Patent Law

From R&D to Patentee

By Gary Odom and Jordan Kuhn

While big IT whines to Congress about patents being unfair to them, in the teeth of a deep recession they are not remiss to keep fueling the fire of genius. From the Wall Street Journal:

Wary of emerging from the recession with obsolete products, big U.S. companies spent nearly as much on research and development in the dismal last quarter of 2008 as they did a year earlier, even as their revenue fell 7.7%, according to a Wall Street Journal analysis.

Big R&D spenders say they've learned from past downturns that they must invest through tough times if they hope to compete when the economy improves. Many innovative products, from the iPod to fuel-efficient aircraft engines, were hatched during downturns. If past patterns hold, today's spending may plant the seeds of innovations that triumph in the recovery.

"Companies by and large realize that large reductions in R&D are suicidal," says Jim Andrew, a senior partner at the Boston Consulting Group. "It is the last shoe to drop."

Microsoft and Intel are keeping it up while revenue falls flat. R&D at Microsoft is up 21% in the fourth quarter from a year earlier. Intel, which posted a 90% fall in Q4 net income, is spending but a tad less on R&D than last year. This year's R&D tab: $5.4 billion.

3M Co., maker of Scotch tape, Post-it notes and other products, has laid off 4,700 workers in the past 15 months and will cut capital expenditure 30% this year, but it expects R&D spending to stay flat or increase slightly.

Miracle Whip salad dressing was a product of the Great Depression of the 1930s, as was packaged macaroni-and-cheese. TV and mass-produced chocolate-chip cookies were inventions refined during the last Depression, but didn't hit commercial stride until after World War II. DuPont introduced nylon at the 1939 New York World's Fair.

A tale of contrast following the end-of-the-century dot.com bust demonstrates the need for continuing R&D.

Apple boosted R&D spending 42% between 1999 and 2002, even as revenue fell more than 6%. Those investments helped spawn the iPod music player, introduced during the last recession in October 2001, and the iTunes music store, which debuted in 2003. Typically, investments in R&D take two to three years to pay off.

Motorola slashed R&D spending 13% in 2002. The company scored big with its super-thin RAZR cellphone in 2004, but failed to develop equally successful follow-up products. Spending on R&D has rebounded, but more slowly than revenue, and Motorola's market share and stock price have withered.

Not willing to rehash past mistakes, a Motorola spokeswoman chirped "innovation is essential to staying competitive."

Full post as published by The Patent Prospector on April 08, 2009 (boomark / email).