September, 2022

A survey done among American economists reveals that 70% think that the economy is entering a severe recession in the next year. With prices of daily life products, such as groceries, skyrocketing due to unprecedented levels of inflation and central banks increasing interest rates to slow down consumer spending, economists predict that goods consumption will massively decrease.

With this panorama ahead of us, the World Intellectual Property Organization (WIPO) released recommendations for taking decisions regarding innovation investment. Since innovation opportunities are still endless with booms in several technological sectors, such as Web 3.0, Artificial Intelligence (AI) and the Internet of Things (IoT) but investment capacities will become increasingly more limited, the WIPO states that it is vital for countries and companies to have guidelines about which innovations should be prioritized.

The WIPO warned that innovation decisions are often very complex due to their cross-industry nature and the involvement of multiple and diverse stakeholders. For example, investing in the recent innovation of hydrogen cells fuel for transportation would involve a decision between technology, transportation, chemistry, and government stakeholders to see whether the current states of those industries will allow the investment to be successful. Moreover, this decision needs to be weighed against the benefits of current technologies to see if the new innovation benefits will surpass the existing ones.

Our current Intellectual Property (IP) data indicates that in the past years there has been a stable trend in innovation sectors that get the most investment and file the most patents and trademarks. For example, digital technologies’ patents have grown about 172% in the past five years with the aid of technology subsectors, such as AI which grew about 718%. Furthermore, the COVID-19 pandemic accelerated digital innovation in fields such as medical consultation and education as lockdowns were a norm in the world during 2020. However, even if the statistics and events highlight a clear innovation trend, the WIPO warns that these patterns are prone to change given constantly changing human demands.

For example, the Second World War brought the need to invest in quicker and more efficient medical procedures as the need to treat wounded soldiers increased at that time. As a result, there are many medical procedures created during that time that are now standardized in current practices. Similarly, during the Cold War, the investment shifted to exploring the universe and Moon missions. Hence, the political commitment, large Research and Development (R&D), and engineering ability contributed to advancing satellite inventions during this time. Given that conflicts were the trigger for these innovation trends, the WIPO experts consider that the commercial conflict between the United States and China might begin a new trend in innovation.

Moreover, the WIPO highlights that companies can learn from these historical events by realizing that normally innovations that get more political and media attention are the ones which more likely to receive more R&D funding, and thus, more likely to succeed and be adopted in a large scale. In this sense, the WIPO also highlights that initially, government investment in new sectors is more influential for its future development. For example, from 2010 to 2014, NASA’s R&D investments comprised about 92% of the total funding for the space sector, which later led to an innovation boom in that sector both caused by public and private organizations from 2015 to 2019.

IP experts also highlight the importance of relationships amongst multiple stakeholders for an innovation to be successful. They’ve identified that the relationships between policy-makers, academic researchers and entrepreneurs determine innovation cycles. For example, there is a two-way knowledge flow between policy-makers and researchers in that new academic findings by researchers inform which new policies are needed, and policies inform what academia should focus its new research on. Similarly, there’s also a two-way economic flow between governments and entrepreneurs, as government spending stimulates entrepreneurs’ investments in several sectors, but also entrepreneurs influence government spending on infrastructure that is needed to accommodate the new inventions.

The WIPO also analyzes that price fluctuations of certain commodities can shift innovation into substitutes for commodities that have high price increases. For example, after oil prices severely increased from 1970 to 2010, green energy innovations increased by 6% at that time. Yet, the WIPO warned that these fluctuations might not be enough to incentivize green substitutes’ innovations as from 2012 to 2017, green energy innovations didn’t experience any growth. The WIPO recommends that early-stage technologies should be supported by heavy government subsidies as these economic incentives reduce the investment risks for entrepreneurs.

Another big catalyzer of innovation is the way in which governments craft and adopt public policies. For example, as mentioned above, creating early subsidy policies that mitigate the investment risk for new innovations can help to give more confidence to entrepreneurs and thus boost inventions in that incentivized sector. Another way in which public policies can help incentivize innovation is by having clear regulations about recent developments. Governments can be proactive in regulating the role of digital technologies and big data to give confidence to entrepreneurs about fair competition in these sectors. In turn, entrepreneurs are expected to invest more in innovation in sectors that are already clearly regulated.

Hence, IP and economy experts define the concept of “direction of innovation” as “the combination, or sum, of all the decisions individuals, firms, universities and governments make on which technological opportunities to pursue”. Since the direction of innovation is a collective decision influenced by multiple stakeholders, industries, and economic conditions, it’s really hard to predict with certainty where will the direction will be headed next. Nevertheless, it’s important to try to determine the future direction of IP so that firms and industry experts are prepared for the changes that the new directions will entail.

To give further details about the general cycle of the direction of innovation, only the new inventions that go through the discovery, the risk mitigation, the adoption, and the diffusion stages are the ones that will set the future direction of innovations. For example, if the fuel made by hydrogen cells for transportation isn’t supported by government policies that incentivize entrepreneurs to enter this new area, the new invention will only be left out as a newly discovered technology.

The WIPO says that IP firms have the responsibility to support entrepreneurs, researchers, and policymakers at every stage of the direction cycle. For example, they need to be more proactive in identifying which new technologies are being discovered by identifying trends in new patent and trademark files (discovery stage). Then, they need to work with policymakers to inform them about which sort of new policies are required to regulate and mitigate the risks of investing in these new inventions (e.g., policies for fair competition in AI products and services). Finally, they also need to act as supporters to entrepreneurs to guide them about what’s the best way to protect their new inventions and advancements with current IP legislation.

Identifying the “direction of innovation” in current ecosystems will benefit economies, governments, entrepreneurs and IP firms by providing the necessary infrastructure for the adoption of current inventions to scale up.

Margarita Guerrero

Patents Specialist Engineer

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