Inc. Magazine reports, in its 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.