Foreigners Hold Half of All U.S. Patents Annually

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April 10 2014 1:55 PM

Foreigners Hold Half of All U.S. Patents Annually

Deputy Director of the Patent and Trademark Office Michelle Lee speaks at an event on the patent system on Feb. 20, 2014, at the Eisenhower Executive Office Building in Washington, DC.
Deputy Director of the Patent and Trademark Office Michelle Lee speaks at an event on the patent system on Feb. 20, 2014, at the Eisenhower Executive Office Building in Washington.

Photo by Alex Wong/Getty Images

This story first appeared in Inc.

There’s probably no other country as innovative as the United States. At least that’s the trope. But recent statistics from the U.S. Patent and Trademark Office and new independent surveys suggest much of America’s innovation is not home-grown: Many of the country’s best and brightest ideas come from noncitizens.

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“There’s the idea of the American melting pot, everything and everyone comes here,” says Vivek Wadhwa, an entrepreneur and researcher of public policy at Stanford Law School. “When we combine this with entrepreneurship and the American Dream, world-changing ideas come from America.”

The immigrant influence is not exactly news—it’s deeply embedded in America’s history. But just how innovative this entrepreneurial set can be may surprise you.

Innovation by the Numbers

In 2013, 51 percent of the 303,000 patents filed in the U.S. were of foreign origin, according to the USPTO. That’s a decrease of one percentage point compared to 2012, but about equal to the percentage of foreign patents granted every year for the past decade. To get some perspective, in 1963, only 18 percent of patents originated from foreign sources.

The force of foreign innovation is not only felt in patent creation, it’s also in the number of startups foreigners create in the U.S. The two are frequently related, as the company usually commercializes the patented idea or product.

Additionally, more than half of startups in Silicon Valley were founded by foreign entrepreneurs, according to Wadhwa and the Kauffman Foundation. (Kauffman’s most recent index, released on Wednesday, also indicates that immigrant entrepreneurs are currently starting businesses at a rate roughly twice that of native-born business owners.)

How Did We Get Here?

A number of obvious factors contribute to the overflow of foreign ideas in U.S. patents: The country has a vast consumer population, and its staggering $17 trillion gross domestic product is the biggest market in the world, so it makes sense that entrepreneurs want to file patents here.

But the U.S., with its breadth and depth of patent law, also offers more patent protection than most other countries or regions. That’s important for innovators, should they wind up in court to protect their ideas against infringers, experts say.

“Having a patent in the U.S has a lot of benefit potentially,” says George Beck, a partner specializing in intellectual property at Foley & Lardner in Washington, D.C. “The U.S has an established court system, and the enforcement mechanisms are strong.”

Both the size of the U.S. market and its strong patent protections were important considerations to Vishal Sankhla, co-founder and chief technology officer of Viralheat, a social media analytics company in Santa Clara, Calif.

Sankhla, who has raised $4.5 million in funding from the Mayfield Fund, filed for two patents in 2009, the same year he founded his company. The patents, which cover technology that helps other companies predict the buying preferences of customers, were granted just this year.

“Ninety percent of our customers and our competition [are] in the U.S.,” Sankhla says.

Sankhla’s decision to get a patent in the U.S. rather than other countries also came down to two other considerations: having recourse to the U.S. court system and the U.S. International Trade Commission. The latter has the power to block potentially infringing products from entering the country, Sankhla says.

Nevertheless, the process of getting the patents was time-consuming and costly. Once all the filing and attorney fees were factored in, it cost between $20,000 and $25,000 per patent, Sankhla says. But that was essential for his company to grow, Sankhla says, adding other foreign entrepreneurs are eager to come to the U.S for similar reasons.

“Having a U.S. patent available to you is a whole different thing, and it is definitely very important in terms of being able to take your idea to the next level,” Sankhla says.

Correction, April 10, 2014: The headline on a previous version of this post misstated that immigrants hold half of all U.S. patents annually. Those patents are actually held by noncitizens of foreign origin.

Jeremy Quittner is a staff writer for Inc.

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