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The subtle differences between invention and innovation

One day, I walked into a Compass Bank to make a deposit or order a foreign bank draft—one or another of those odd tasks I have to do as a business owner—when I saw an ad written in bold white text on a framed, large red panel. The message was simple: the bank has innovative solutions for all my banking needs.

But the ad annoyed me immensely. It seemed to me that I’d seen the word “innovative,” and variations thereof, one too many times. My disgust surged as I thought of the way companies brandish the word, when in fact they’ve done little more than add clear varnish to an old painting. For some reason, I expected innovation to mean more than cosmetics.

I admit that in the case of Compass Bank I couldn’t tell if the ad alluded to mere cosmetics or something more serious. All I knew was that Compass Bank didn’t ask me about my banking needs and so could not have possibly devised innovations for all my banking needs.

I found later that my reaction to the ad at the bank was fueled at least in part by my confusion of “innovation” with “invention,” and my knowledge of what an invention is. I certainly wasn’t alone in confusing innovation with invention. I only had to look at articles and comments on the Web to see that many people do not know the subtle differences between the two and use the terms interchangeably, often to make cases for or against the patent system. 

It took a few e-mail exchanges with Professor Eric Von Hippel, Head of the Innovation and Entrepreneurship Group at MIT, to sort out the differences between innovation and invention. I share my understanding of the differences here.

Ordinarily, an invention is something invented or devised. Legally, the meaning of invention has restrictions. If you take a look at Section 100 of the Title 35 of the United States Code, you’ll notice that the term “invention” is defined as invention or discovery, which is like saying a “box” is a box. 

A further look at the Code reveals that an invention is something invented or discovered that is new and non-obvious (in view of what has already been invented or discovered). Legally,  an invention can be a process, machine, article of manufacture, composition of matter, ornamental design for an article of manufacture, or a plant reproduced asexually. If the invention is a process, machine, article of manufacture, or composition of matter, it must also be useful. Because an invention has to be non-obvious, any trivial change to something otherwise old would not by definition suffice as an invention.

An innovation is something new or introduced differently into the marketplace. I’m defining a marketplace as any place or environment where ready-to-use solutions that meet defined needs are offered for sale or use to consumers or users.  An example of an innovation may be a new shoe design, or it may be an old shoe design packaged differently for the marketplace. An innovation does not have to be non-obvious. An innovation does not have to be useful. Because an innovation does not have to be non-obvious, any trivial change to something old can suffice as an innovation.

An innovation is made for the marketplace and has a real value because it reaches the marketplace.

An invention, on the other hand, only has a potential value. But the potential value can become a real value if the invention is engineered into a ready-to-use solution that meets a defined need and the ready-to-use solution is introduced into the marketplace.

There is a prevailing thought that the patent system promotes innovation, but the patent system does no such thing.  What the patent system does is encourage disclosure of inventions to the public and award timed monopolies to owners of inventions for the disclosure. The patent system does not encourage introduction of inventions into the marketplace and therefore does not promote innovation.  Not only does the patent system not promote innovation, it also often deters or penalizes introduction of “something new” into the marketplace, which is the same as discouraging innovation. On the other hand, by its demand-and-supply nature, the marketplace promotes innovation.

We could say that invention is to the patent system as innovation is to the marketplace.