|Montréal, 2 septembre 2000 / No 66||
by Pierre Desrochers
One of the few topics over which free-market proponents often radically disagree is the relevance of the patent system (Kinsella, 2000). According to some, without patent protection an inventor has no incentive to invest time and money into something that can be easily copied by its competitors without incurring significant R&D costs. Patents therefore correct this market failure by providing a temporary monopoly to the inventor. Even though monopolies typically involve a misallocation of society’s resources, any welfare losses due to the restrictions in disseminating an invention are outweighed by the incentive to invention they provide. Besides, the fact that the technological bases for these rights are made public contributes to the body of generally accessible information. Furthermore, to the extent that patents cover successful process innovation, lower costs of production and lower market prices will result even if the patentee behaves like a rational monopolist.
Despite this rationale, there has always been a set of thorny issues about
the patent system. For example, patent holders may capitalize on inventions
by suppressing their development, even though these inventions would benefit
the public. Furthermore, the patent system provides incentives to focus
on what is patentable and on developing certain superfluous innovations
simply to avoid what is covered by a patent.
The arguments for and against patents are probably as old as the patent system and numerous studies on both sides of the debate can be found. Yet, most analytical and historical examinations of patents and their meaning for technology and economic growth are generally deemed inconclusive. Actually, the authors of many empirical studies point out that patents do not play anything like a dominant role among the various mechanisms by which returns from innovation are captured. Indeed, for most firms trade secrets, know-how, lead time to markets, continuing technological innovation, licensing, name recognition, service capabilities and the use of complementary marketing and manufacturing capabilities are often deemed more effective than patent protection. In the end, in virtually all branches of industry, the absence of patent protection would have had little or no impact on the innovative efforts of a majority of firms (Mazzoleni and Nelson, 1998; Cohen et al., 2000). To understand how this can be, one must go back to the essence of what patents are (and are not) and to the way human creativity actually generates new ideas and products.
A Right to Exclude, but not to Use
A patent is a property right granted by a government to an inventor or his assignee to exclude others from making, using, or selling an invention fulfilling certain requirements, most notably that it performs a
Another issue that must be stressed is that the final responsibility for validating or invalidating a patent lies with the court. In practice, the burden of proof of infringement lies with the patent owner because the alleged offender is held innocent until proven guilty. Furthermore, the patent office is not responsible for failure to discover previous conflicting claims, which means that a patentee never knows for sure if his patent will be deemed valid by a judge (who might also lack the training to understand the technical aspects of a case). Even though it is often argued that there is a presumption of validity on behalf of the patentee, as one critic pointed out many decades ago:
Considering the huge amounts of money needed to use the patent system successfully (i.e. to hire patent attorneys and industrial drawers, to file applications, to manage a portfolio of patents in many countries, to renew patents and to sue alleged infringers in courts), such a process is not too comforting even if in some cases damage suits have proven very lucrative. Actually, a patent protects the inventor only so far as the inventor’s money will carry him in the courts, for the more financially endowed party to a suit might prevail simply by bankrupting its opponent. It is therefore not surprising that many individuals and corporations do not seek patent protection because they see no added value to it. This will typically be the case when technological advances are very rapid, difficult to police, costly to copy or are likely to infringe on other patents.
Despite all these flaws, however, patenting activity has grown substantially in the United States since the early 1980’s. Why is this the case? As patent law has remained fairly constant, this is most probably due to the emergence of many new technologies related to everything from genes to e-commerce. In some instances, however, many first-time inventors operate under the delusion that a patent gives a reasonable presumption of the possession of salable and valuable property. The neophyte is told by friends who have no detailed knowledge of the patent system and by
On the other hand, firms who employ people who know better will typically patent for reasons that go beyond directly profiting from a patented innovation. Among their most prominent motives are the prevention of rivals from patenting related inventions, the use of patents in negotiations (especially for cross-licensing) and the prevention of suits (Cohen et al., 2000). In short, in these instances patents are nothing more than
The previously listed flaws of the patent system are serious enough to make the case for the abolition of the patent system. An even stronger case can be made, however, when one considers that the patent system rests on a fundamentally flawed view of human creativity.
A Misleading View of Human Creativity
As many psychologists and historians of technology have shown, innovation does not proceed through major breakthroughs by specific individuals, but rather through the collaboration of different people who, through small and cumulative improvements, yield novel and useful artifacts over time (Basalla, 1988). All of patent law, on the other hand, is based on the assumption that an invention is a discrete and novel entity that can be assigned to the individual who is determined by the courts to be its legitimate creator. The associations of an invention with other existing or past artifacts are therefore obscured. Despite its philosophical foundation, however, the patent system cannot entirely obscure the true nature of technological change. As I have already mentioned, virtually every new patent infringes in some way on other patents. Furthermore, most patented innovation are typically very minor improvements. As the economist F.M. Scherer (1987: 124) has noted:
What the incremental view of technological change implies is that the contribution of an individual to a new device is likely to be small. Thus an inventor that comes up with a better mousetrap is building on the previous work of metallurgists, machinists and wood-workers, but also on the contribution of other individuals who previously worked on similar devices (if only by learning what did not work). Granting him a 20-year monopoly from the initial filing date seems somewhat outrageous in this light.
It must also be kept in mind that technological innovation implies a continuous flux, for creative individuals never cease to improve existing artifacts, whether they be cars, computers or ballpoint pens. Why do some people innovate relentlessly? As Petroski (1992: 22) puts it:
For example, in order to increase the assembly rate of their tremendously successful Model T, engineers and technicians at the Ford motor company drew inspiration from the
Another recurring feature of creative individuals is that they do not come up with
One last feature of technological change that deserves mention is the fact that there is always a surprisingly wide range of alternative methods of getting a job done, each being characterized by a different mix of inputs. It is therefore not surprising that most interesting inventions can easily be
Anyone familiar with the world of inventions knows that there is no short supply of new ideas. Indeed, most companies are typically flooded by request from inventors who have come up with a
The case against the patent system is even stronger if one considers that an inventor is, to some extent, protected by the law as long as he clearly explains to another party that he is presenting him an idea which is his personal property. The use of a
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