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Funding Innovation Takes a Backseat Due to Budget Cuts

Everyone knows that in America, innovation drives growth. The United States is no longer a manufacturing hub, China has taken that title. The U.S. no longer relies on agriculture, mining, or outsourcing to sustain growth. However, this advantage may be fast becoming a non-driver of growth. With the recession, budgets have been cut and inventories are being protected.

For the first time in almost 13 years, innovation has slowed down. For 2009, the number of patent filing went down 2.3 percent from last year after years of growth, year on year. According to David Kappos of the Patent Office, “That’s unfortunate because patent filings are a reflection of innovation.” In turn, the development of new products and services provides a lot of opportunities in the country. It is recognized as a key to long-term success in today’s economy.

At the same time that number of patents filed by US companies fell, US patents that are issued to foreign businesses rose to 6.3 percent. For companies in Silicon Valley, this is a worrying sign. It has been a leader in the industry for decades but it might be in a vulnerable position because of the recession. Symantec, one of the most notable companies in tech security reported that their filings went down 25 percent as a direct result of a bigger macroeconomic issue.

Cost Cutting

Companies cited cost cutting as the main reason why they didn’t file for patents. Applying for US patent costs around $15,000 in processing and legal fees. This doesn’t include the costs companies have to bear in case they need to defend their patent. Generally, legal fees cost about $3 million to $6 million.

Henry Nothhaft from Tessera noted that “Once you have a patent, you have to go out and defend your own turf.” When companies don’t have the financial back-up to defend themselves with their finances, some would rather keep their invention hidden to prevent others from duplicating it.  Ultimately, it can spell trouble for US workers. The Obama administration cited innovation as the key to an economic recovery. It might not be the case if this competitive edge is eroded.

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