” However, Jackie Hunter asserts that companies should engage in offensive patenting by “putting a patent fence around the big [competitor] company’s technology lawn. . . [This] will reduce or prevent the bigger player’s free movement in its desired business space.” See Jackie’s article for more details on “offensive patenting” strategies.
• Patent Map [FreePatentsOnline] -
  “FreePatentsOnline has launched a patent map . . . The Google Map mashup is located at www.localpatents.com, where today 3,143,630 patents and patent applications are shown in their respective locales, based on inventor and assignee cities. An assignee is the entity that holds the rights to the patent. “A big reason we now show patents on a map is for job searching,” said Erik Reeves, CEO of Patents Online, the company behind FreePatentsOnline. “You may imagine that where you live, or where you’re moving, is a place with limited innovation. But with a few clicks in a given geographic area you may discover one or more companies inventing new products or services of great relevancy to your job interests. And, to interview armed with knowledge about a company’s intellectual property makes you a much better prepared candidate.”
• Bilski, Software Patents and Business Method Patents [State of Innovation] -
  “Will the Supreme Court use the In re Bilski 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008) case to deny patent protection to information age technology? Many observes believe that this case will have major implications for software and business method patents.”

• Bilski at the BPAI – What a Mess (Part 1) – [The 271 Patent Blog] –
  "…the process of determining patentable subject matter after Bilski has become a weird, metaphysical endeavor. It has gotten to the point that a given claim may receive 4 different interpretations from 4 different people, and each of them could be arguably correct. In the case of computer-related inventions, the end result of a patentability analysis is rarely supportable with a single, cogent rationale."
• In Re Bilski Discussion [Intellectual Property Colloquium] –
  "In its . . .decision in In Re Bilski, the Federal Circuit articulates a new test for whether a given innovative process falls within the subject matter of federal patent law. In this audio presentation, Professors Rob Merges and John Duffy join moderator Doug Lichtman to think through what the new test actually means; where it came from; and whether it will actually change the kinds of patents that issue." (Nov. 2008)

• Patent Thickets, Bad Patents, and Costly Patent Litigation [The Volokh Conspiracy] –
  . . .we must be especially cautious in assuming that modern problems are necessarily different from those experienced in yesteryear . . . As Professor Khan has shown, the American patent system excelled precisely because it did what none of these other patent systems [England, Germany, and France] would do: It secured inventions as property rights within an institutional framework governed by the rule of law.
• Software rankings: Microsoft in 1st, then IBM and Oracle [CNET News] – –
  The R&D focus at IBM has shifted more toward software and services. More than 70 percent of the U.S. patents IBM received in 2008 (IBM's 16th straight year of patent leadership), were for software and services.
• May 26, 1981: Programmer-Attorney Wins First U.S. Software Patent [Wired.com] - –
  Indian-born Asija had created the program years before, in 1969. He wanted to patent it and visited a few attorneys. But the U.S. Supreme Court had ruled against software patents, and the conventional wisdom was that software would remain not patentable, that it could be protected by copyright. . . . So he personally took on the challenge of getting a patent for his own software, fighting the battle as his own lawyer. He went to law school, learned patent law and passed the bar exam. He filed his application for the Swift-Answer program with the U.S. Patent and Trademarks Office on Dec. 30, 1974.