Intellectual Property plays an important role in facilitating process of taking innovative technology to the market place. Peter F. Drucker, the management consultant and author of “Innovation and Entrepreneurship stated that “…Because its purpose is to create a customer, business has two—and only two functions: Marketing and innovation. Marketing and innovation produce results, all the rest are costs."
So the question now is what is innovation? Generally put, an ‘innovation’ is developing a new idea and putting it into practice. Edward Kahn in his book stated that innovation is inherently unstructured, unpredictable, and risky. Nearly 50% of enterprise research and development (R&D) budgets are wasted, and in the United States…show more content… Not all inventions are commercialized, so it is clear that not all inventions result in innovation. Many new ideas are born but “most die a lonely death, never seeing the light of commercial success.” As is the case with inventions, so trade secrets, utility models/petty patents and patents are relevant for protecting, managing, exploiting and leveraging innovations. Economic studies have revealed that patents are the preferred IP right sought for the protection of technological innovations. This seems to reflect the use of the terms ‘innovation’ and ‘invention’ as synonyms .
Consequently, it is important for us to measure the innovation. Why it is important is because innovation is a key to the growth of output and productivity. Further, the relationship between innovation and economic development is widely acknowledged. The innovation data is also important to better understand innovation and its relation to economic growth and to provide indicators for benchmarking national…show more content… Patents represent only a portion of innovative activity and none of the latter stage investments entailed in commercializing technology. Patents are of widely varying value to firms. Motivations for patenting vary across industries and technologies; equally important, they change over time. The analyses based on patent data need to be treated with caution when interpreting the geography of innovation activities. What an indicator reflects depends on the underlying methodology used to construct the indicator .
1. Patent data do not capture all innovations
As a matter of fact, some important innovations are not patentable and, even when they are; patents are not considered by firms to be the most efficient way of protecting and of appropriating innovations. For example, software is not patentable, it is protected by copyright . The main limits of patents emphasized by the surveyed firms are: the possibility to innovate "around" the patent, the fact that some innovations can only be partly patented, and the detailed description of the patented innovation which is considered to be a source of diffusion of information. As a consequence, patented innovations only represent a small share of the overall set of innovations