No. 228

 April 2003

SMALL BUSINESS

RESEARCH

SUMMARY

Foreign Patenting Behavior of Small and Large Firms: An Update

By Mary Ellen Mogee, Ph.D.

2002. [28] pages Reston, Virginia 20190

under contract no. SBAHQ-01-M-0357

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

Previous studies of U.S. firms’ patenting behavior

have shown that small firms are less likely than large

firms to seek patent protection in other countries.

This report updates a 1995 study that compares the

foreign patenting practices of small and large firms.

Overall Findings

Both large and small firms are seeking foreign patent

protection more often than they have in the past, and

small firms are increasing their foreign patenting

more rapidly, but large businesses still patent abroad

more often than small firms. To understand the

underlying reasons for the differences, the study

looks at the value of patents as measured by the

number of times patents are cited by other companies in their patent applications (the public value)

and by whether patent holders are renewing patents

at the required intervals or allowing patents to lapse

(the private value). 

By these measures, small business patents were

found to have more public value but less private

value than large business patents. Differences in the

value of patents were found to have a significant

effect on differences in foreign patenting, but less

effect than company size.

The study narrows the range of possible explanations for the difference in small and large business

foreign patenting, and finds that small business

resource limitations are a more likely factor in this

difference. The researchers conclude that if small

businesses are not patenting in foreign countries to the

extent that they could, they may be missing commercial opportunities and possible sources of revenue

that would contribute to growth in the U.S. economy.

Highlights

• Over the period 1988 through 1998, the number

of small business patents increased by more than a

factor of three.

• Large businesses seek foreign protection for

more of their patents, and they seek patent protection

in more foreign countries than do small businesses.

This pattern has remained unchanged since the previous study.

• The percentage of international patents grew

faster for small businesses than for large businesses

over the period 1988–1998. Nonetheless, small businesses still patent abroad significantly less (37.7 percent) than do large businesses (52.6 percent).

• Small business patents are more likely to be

among the rare patents that “hit the jackpot” in

value: they represent a higher percentage of both the

top one percent and the top 10 percent of patents

most often cited in other patent applications. This

has been particularly notable in the fields of 

communications, computers, and miscellaneous electrical technologies. 
• Technologies most likely to be patented internationally by both small and large firms are bioengineering, medical, and miscellaneous chemical.

• Of the top one percent of often-cited patents, 59

percent belonged to small businesses and 41 percent

to large firms.

• The measure of private value—patent

renewals—showed large business patents to be more

valuable than small business patents.

• The fact that large business patents have higher

private value than small business patents shows that

the limited resources of small businesses not only

inhibit them from filing for foreign patents, but also

hamper their ability to commercialize their patented

inventions.

Conclusion

Small U.S. businesses are making more use of the

U.S. patent system than before and have more valuable patents when measured by number of citations.

The number of U.S. patents for both large and small

businesses that were filed abroad has increased yearly, although large businesses file significantly more

patents abroad than small businesses. A possible reason is the high cost of filing for foreign patents,

which may be limiting small firms’ ability to commercialize their products overseas.

Scope and Methodology

Data on domestic patents issued to U.S. small businesses were examined for 1988, 1992, 1996, and

1998. U.S. patent data were obtained from

MicroPatent’s U.S. Patent Search Plus database.

International patent family data were collected from

the Derwent World Patents Index (DWPI), an online

international database that permits the examination

of U.S. firms’ patent records in foreign countries.

U.S. patent citation data were collected from the

Patent Citation Analysis Database (PCAD).

The final sample size consisted of 23,624 matching pairs of small and large business patents for the

four data years. Patents in this study were aggregated

into 13 technology fields.

The study uses statistical analysis to measure the

importance of and differences in foreign patents of

small and large firms. Differences in the value of

patents, whether measured as number of other citations, self-citations, or lapsed status, have a significant effect on differences in the breadth of foreign

patenting, but this effect is much smaller than that of

company size.

Ordering Information

The full text of this report and summaries of other

studies performed under contract with the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at: www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2003-101302

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