IP Related Services and Products

It has been a while since my last post, and far overdue from my original intentions. Unfortunately, I have experienced a tragic life event. One that I would not wish upon even the worst of enemies, one that no parent should ever have to endure. My daughter, Sara Catherine Hayes, passed in April of 2024. She was absolutely a gift and a miracle, the very best part of me. She is and will continue to be missed.

In my last post, I mentioned that my next post would be about “series A - series C

funding, the Securities and Exchange Commission (SEC), and IP equity.” However, I am going to take a detour and get to that when I am better able to do so.

This post is a discussion about our shrinking middle class, market control of the IP related services sector, and how addressing this market control through a comprehensive set of policies may be one solution to help address the socioeconomic changes we are witnessing in this country. ??

The issue being raised in this post is that large businesses have highjacked the market for IP related services. They have in effect generated so much demand that service providers are running at or near capacity, leaving little if any of the remaining supply for smaller entities.

By implementing comprehensive policies that include provisions for eliminating this type of control on the market, and other provisions to help smaller business entities, this could have the effect of making a change to some of these socioeconomic issues that are currently being witnessed in this country.

This post will be followed up with another post directed at small businesses looking to protect their IP for the first time. The market for IP related services and products can be difficult to understand. Making purchases in any market always involves some level of risk but making uninformed or uneducated purchases in a market you don’t understand can be especially risky.

The purpose is to provide an overview of the market for IP-related services and products so that more informed decisions can be made before purchasing these services and products. ?

Middle Class

The economy of the United States seems to be doing ok, but perhaps not as well as it should. We all, especially the older generations, see the changes that are taking place to the social and political fabric of this country. How far these changes continue to take us is anyone’s guess.

??According to the Pew Research Center, the middle class in this country shrunk from 61% of the population in 1971 to 51% of the population by 20231. Over the course of this period, the greatest decline was realized from 2000 to 20142. It is unclear if the trend is likely to continue, but considering recent advancements in technology it is likely so. ?

History is replete with examples where significant political changes were brought about due to certain socioeconomic factors, a shrinking middle class being one of the major factors. In other words, the once happy masses became unhappy with their new economic stratum and took action to make changes that remedied or attempted to remedy the issues.

The changes, in some cases, came in the form of policy changes that were viewed as being needed to address the problems. In other cases, the policy changes (or carrot) may have been accompanied with a little persuasive reinforcement (the stick).

Descending Middle-Income, (Rapid) Ascending Upper-Income

??????????? The middle class is shrinking. The cost of living has increased substantially and continues its ascent. Jobs that offer middle-income wages are not as abundant or as readily available as they once were. However, as the middle class has shrunk, the number of low skilled jobs and the number of high skilled jobs has grown, consequently increasing the lower or working class and the upper-class ranks. ?

The reasons are likely many, some of which would probably broach subjects most would find too uncomfortable to discuss. It could be the effects of globalization or an imbalance in immigration that bring so many workers here to work low skilled jobs and high skilled jobs. It could be a black market for labor that is estimated to have a monetary value of between 1.7 trillion to 3.2 trillion, in effect matching or exceeding the GDP of some major European countries. It could be the greed of corporations at a time of record revenues and profits. It could be several things. ?

Additionally, anyone that works or has worked in engineering, research, software development, office management, etc., should realize that with the advancements in computing technology and Artificial Intelligence (AI), the socioeconomic demographics of this country are likely to continue following the current trend.

A Public Service … for the Few?

The Department of Commerce is a cabinet-level agency of the federal government. Its goal is to identify and implement mechanisms that facilitate economic growth. The USPTO (United States Patent and Trademark Office) is an agency within the Department of Commerce, serving as a mechanism to promote economic growth through innovation.

The Department is a public service sponsored by the U.S. federal government. In this capacity it provides for different forms of assistance to communities and businesses for the purpose stated above.

One of those forms of assistance can be found in the recognition and enforcement of patents, trademarks, and copyrights. These are legal instruments enforceable in a federal court of law. The rights bestowed upon their owners are exclusive rights to make, use, or sell inventions protected by these instruments.

As tools of the Department, one would naturally assume that the purpose of granting such privileges is to help facilitate economic growth and improve the lives of as many people as possible.

Market Dominance

Large business entities have the resources and motivation to file for protection of various IP-related products, such as non-provisional patent applications, design patent applications, and trademark applications each year.

These entities have the resources to influence or control the market that provides services for these products. Service providers, either in response to or as a driving force, have adapted their business models to improve the efficiency of their supply chains.

According to USPTO (United States Patent and Trademark Office) statistics3, 4, there were approximately 232,000 utility and design patent applications filed the year I started work, circa 1997. In 2006 (data for earlier years are not readily available), there were about 31,000 IP practitioners (attorneys and agents) registered with the USPTO.

In 1997, law firms generally expected practitioners to bill their clients around 1,600 hours per year for all IP-related billable matters. For a utility application for patent, firms would allocate 40 hours for a practitioner to draft an application for examination by an Examiner with the Office.

A firm, depending on a practitioner’s education and technical background, could bill clients $250 to $350 per hour of service. A complex utility application for patent could be drafted, depending on the client, for about $10,000.

In 2017, there were approximately 650,000 utility and design patent applications filed, about three times the number of applications filed in 1997. In 2017, there were about 46,000 practitioners registered with the Office, representing about a 67 percent increase from 2006 to 2017.

A firm now, in general, still expects their practitioners to bill around 1,600 hours per year, but they bill their practitioners out to clients at rates of around $500 to $700 per hour. Today, however, practitioners are expected to render comparable work products at 20 hours or less. Depending on the level of experience, it can be as low as 10 to 12 hours.

A complex utility application for patent still costs around $10,000. But, at least with respect to utility applications for patents, firms now get 2 to 3 times the number of applications out of each practitioner per year.

Unnecessary Consumption

It is reasonable to assume that these large business entities are likely responsible for the significant increase in the number of filings over the last 20 years. Previous 20-year periods, dating back to 1963, do not show similar increases in output or anywhere near these levels.

Contrary to public perception, these large business entities rarely engage in direct IP conflicts with each other. Their IP portfolios, including pending applications for patents and granted patents, are seldom used against competitors in this manner.

Primarily, patents serve as deterrents. License agreements, also known as cross-license agreements, are periodically negotiated between competing entities. These negotiations are based on business-related technology areas, the number of filings per technology area, the number of patents issued per technology area, and the importance placed on each area.

Basically, their IP portfolios are paper mechanisms that can be used to prevent legal issues from arising, providing the instruments by which freedoms to operate are assured.

In the context of the Department of Commerce, their portfolios, or significant parts of them, are a waste of resources. If freedoms to operate are all that is needed between industry peers, surely there are better ways to go about it than clogging up the respective market for these services. ??

It is understood that there are companies that use their IP portfolios to create, develop, and advance markets, such as Qualcomm, but the crux of the argument still stands. The excesses of the few may be having the unintended consequences of limiting the opportunities of the many.

Small Business

We all know how important small business is to the U.S. economy. Not everyone can work for a fortune 500 company. And not everyone wants to work for a fortune 500 company.

Available data from government agencies and other sources can provide an insight into the level of measure small businesses contribute to the socioeconomic health of this country. The percentage of all businesses considered small, and the percentage of people small businesses employ would be one example.

It is also believed by many, including myself, that small businesses in general are more creative and efficient when it comes to sensing and identifying the needs of a market and rendering the solutions to address those needs.

If the effect of IP and their rights amount to little more than a steady revenue stream for the federal government and law firms, and nothing more than a nuisance to established large business entities (believe me, that is what they think of patents), why even have the system. The coffers of law firms and the government can be filled in other ways. ?

If the effects of obtaining IP and provisions of bestowing their rights are intended as a public service to foster and facilitate innovation and economic growth, it is hard to see or correlate the results with the intent.

Comprehensive and Substantive Assistance

There are examples throughout history where income inequality between the classes resulted in socioeconomic changes. The Russian Revolution and the Cuban Revolution would be a couple of examples. A significant factor that contributed to the initiation of both revolutions was the significant change in middle-class demographics.

The US itself has experienced a major shift in middle-class demographics that was much more significant than the one we are witnessing now, or for the time being anyway.

One of the founding fathers, Alexander Hamilton, championed the industrialization of America shortly after the revolutionary war. His purpose was to change our primary means of production from one that was heavily dependent on farming to one distributed between agrarian and industrial.

The Great Depression resulted in a significant change in middle-class demographics. Franklin D. Roosevelt introduced the New Deal that introduced several policy provisions that helped lay the foundation for a flourishing and prosperous middle class. ?

In response to significant socioeconomic changes, the US Federal Government has implemented comprehensive and substantive policies to address the systemic issues and vulnerabilities exposed by these changes. Reforms were necessary to restore confidence in the economy and protect citizens from the excesses that contributed to the changes.

In Summation

??????????? We have a growing lower and upper class, a shrinking middle class due to a lack of middle-income paying jobs, and an increasingly divided and hostile political environment.

Perhaps not all is as bad as it seems. Or perhaps it is worse. Perhaps there isn’t even any issue at all. Regardless, finding ways to help others who need that help can’t be all bad. Plus, it might help prevent some crazy politicians from flipping the script or constitution on us.

With the recent advancements in certain technologies, AI/ML based applications, 3D printing technology, Industrial Internet of Technologies (IIOT), software automation, etc., it would be a form of smart governing to implement policy to assist communities, e.g. those identified as distressed communities, to retool their economic base for the 21st century.

And, while our political (upper) class is doing some smart governing, perhaps they can implement some policy capable of loosening the grip big business has on the IP related services market.

1.?????? Pew Research Center. (2022, April 20). How the American middle class has changed in the past five decades. Retrieved from https://www.pewresearch.org/short-reads/2022/04/20/how-the-american-middle-class-has-changed-in-the-past-five-decades/.

2.?????? Pew Research Center. (2015, Dec. 09). The American Middle Class Is Losing Ground. Retrieved from https://www.pewresearch.org/social-trends/2015/12/09/the-american-middle-class-is-losing-ground/.

3.?????? U.S. Patent and Trademark Office. U.S. Patent Statistics Summary Table, Calendar Years 1963 to 2020, 05/2021 update. USPTO. https://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm. Accessed 26 September 2024.

4.?????? U.S. Patent and Trademark Office. (n.d.). Historical Rosters of Patent and Trademark Practitioners. Retrieved from https://www.uspto.gov/learning-and-resources/patent-and-trademark-practitioners/historical-rosters.

?