Patent Quality vs. Quantity

Patent Quality vs. Quantity

According to WIPO (World Intellectual Property Organization), China filed 1.5M patents in 2020, while the US had roughly 0.6M filings for the year. In 2011, both China and US had roughly 0.5M filings. So, in a matter of the decade, China tripled its filing numbers as the US stayed flat. In the US, IBM ranked number one with 8.6K patents in 2021 and Huawei, which has been banned by US regulators, rose in rankings ahead of Intel, Apple, Microsoft, and Qualcomm. To the untrained eye, it might seem like the Chinese are innovating fast and furious, and to some extent they are, but patent counting is not the only measure that will determine the innovation rankings.

Even if we base our assessment on patents as a way to determine innovation, patent quantity is one of the most misleading metrics one can use to assess quality of the portfolio or individual patents. The media barely understands the complexity of the patent system, let alone possesses the skills to determine what makes a patent valuable. So, it often resorts to the least complex metric – the total number of patents. Of course, the more “issued” patents you have, the probability that there is some valuable IP in the mix goes up, but any analysis purely based on the number of patents in a portfolio won’t be able to determine its overall value.

In a domain like wireless or telecommunications, the analysis gets even further muddied. There is the practice of “Standard Essential Patents,” or SEP’s, through which various players declare based on their internal assessment and strategy the SEPs they own. This provision is just a rubber stamp rather than an objective assessment of what’s essential to the standard. The value of the patent(s) can only be determined by an objective (though subjective) assessment of what areas the patents read on.

Unfortunately, misunderstanding the patent quality vs. quantity debate has policy implications as well. There are different ways regulators might respond to the emerging trend. They might see China gaining a large share of the granted patents and see that as a threat, and therefore try to weaken the patent system, which in turn impacts the legitimate players and patent portfolios in getting their fair share of value. They might instruct the USPTO or respective patent bodies to get stringent on how they award patents. The USPTO is probably the best patent agency in the world and is widely revered for its thoroughness. Other patent bodies look to the USPTO for guidance, but a misplaced policy might damage how the patent bodies work and do their jobs.

Overall, it will be wise for the ecosystem, policy makers, and players involved to focus on the merits of the innovation economy—the substance of what really matters in invention and IP—and apply critical thinking to understanding the true value (quality) of patent portfolios. It is determined by analyzing the patents and claim construction and not by merely counting (quantity) them.