How Intellectual Property Promotes Systematic Innovation And ‘Eureka Moments’

Eureka Moments

From patents to trademarks, copyrights and design registration, intellectual property (IP) protection can provide very tangible benefits for business. For start-ups and SMEs in particular, properly identifying, protecting and strategically positioning a company’s IP can help to provide an edge in competitive markets.

Developing and pinpointing particularly valuable innovations – and the IP needed to protect them – is often the result of months or years of dogged work and determination. Then again, the incentives and rewards of the IP system can also support an epiphany or ‘Eureka moment’ when new technologies are born.

The medical device company Anaxsys, based in Surrey, provides an interesting case in point. Anaxsys spent significant time and resources in developing sensor technology, based on carbon dioxide monitoring, to more accurately test for the presence of asthma. During the development process, scientists left one of the sensors out to dry overnight.

From the performance of the sensor after drying, they discovered that the device could be used to monitor the water profiles in a person’s breath – something they found could be used to detect lung cancer and other tumours. This ‘Eureka moment’ provided Anaxsys with a technical breakthrough that substantially accelerated the process of this SME getting its asthma and tumour detection device to market.

Neither Anaxsys’s systematic R&D, nor its ‘Eureka moment’, could have happened without adequate funding, which in turn relied squarely on Anaxsys’ ability to protect such inventions and secure investor funding through patent protection of its innovations.

Patents help companies – large and small – get and maintain funding to develop their inventions. Patent ownership at early-stage high-technology companies has a positive impact on the timing and value of the venture capital (VC) financing that small companies receive, and on the likelihood of attracting a prominent capital investor.

Haeussler et al. (2009), who surveyed 190 VC-seeking biotechnology companies founded after 1989, found that the firms’ patenting activities had ‘consistent and cogent effects’ on the timing of VC financing. Having at least one filed patent application reduced the time to the first VC investment by 76%.

Like other areas reliant on information technology, healthcare devices and healthcare more generally are among the many sectors where IP is helping to encourage research and development and to create a ‘virtuous circle’ of investment in innovation. If one thinks just about research on cancer, for example, a disease that affects almost one-third of the population of the UK and the rest of Europe, ground breaking, innovative and imaginative leaps in invention are needed, many of which are supported by the IP system.

European Patent Office data, released on 14 May at an Ideas Matter roundtable in London on IP and Healthcare, showed that nearly 15,000 patents in the area of cancer prevention, detection and treatment have been filed since the year 2000. More than 70% of the inventors were European, and their innovations cover a range of devices, medicines and technologies. Smaller companies (even individual inventors) and academic institutions were well represented among the European patent filers in this area, not just the large well-known companies.

Innovations in medicine and healthcare depend heavily on the incentives and funding that IP helps to provide. The average cost to develop a new medicine or biotech product can be as high as $500 million, and extended testing and capitalisation requirements can increase this to a real cost of between $800 million to $1.3 billion to get a new medicine or treatment to market (Maskus (2000), Grabowski et al. (2002, 2007))

Overall, patents have a positive impact on R&D spending. According to an Arora et al. (2003), without patents, US and French companies’ R&D spend would be 25%-35% less in the pharma sector, for example. As the market value of companies that protect their IP is on average 180-240% higher, they are in a far better position to channel more investment into R&D.

In our ‘knowledge economy’, it is ultimately those businesses that can develop and capitalise on innovative and creative inventions like those of Anaxsys that are best able to compete and succeed. Intellectual property is helping to move them to the front of the pack – whether their innovations are the result of years of meticulous R&D, or indeed involve a ‘Eureka moment’!

Allen Dixon

Allen Dixon, Director, Ideas Matter, is a leading lawyer and international specialist in the intellectual property and information technology field. He has advised high technology and traditional content companies and industries in various capacities for more than 20 years. His experience has included senior legal positions in companies and trade associations on three continents. Since 2006, he has run the IIPTC consultancy, concentrating on intellectual property and high-technology issues, based in London. Allen holds a Bachelor of Science, magna cum laude, from the University of Maryland, and a Juris Doctor, summa cum laude, from American University. He is a specialist editor of the major UK copyright law treatise, Copinger & Skone James on Copyright.