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The Long Tail of Patents

Chris Anderson is the author of the wildly popular book The Long Tail: Why the Future of Business Is Selling Less of More. The Long Tail refers to the shape of the long, downward-sloping curve which graphs the number of different types of products available, against the demand for those products.

Bricks and mortar companies only have a limited amount of shelf space. These companies, therefore, only offer the most popular 20% of products that account for 80% of sales. If you manufacture the 21st% most popular product and, therefore cannot get your product in stores, your sales are likely a very tiny fraction of the sales of the 20th% most popular product.

The Internet has changed all that. Amazon, iTunes and Netflix provide virtual shelf space for 98% of the available products. Internet retailers capitalize on the fact that the additional 78% of products online account for half the revenue and two thirds of the profit. Online retailers are now honing in on better filters, search techniques and user and algorithm generated recommendation systems to put the consumer in front of that 1% of the additional 78% of products. Not only are these custom products of the most value to the consumer, they coincidentally generate the highest profits for the retailer.

Intellectual property, like a patent, is perfectly positioned to capitalize on these new long tail markets. Intangibles require no shelf space to market them. Indeed, nothing tangible need ever be transferred to confer benefits. In this regard, patents are even better positioned to capitalize on long tail markets than books, music or movies.

Historically, getting a patent was like buying a lottery ticket. If you were one of the lucky 2% of patent holders able to profitably market the product or garner a lucrative licensing arrangement, you stood to make untold millions. For the rest, even recouping their original investment was unlikely. With the Internet, however, things have changed.

Information and tools are the key to this transformation. More information is available about more patents, more quickly than ever before. Better filters, better search techniques and better user and algorithm generated watch and recommendation systems will emerge. As they do, companies will be able to secure patent rights, and the associated market monopolies, in synergistic product lines they might never have known even existed. More importantly, many of the 98% of inventors who would otherwise have been left penniless will have the opportunity to license their patents to those companies best suited to capitalizing on their inventions. The emerging “long tail” of patent licensing opportunities will change the existing patent lottery into the just compensatory system envisioned by the framers of the Constitution to promote the progress of science and useful arts.

Brett Trout

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