By James Edwards, Ph.D, Conservatives for Property Rights
Remember how early mobile phones routinely dropped calls? Mobile devices today operate on better technology.
The innovative system, called “code division multiple access,” supplanted an approach the telecommunications industry was considering as the underpinning for wireless communication. CDMA more efficiently uses airwaves to handle many simultaneous calls and data by encoding them in order to share airwave frequencies.
The industry had been pursuing a “time-share” approach to using limited airwaves. CDMA made it possible to scale up from “brick” cell phones to today’s smartphones.
A 1985 startup, Qualcomm made the first CDMA phone call in 1989. The firm in 1992 patented an invention using CDMA to share the same frequency for multiple calls and an invention improving the switching of cell towers midcall. The company licensed its patents to makers of handsets and other equipment that ride atop the infrastructure CDMA and related inventions create.
All along, Qualcomm kept up its sophisticated inventing and engineering, researching and developing. In 1993, the U.S. telecommunications industry adopted CDMA as the standard for digital cellular. It became the foundation of 3G wireless connectivity.
By 2007, Qualcomm had enabled key features of the smartphone, such as streaming video and “airplane mode,” and had become the world’s mobile chipset leader.
Fast-forward to today and Qualcomm’s R&D not only has made it the industry-leading technological standard-setter for 4G, but global leader in the emerging 5th-generation wireless evolution.
Thanks to its R&D-patent licensing business model, dropped calls are much rarer and our phones help us get around with GPS, text, latch our homes’ locks, stream our favorite programs, monitor our cardio exercise and more.
This example shows how something goes from a discovery to an idea for translating it into practical application to standard-setting core technology. This basic path applies to independent inventors’ discovery and commercialization.
In fact, research and development-based businesses often create the high-value inventions and advancements that benefit society and the nation. Their breakthroughs can produce new technologies and industrial sectors, new and improved products and processes.
There’d be no Uber or Airbnb without mobile apps and location service. There’d be no mobile apps without 4G wireless broadband, handsets that can handle fast data rates, and reliable transmission and switching technology. There’d be no wireless transmission superstructure without Qualcomm’s standard-setting core technology.
R&D companies invent the things that form the foundation for others to follow and build upon. Most aren’t household names. New technological applications and business models become realities, thanks to R&D-based, foundational inventions. Those who follow and build on the foundation are consumer-facing brands.
Just as Qualcomm’s technology enables the mobile app economy, the same holds true in other sectors. You have innovators, whose R&D pioneers a new foundation, and implementers, who build new devices that operate using the core innovation.
These fruits of the investments and labors of R&D-based businesses create new wealth. The foundational inventions that make it to the commercial market grow the economic pie and produce new kinds of jobs.
But the road starts with investing much time, effort and resources up front — with no guarantee that anything will become a commercial success. The more sophisticated the art, such as those in electronics, biochemistry and physics, the greater the risk of failed attempts and sunk costs.
It’s called risk and reward for a reason; the likelihood of failure (which can mean running out of money) far exceeds the chances of success. For instance, in pharmaceutical R&D, about 9 of 10 prospective new medicines don’t make it to approval as safe and effective. And only some of the new products that go on market recoup their R&D costs.
The R&D business model is like a batter who strikes out up to 9 out of 10 times. The batter has a pathetic batting average, but when he does hit, he hits homers and triples.
What makes the investment of significant sums worth all the swings and misses? Secure, exclusive ownership rights secured by patents and other intellectual property. These private property rights, along with the ability to enforce them and to rely on quiet title in the patent, attract investors and enable firms to invest their own earnings in R&D.
For pioneering R&D firms that develop state-of-the-art technologies, their R&D budget comes from selling patented products, licensing patents and IP to others and attracting new investors, often stockholders. The breakthroughs R&D leads to increase the company’s value, as seen in stock prices and returns to investors.
Such technological and economic progress won’t be possible without secure, private IP rights. And the R&D model, backed by secure IP, is critical to innovation and U.S. leadership in key emerging areas like artificial intelligence, quantum computing, 5G wireless, aerospace, energy, biopharmaceuticals, advanced manufacturing, robotics and advanced materials.
James Edwards, Ph.D., is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy advisor to Eagle Forum Education & Legal Defense Fund. The views expressed are his own.