New Study Shows Patents And Innovation Are Not Related

from the no-clear-connection dept

There's an annoying trend among many to assume that patents are a proxy for innovation. In fact, this leads to the false assertion that more patents or more patent applications somehow means more innovation. However, as we've obviously seen, the reverse can often be true. We've shown plenty of examples where patents have been used to hold back innovation rather than encourage it. It's nice to see that there's some more data supporting this as well. John Bennett at Against Monopoly points us to a new paper from Booz Allen Hamilton, looking at 1000 companies that do serious research and development, where they found no link between patents and innovation. Patents, they note, show no statistical relationship to profits. They point out that few patents actually have any real impact on innovation, and often the most innovative things have no patents at all. Another interesting finding in the study is that big companies aren't very good at leveraging their scale to innovate. This is an issue that comes up often when we discuss patents. People make the claim that small companies can't out-innovate large companies because those large companies have all the money. However, the study suggests that's not true at all. Larger companies can be woefully bureaucratic, slow, inefficient and risk averse. That leaves plenty of opportunity for smaller companies to out innovate the larger ones despite the appearance of a disadvantage in money and scale.


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    dorpus, Jan 9th, 2007 @ 1:40am

    No link between Techdirt and reality

    Did they check the QUALITY of patents vs. innovation? How do you measure "innovation"? How about patents vs. profit?

     

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    misanthropic humanist, Jan 9th, 2007 @ 2:15am

    agility and size

    "Larger companies can be woefully bureaucratic, slow, inefficient and risk averse. That leaves plenty of opportunity for smaller companies to out innovate the larger ones despite the appearance of a disadvantage in money and scale."

    In my opinion that is precisely why larger companies use patents to try and stifle innovation by their smaller competitors. Those markets where rapid development is facilitated by smaller size and faster agility are the very ones where patent abuse is most obvious. Patents have been completely turned on their head in this regard.

    However there is another side to this debate. Certain processes can only be acheived with an enormous wealth of resources and special facilities, eg space technology. There's no point pretending that Joe Startup can play in this game.

    "No link between Techdirt and reality"

    Don't be shooting the messenger Dorpus, Mike didn't print that did he?

     

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      Mike (profile), Jan 9th, 2007 @ 2:27am

      Re: agility and size

      Certain processes can only be acheived with an enormous wealth of resources and special facilities, eg space technology. There's no point pretending that Joe Startup can play in this game.

      Did you follow the X Prize? Have you seen how many startups are working in space technologies these days? They are well funded, but that's because we have a reasonably efficient capital market for moving money to where it's needed...

       

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        misanthropic humanist, Jan 9th, 2007 @ 2:33am

        Re: Re: agility and size

        No I haven't Mike. I'm quite interested in space obviously, but the X-Prize thing has sort of passed me by a bit.

        I've always thought that eventually communication satellite technology would filter down the chain to the smaller players simply because the technology is getting smaller and hence lighter. Good to know this is really happening.

         

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      dorpus, Jan 9th, 2007 @ 6:24am

      Re: agility and size

      Will anyone argue that the huge companies that got patents for drugs like V*****a, Prozac were "not innovative" or unprofitable?

       

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    Pixcavator, Jan 9th, 2007 @ 4:51am

    Patent is a RIGHT

    Nobody is that stupid to claim that “more patents or more patent applications … means more innovation”. Patent is a RIGHT. It is an ownership right of an individual, firstly. It is very strange that in this forum patents are frequently discussed without ever mentioning INDIVIDUAL inventors…

     

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      The infamous Joe, Jan 9th, 2007 @ 5:13am

      Re: Patent is a RIGHT

      That's because most companies own patents these days, not individuals.

      You are usually required to sign an agreement upon employment that anything you create on their dime is theirs.

      By large, the patent system isn't about protecting the little guy, it's about manipulating the system to form a psudo-monopoly, or if that fails, a weapon of mass litigation.

       

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      misanthropic humanist, Jan 9th, 2007 @ 5:48am

      Re: Patent is a RIGHT

      Though it is described as a right I think that is too strong a word for it Pixcavator. Food, water and shelter are rights because they are fundamental needs. Evertything else is optional and earned through
      cooperation or audacity. The "right" to a state sanctioned limited monopoly on intellectual property is very low on that heirarchy of needs.

      You will frequently hear me championing the individual inventor, I am sure there is no other kind. Creativity is the province of consciousness, and we do not have a borg-like collective consciousness. Teams can implement visions but real visions are born of outstanding individuals.

       

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      Bumbling old fool, Jan 9th, 2007 @ 6:05am

      Re: Patent is a RIGHT

      You are correct. Patents are supposed to be awarded to INDIVIDUALS (as well as copyrights), but some extremely unwise judge in history ruled one day that a company should be granted the same rights as an individual.

      As such, every possible intent behind the IP laws was completely shattered, and the laws have been used for the worse ever since.

      Companies cannot be sentenced to community service, cannot be jailed (for life), cannot be deported, and cannot be executed.

      If a company cannot be held personally responsible for personal actions, then it shouldn't be considered a person. As such, it should not recieve the rights of a person.

       

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      Enrico Suarve, Jan 9th, 2007 @ 6:14am

      Re: Patent is a RIGHT

      Nobody is that stupid to claim that "more patents or more patent applications... means more innovation"

      Actually Audi have an advert in the UK at the moment I quote(ish) "to date NASA have filed 6xxx patents" (I forget the exact amount). "In designing the Audi A-Whatever Audi filed 9xxx"

      The clear implication being that business and corporations would have you believe there is a very clear correllation between patents and innovation

      To be honest this advert really pisses me off and the kids can't understand why I shout at the telly every time its on!

       

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    Pixcavator, Jan 9th, 2007 @ 6:08am

    Re: RE: Patent is a RIGHT

    It is a property right. Yes, it is limited, just like other property rights - real estate, firearms, copyright,... Is food really a right, if you have nothing to pay for it? I guess I shouldn't address this question to a humanist...

     

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    Anonymous Coward, Jan 9th, 2007 @ 6:13am

    get a life dorpus

     

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    angry dude, Jan 9th, 2007 @ 6:24am

    another nonsense from Mike

    hey, Mike,

    This is really just a BS argument.

    Patents awarded to people for real inventions (not corporate BS patents) promote the progress by giving people incentives to come up with those inventions in the first place and then share the knowledge.
    Unless the government can figure out some other way to spur invention in this dog-eat-dog capitalistic society, this society is doomed without patents...
    (Don't even mention China - those economies are built on dirt cheap labor and stolen IP )
    Come live in some communist country (alas, there aren;t many left...)- you won't need no stinkin patents there.

     

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      misanthropic humanist, Jan 9th, 2007 @ 8:11am

      Re: another nonsense from Mike

      "Patents awarded to people for real inventions (not corporate BS patents) promote the progress by giving people incentives to come up with those inventions in the first place and then share the knowledge."

      You're just regurgitating a myth that has no validity.

      I have never met a truly creative thinker who claimed that patents were their sole motivation for ideas, never. I've met lots of people who crave money and riches who support patents and claim to be ideas people, but eventually found them to be intellectually empty vessels.


      Innovators are driven by an inner need just like we all are. In our case it is a strange mixture of altruism and egotism. We want to contribute something useful (not even necessarily profitable) and to take some credit for it. As a selfish position innovators seek recognition above all else, but they are also driven to see the success of the idea which has a life of its own. And believe me, real innovators shit good ideas before breakfast. It's hard *not* to have good ideas once your mind is tuned that way. Do naturally gifted musicians need an audience to perform? Of course not. But they like it, it makes them feel loved by spreading love, it makes them a participant in life instead of a bystander. Do you think doctors do it for the money? Only the most cynical fool would believe that, Doctors inner needs are to help patients. Do you think airline pilots spend a lifetime of training for the money? No chance, they are little boys at heart who still get a rush of adrenaline every time they fire up those huge engines and feel the G-force in their bones. The reward of money is vastly overrated in the fiction of our society. Money sucks, and that's not a socialist position, it's a humanist one because money dehumanises and distorts, trust me I'm quite the capitalist and industrialist at heart. The lust for money has destroyed more wealth than anything in history.

      Now, lets deal with this fallacy of protectionism shall we.....

      Someone with lots of resources and money "stealing" your idea and making a success of it can actually help you if the situation is right. Assuming you are already in business and have a good headstart on your technology they can create a market for you. So long as they can't *prevent* you from trading on your own idea (which is exactly what patents allow them to do) you can capitalise on the free marketing, slipstream in their wake. If they make improvements that you got stuck on why not just "steal" those ideas back!

      Now lets deal with altruism... or in other words the "promotion of the arts and sciences"

      If you have wonderful ideas and don't have the inclination or ability to capitalise on them then just publish the damn things. What kind of mean minded person keeps their light under a bushell because others might read by it?

       

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        Jose Guia, Jan 9th, 2007 @ 9:18am

        Re: Re: another nonsense from Mike

        "..And believe me, real innovators shit good ideas before breakfast. It's hard *not* to have good ideas once your mind is tuned that way..."

        You described me to a tee!!
        Damn near gave me goosebumps.

        Check out the site I set up over at www.ideafordell.com. I had set it up with the intention of pitching my idea to Mr.Dell himself, and letting him walk away with it for free.

        I have the idea sketched out and ready to go, it has the potential to revolutionize the way we use computers, and how we consume media.

        My site made the front page of DIGG and suddenly I was getting emails from people all across the world. Through all my correspondence what I learned hands down was that I need to make it be known that I came up with the idea first (via provisional patents) and after I blow about $1200 bucks for the several aspects of the idea, I will then try to pawn it off onto some BIG company that can actually make it happen (no fee on my part except for the 1200 back possibly) , if those efforts are fruitless I intend to release it to the community and see if I can join an "OpenSource for Hardware" type group.

        Anyhow I do have the attention of one guy whom has the keys to a huge R&D so if I get brave enough I may let him have it and cross my fingers. He was sold on the basics of the idea, but once I show the basics and all the uses I have no doubt in my mind that it can be something that can change it all.

         

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        Anonymous Coward, Jan 9th, 2007 @ 9:53am

        Re: Re: another nonsense from Mike

        X cannot be made without Y.

        If I want to make X, I must invent Y.

        I invent Y. I produce and sell X.

        Company Z uses Y to produce X also. It is better and I go out of business.

        Innovation occurred. Wealth increased.

        Next time I have an Idea, I.... hoard it? No, I try again to profit. If I fail over and over then quit inventing then thats a shame, but at this point things are so altered and muddle that I defy anyone to decide whether it is better or worse this way.

        Or, if I fail over and over, then I will post my idea in a blog or journal anyway. Because I'm that kind of person.

        Sorry, guys. I create ideas all day long. Some for money, some for pleasure. I can't conceive of the emotion: 'that BASTARD stole my idea! I have been wronged!' If this emotion ever comes to me in response to someone making a TON of money from my ideas, then I have already armed myself to resist the emotion by recognizing it in advance of raw jealousy of success where I have failed.

         

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          misanthropic humanist, Jan 9th, 2007 @ 10:26am

          Re: Re: Re: another nonsense from Mike

          "If this emotion ever comes to me in response to someone making a TON of money from my ideas, then I have already armed myself to resist the emotion by recognizing it in advance of raw jealousy of success where I have failed."

          Your candour behooves you well AC#25. Furthermore, that success validates your creativity. Even more so when the other person arrived at it independently of you.

           

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      Mike (profile), Jan 9th, 2007 @ 9:48am

      Re: another nonsense from Mike

      Unless the government can figure out some other way to spur invention in this dog-eat-dog capitalistic society, this society is doomed without patents...

      That has to be one of the oddest comments I've ever heard.

      The point of a capitalist system is that the government doesn't NEED to spur innovation. The *market* does that.

      The way invention is spurred is by the potential of the market to reward the inventor. That's what capitalism is all about.

       

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    another, Jan 9th, 2007 @ 6:24am

    Investment chases return, thats just Economics 101. Patents allow people to be rewarded with their inventions. Take away that incentive, and you will see less resources and less money going into R&D.

    Its not rocket scientists.

     

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      Mike (profile), Jan 9th, 2007 @ 9:51am

      Re:

      Investment chases return, thats just Economics 101. Patents allow people to be rewarded with their inventions. Take away that incentive, and you will see less resources and less money going into R&D.

      You probably should have taken another level of economics, because your analysis leaves out an awful lot. Basically, you do a single pass scenario, and don't look at the ongoing second, third, fourth etc degree passes.

      Yes, initially it may look like it encourages innovation, but it actually gives a monopoly to only a single person, rather than letting competition continue to improve and innovate.

      You make it sound like patents are the only incentive for innovation, but they're not. Making money in the market is the real incentive for innovation, and it rewards innovation just fine without patents. All the patents do is slow down the innovation by limiting the ability to continue the innovation until the patent is up.

      So, no, it's not rocket science, but it's a bit more than your econ 101 analysis.

       

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        Anonymous Coward, Jan 9th, 2007 @ 9:56am

        Re: Re:

        I should add that the only real lesson you should learn from econ 101 you missed: that there is always another layer of costs and benefits to untangle.

        Do not confuse the first layer of analysis with the only layer. It is only the coarsest of factors. Investigate chaos theory and discover how even the finest factors can work just as well to jar things in entirely different directions.

         

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    citizenj, Jan 9th, 2007 @ 6:29am

    tinfoil hat time

    does anyone have an idea how many innovative things have actually been stifled due to patents being bought and shelved. is there any serious research done there? one would think that large institutions with a massive amount of capital and a vested interest in maintaining the status quo would engage in such chicanery, but i've never seen any hard evidence for such abuse.

    anyone?
    bueller?

     

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      Louis., Jan 9th, 2007 @ 7:32am

      Re: tinfoil hat time

      does anyone have an idea how many innovative things have actually been stifled due to patents being bought and shelved. is there any serious research done there? one would think that large institutions with a massive amount of capital and a vested interest in maintaining the status quo would engage in such chicanery, but i've never seen any hard evidence for such abuse.

      anyone?
      bueller?




      Follow the links in the article dumbo.

       

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    Rational Beaver, Jan 9th, 2007 @ 6:45am

    Booz Allen Hamilton is the best name EVER.

     

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    Enrico Suarve, Jan 9th, 2007 @ 7:40am

    So that'd be the end of the world and everything t

    So we are basically saying that without patents no one would innovate and nothing would move forward, companies would not invest in anything and development would stop?

    Wow

    Never thought of it like that - good job they were around before the wheel then

    Seriously I don't think anyone begrudges the right of designers and innovators to rewards for their work nor for those who invest in innovation to be rewarded. However I think assuming there is always a direct correlation between number of patents and innovation is maybe a little stretched as well?

    From reading through other posts in Techdirt the focus has always been on software patents and the growing ludicrousness of them. Companies getting awarded patents for basic ideas and buying up patents for ideas that have been in circulation for years (Microsoft and RSS) are rife

    I think most people would be happy with an overhaul of the patent system including big business, who would no longer have to pay to get absolutely everything patented in case someone else comes along and trolls a patent to breath...

    Maybe I should patent tin foil hats?....

     

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    Most Cynical Fool, Jan 9th, 2007 @ 9:18am

    To Misguided Humanist

    There are many ways to generate ideas. You can do that academically and publish them, like you suggested. Or you can develop them as products and push them commercially. Two very different things! Without patents few would follow the latter path - personal experience. And money does not suck, low pay does.

     

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      misanthropic humanist, Jan 9th, 2007 @ 10:19am

      Re: To Misguided Humanist

      "There are many ways to generate ideas. You can do that academically and publish them, like you suggested. Or you can develop them as products and push them commercially. Two very different things!"

      It was precisely my point that these are not such different things. To see them as such is to misunderstand the mind of the innovator.

      "Without patents few would follow the latter path - personal experience."

      I accept that your personal experience trumps any other formative influence but I do not think you should not generalise that to what other peoples motives may be.

      "And money does not suck, low pay does."

      When it's in my bank account money does not suck :) But you are quoting that out of context, or being disingenuous about my obvious implication, money as a sole motive can be destructive. For a simple example, greed - you want to sell something worth $200 and are offered $250 for it. You say you won't take less than $300 and refuse to budge. You end up with nothing instead of a $50 profit.

      Oft misquoted is "money is the root of all evil" (an axiom from which
      many other proofs develop) but in actual fact our favourite sandal wearing hippy never said any such thing, he said "The love of money is the root of all evil". There's an important subtlety there. Money as an abstract concept like mass or charge neither sucks nor blows, it is the human interpretation of (and unreasonable lust for) it that creates problems.

       

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    Anonymous Coward, Jan 9th, 2007 @ 9:38am

    What you guys forget is that even if a patent rewards an inventor and thereby provides a general encouragement for innovation, once it is executed, it pretty much guarantees the least efficient possible utilization of that invention by taking what is in essence just an idea, and bogging it down with legal trappings. Now a company is not sure whether it can use that idea (thus leading to even more innovation) because it might not be able to reach a workable licensing arrangement. At the very least it is slowed down by its engineers thoughts getting inevitably detoured down a more clever path and then roadblocked by a patent which needs working around or biz wrangling.

    I do insist that for every idea that the patent system rewards, it kills ten more by transforming that ethereal wisp of a notion into a giant gorilla. Which is easier to bend to bind into your own innovations?

     

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    Noel Le, Jan 9th, 2007 @ 10:18am

    reply to Masnick

    Masnick, I don't know a single person who argues that more patents correlates with more innovation. Check out amicus filings for the KSR case, where groups like Microsoft and PFF sided with KSR on raising the non-obvious standard. (with the FSF and CCIA agreeing with them). Implicit in the position of raising standards of patenting is that there should be less patents of higher quality.

    The Booz Allen Hamilton study, as far as I see, does not only consider *more* patents, but patents generlaly, not correlating with innovation and profits. This is a pretty extreme finding. But take it in context. The study also does not find innovation to correlate with R&D spending. So whats a company to do, not spend on R&D, and if it does, not patent its work to capitalize on that spending in the case that the R&D may be valuable down the road.

     

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      Mike (profile), Jan 9th, 2007 @ 10:30am

      Re: reply to Masnick

      Masnick, I don't know a single person who argues that more patents correlates with more innovation

      Then you clearly don't pay attention. It's pretty standard for the press and politicians to use the number of patents as a proxy for how much innovation is going on. Last year, when everyone was talking about Tom Friedman's book, some magazine did a whole take down on it by using the location of patents as a proxy for where innovation occurs. It's pretty common. I'm surprised you haven't seen it.

      Check out amicus filings for the KSR case, where groups like Microsoft and PFF sided with KSR on raising the non-obvious standard. (with the FSF and CCIA agreeing with them). Implicit in the position of raising standards of patenting is that there should be less patents of higher quality.

      I'm familiar with it, and have written about it. It's one of the few things PFF has done that I think makes sense.

      The Booz Allen Hamilton study, as far as I see, does not only consider *more* patents, but patents generlaly, not correlating with innovation and profits.

      Yup.

      The study also does not find innovation to correlate with R&D spending. So whats a company to do, not spend on R&D, and if it does, not patent its work to capitalize on that spending in the case that the R&D may be valuable down the road.

      Noel, I'm curious about your background. Have you worked in industry before? The argument isn't that spending on R&D is bad, that the incentives cause people to spend poorly and inefficiently on R&D. A large part of that is patents. The system encourages R&D on ideas that don't actually drive innovation and profits, but to ideas that can be locked up in case of a future ability to exert monopoly powers.

      In other words, the incentives are screwed up, so money is being wasted.

      The market itself is very good at rewarding innovation. Why do we need a big government bureaucracy granting monopolies when the market is functioning just fine without them?

       

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    Anonymous Coward, Jan 9th, 2007 @ 10:32am

    I have awesome ideas. I have no money.

    Now you can call my ideas actually bad, or accept my explanation:

    Ideas are a dime a dozen. Capitalization on ideas is far more crucial than the ideas are. Our current system rewards inventors--a dime a dozen--while suppressing capitalizers.

    This is just ass backwards. That is all.

     

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      Anonymous Coward, Jan 9th, 2007 @ 10:54am

      Re:

      haha MH I just saw you posted the same thing in bubbles and busts

       

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        misanthropic humanist, Jan 9th, 2007 @ 11:10am

        Re: Re:

        "haha MH I just saw you posted the same thing in bubbles and busts"

        Yeah, same bollocks, different spin. But I'm sincere. Having been at the sharp end of this myself I speak from the heart. Why do you think I get so wound up about it? ;)

         

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      angry dude, Jan 9th, 2007 @ 1:15pm

      Re:

      "Our current system rewards inventors--a dime a dozen--while suppressing capitalizers.
      This is just ass backwards. That is all"

      Hey dude, are you serious ?

      First, this statement is just FALSE. Period.

      Second, screw you, idiot !

       

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        Anonymous Coward, Jan 9th, 2007 @ 1:55pm

        Re: Re:

        I stand by the statement. Inventions are generally worthless until put into physical form. This is done by a businessman. Businessmen are constrained by availability of savvy and economic resources. Ideas are not constrained by those factors. It is therefore easier to create an idea than to market it.

        Inventors have several avenues of reward, only one of which is money through the channel of government monopoly.

        If an inventor has worked hard at something, then he probably knows a lot about it and can obtain a forum to professionally develop his idea through partnership with business.

        An inventor will oftentimes be rewarded with having discovered an idea first. This has its own business advantages.

        If an inventor just has a random strike of insight, then why does he deserve the rewards anyway? It could have just as likely been anyone else.

        Never mind all the intangible rewards of inventing, which have been discussed already in this forum.

        The VALUE of an invention, in the end, is nothing until it is put on the market and a value placed to it.

        Some inventors will keep on inventing to some degree if they never see a dime for it. But no business is going to use those inventions to create products that improve the world unless they see a dime for it. Therefore the fundamental asymmetricity and why I believe the businessmen should be favored here.

         

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          angry dude, Jan 9th, 2007 @ 2:11pm

          Re: Re: Re:

          "I believe the businessmen should be favored here"

          I believe you are a complete idiot, sir.

           

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            Anonymous Coward, Jan 9th, 2007 @ 2:24pm

            Re: Re: Re: Re:

            Create an idea and wait and see how much money appears in your bank account until businessmen with checks come your way.

             

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    misanthropic humanist, Jan 9th, 2007 @ 11:06am

    ass backwards

    Mike: "In other words, the incentives are screwed up, so money is being wasted."

    Exactamundo! The patent war (lets call it that because it's trendy to make everything a war these days) is a self-perpetuating money pit with no winners. Potential (unknown) future profit is being traded against real achievable development here and now.

    AC#3: "Ideas are a dime a dozen. Capitalization on ideas is far more crucial than the ideas are. Our current system rewards inventors--a dime a dozen--while suppressing capitalizers.

    The raw ideas are a plentiful yes. Before ideas become products and profit they need development, improvement, testing etc. That is the D in R&D that is neglected because money is diverted to patent lawyers to "weaponise" the ideas and shelve them instead. No one gains here, the innovator never sees the fruits of his mind mature (defeating his primary motivation) and the capitalist never sees his profit return (defeating his primary motive). The customer never gets his new technology. Lose, lose, lose.

     

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      Anonymous Coward, Jan 9th, 2007 @ 11:17am

      Re: ass backwards

      I guess I just realized, in a formulatable way, that you do not have to disagree with any of the aims of the patent system in order to realize that it achieves none of them.

      And recall that in our economic-political system, it is acceptable to, when appropriate, select inaction as a response to a situation or stimulus. (do not always take for granted that any given participant in a conversation remembers this principal, but instead reflexively takes as a given that someone ought to take some action)

      I am fond of the scene in tommy boy when tommy callahan (farley) is demonstrating how you can lose a sale by overworking it to death.

      It is quite possible to coddle X so much that you kill it. Substitute X for innovation, or anything else.

       

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    Noel Le, Jan 9th, 2007 @ 11:15am

    Masnick, patents do indicate a level of innovating activity, but they don't reflect the level of innovation itself. The press and politicians you cite can say what they want, but again, I don't know a single person in industry or academia who agrees with the notion that more patents means more innovation.

    ***The argument isn't that spending on R&D is bad, that the incentives cause people to spend poorly and inefficiently on R&D. A large part of that is patents. The system encourages R&D on ideas that don't actually drive innovation and profits, but to ideas that can be locked up in case of a future ability to exert monopoly powers.***

    That’s interesting. How do patents distort R&D incentives? Masnick, is this your argument; I don’t recall seeing it in the BAH study, although I will look again.

    My industry background includes knowledge-management dev, govt affairs, and R&D strategy/communications (for a company that spends several billion in annual R&D, although apparently, it doesn't spend it optimally!).

     

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      Mike (profile), Jan 9th, 2007 @ 11:46am

      Re:

      That’s interesting. How do patents distort R&D incentives?

      The goal becomes to do R&D for the sake of patents, rather than the sake of successfully bringing a product to market. It distorts the market by moving the incentives away from the actual market for products, to a made up market in gov't granted monopolies.

       

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        Anonymous Coward, Jan 9th, 2007 @ 11:59am

        Re: Re:

        Just to forestall an argument, one of the justifications brought up for the patent system that it allows inventors without business savvy to polish their ideas and then wait for a business to scour the literature and find it and compensate them for it. That independent inventor is well-served by the goal of doing r&d for the sake of patents. The patent system promotes that r&d incentive.

        But it distorts those incentives in other scenarios and the question is by how much in which case.

         

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    Noel Le, Jan 9th, 2007 @ 12:07pm

    Reply to Masnick again...

    ***The goal becomes to do R&D for the sake of patents, rather than the sake of successfully bringing a product to market. It distorts the market by moving the incentives away from the actual market for products, to a made up market in gov't granted monopolies.***

    Masnick, that is a persuasive argument, but I find it hard to believe a company would undertake R&D just to patent. Fiscal year reviews are always a painful process, especially because SVPs have to justify the business goals of their budgets. If business goals include patenting for the sake of patenting... well that was not the situation in my former company.

    I would caution against concluding that firms' incentives are entirely distorted by patents. Many firms undertake R&D for products extending 5-10-15-20 years ago. If the market for the future product is unstable, or does not yet exist, then patenting early and often would make sense. Of course, the counterargument to the productiveness of this practice is that those patents may be non-obvious and novel now, but when their underlying technology reaches the market or their market matures, they may seem dimwitted in hindsight.

     

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    another, Jan 9th, 2007 @ 12:32pm

    Mike

    "The goal becomes to do R&D for the sake of patents, rather than the sake of successfully bringing a product to market. It distorts the market by moving the incentives away from the actual market for products, to a made up market in gov't granted monopolies."

    Considering the cost of bring a new drug to market tops a billion dollars, what incentive would encourage someone to shell out that type of money other than financial reward?


    I understand that Dr. Salk didn't patent his discovery of the Polio vaccine, but he didn't bring that product to market, a drug company did. Also, nothing is keeping anyone from not enforcing their patent, that is their choice. Most choose to enforce their patent, because they expect to profit from their hard work.

    I believe that it is an economic fact that if you don't provide patent protection, innovation will ultimately decrease. If someone can't expect to profit from their work, they will go and do something else that will allow them to provide the things that they want.

     

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      Anonymous Coward, Jan 9th, 2007 @ 12:50pm

      Re: Mike

      The circumstances under which the patent system breaks down are not as profoundly clear with drugs as they are with basically everything else. Thats why you guys always bring it up. We KNOW already. Thats why this blog in response brings up example after example of bizarre patents that show the breakdown of the concept.

      I believe that it is an economic fact that if one innovation is protected with patents, ten more are crippled or stillborn.

       

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      Mike (profile), Jan 9th, 2007 @ 2:48pm

      Re: Mike

      Considering the cost of bring a new drug to market tops a billion dollars, what incentive would encourage someone to shell out that type of money other than financial reward?

      This is a bogus example, as we've pointed out many times in the past. The reason it now costs billions to bring a drug to market is often due to bad regulatory policy. Besides, you'll note that a large % of that billion is advertising dollars. Also, what patent policy has done in the pharma market is make it so that the incentives are actually to create similar "me too" or "luxury" drugs that get patent protection, rather than solving any real problems.

      Furthermore, the idea that the market alone cannot put in place incentives for new drug discovery is wrong. Again, I'll point you to countries that did not have pharmaceutical patents until quite recently, but which had thriving pharmaceutical industries, including development of important new drugs.

      The billions being spent on drug discovery is a result of the inefficient system put in place and the monopoly rewards given by patents -- it's not the other way around.

       

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        Anonymous Coward, Jan 9th, 2007 @ 3:05pm

        Re: Re: Mike

        Mike, I dont think your argument that costs to develop drugs are inflated is very helpful. I for one still imagine that theyre incredibly high enough even on raw r&d for it to be a good example of the investment-heavy type of stuff in the patent problem. Even if we quibble on the details, it still feels like it should cost a whole damn lot to r&d some things, and drugs seem reasonable.

        Can you name a specific market mechanism that a pharma company can use to recoup their r&d in the face of competitors who are reverse engineering their formulas and selling generics, in an environment without patent protections? I agree with you in general but this case just doesn't add up.

        Drugs are a bit different from other things. We can let the market sort out which implementation of a hierarchical menu for navigating music is the best based on a myriad of other factors causing one product to be superior to another. But how superior can one company's drugs be to another? We're not going to let them cut costs by making them impure and unsafe.. does it take time to reverse engineer the formula? Does it take time to figure out a manufacturing process? Don't forget the marketing costs for a new drug which can be piggybacked by the generics.

        I'm not sure what makes drugs feel different than basically every other subject, but somehow they just comprehensively do.

         

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          Mike (profile), Jan 9th, 2007 @ 3:36pm

          Re: Re: Re: Mike

          Can you name a specific market mechanism that a pharma company can use to recoup their r&d in the face of competitors who are reverse engineering their formulas and selling generics, in an environment without patent protections?

          There still is marketing. Selling the drugs to people who use them. Even in markets where generic drugs are available, brand name versions command a premium. On top of that, there can be other business models for the development of new drugs, again, which we've discussed in the past.

          If it's true that there's no market mechanism for pharma without patents, please explain the success of pharma industries in countries with no patent protections.

           

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            Anonymous Coward, Jan 9th, 2007 @ 4:01pm

            Re: Re: Re: Re: Mike

            explanation: relatively unsophisticated competitors. I don't know that its true that theres no market mechanism. I don't see it and I was wondering if you could point it out. I can't explain the success. Honestly I'm not sure how it works at all, period.

            Marketing is not a mechanism available only to the r&d investors. If a generic drug maker has a more savvy marketing strategy, then it can _become_ the brand name. I can only speculate that this doesn't happen due to industry regulations. The premium on brand name drugs is some other artifact of this regulation and a consequence of government/insurance/inventors/generics dividing the pie in a way that makes everyone relatively happy..

            I'm a smart guy, man. I want to believe. But in this one example I just can't get any traction whatsoever.

             

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              Anonymous Coward, Jan 9th, 2007 @ 4:10pm

              Re: Re: Re: Re: Re: Mike

              Let me elaborate. In a small, young market, with few players and immature QC, there is not enough energy or room for firms to manufacture generics. One company making a drug is plenty, and its probably whoever invented it.

              As the markets mature, there is room for more than one manufacturer. The innovators aren't going to manufacture each others drugs because thats not in anyones interests. Then the generics manufacturers step in. They can compete all the profit out of the product--normally desireable except that in this case maybe due to how the numbers work out, the initial r&d isn't recouped.

               

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                Anonymous Coward, Jan 9th, 2007 @ 4:21pm

                Re: Re: Re: Re: Re: Re: Mike

                The same course is followed in any industry, really. Trailblazers get early sales capitalizing on their clever ideas for pc sound cards and eventually the generics get a sound card built into every motherboard for $0.03 but yet somehow the trailblazers are still around. The differences are in the details: if it truly takes more $ to create a different or better drug than a different or better sound card and there are truly fewer ways to differentiate products, then generics are a much greater threat to the innovators.

                How about a pharma example of this: if we're deigning to dispense rewards to deserving players in the industry, then I might choose to reward someone who makes a different formulation of the drug suitable for a different delivery platform. Thats a reuse of a drug IP that provides a significant improvement. But I don't know if such differences are always possible for other players. Its just too easy to rip off directly.

                Since I recognized I was playing god here and distributing wealth to individuals I deem deserving, then I may as well give a better solution: if a drug inventor agrees, I will permit it to have a patent on the IP up to the point at which it breaks even on the product, at which point the patent expires and they take their chances in the market.

                 

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    Noel Le, Jan 9th, 2007 @ 1:19pm

    Reply to Anon Coward

    Anon Coward, I believe the lesson that *more* patents do not signify increased innovation is a universal economic lesson, even for pharma. You wouldn't gather that by the the US govt's current foreign agenda of repealing DOHA round talks to extend patent terms though.

    It seems like those who don't like patents lump all of us IPR defenders, like me, into one group. That shouldn't be the case. Those who argue that more patents are good for the technology industries give us all a bad name.

    (of course, when we say *more* we mean lowered patenting standards in relation to the necessity of patents in an industry or extended patent terms, not simply the number of patents).

     

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      Anonymous Coward, Jan 9th, 2007 @ 2:04pm

      Re: Reply to Anon Coward

      But you said less patent protections equals less innovation. I will provisionally accept your statement pending acquisition of more knowlege and certainty on the subject than I am ever likely to have, given that you restrict its scope as a conclusion to the pharma example you provided.

      In fact, part of the whole problem with this topic is that folks like myself who try to think it through look at one patent and nod approval and feel that it assures invention that would otherwise never happen, and look at another and chuckle derisively--without being able to clearly identify the differences between the two scenarios except on a pragmatic basis.

      It is difficult for nonexperts to argue a pragmatic issue like this because we lack the experience and knowlege that are necessary premises in these arguments. We prefer instead to try our hardest to force it into philosophical bins, and go round in circles trying vainly to do so. Could it be that there is no simple answer? Then the solution must be a 1000 page bill, distinguishable from the other 1000 page IP bills only by experts and outcomes... it's frustrating.

      Maybe the whole situation is complex enough to warrant constitutional theory and big guns such as separation of powers.

      For example: could we elect patent prosecutors instead of letting patentholders direct the lawsuits? (patentholders could always petition the prosecutors)

      This solution gives up trying to codify the uncodifiable and puts it in the arena of public policy. Just, I'm afraid, the last place businessmen would like to see it.

      mumble

       

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    Noel Le, Jan 9th, 2007 @ 3:02pm

    Yet another reply to Masnick

    ***I'll point you to countries that did not have pharmaceutical patents until quite recently, but which had thriving pharmaceutical industries, including development of important new drugs.*

    Masnick, what countries do you have in mind.

     

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      Mike (profile), Jan 9th, 2007 @ 3:34pm

      Re: Yet another reply to Masnick

      what countries do you have in mind.

      We've discussed this before. There are a bunch, but start with Italy and look at the drug industry there prior to 1978.

       

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    Otto Hunt, Jan 9th, 2007 @ 6:52pm

    I am an inventor

    I was awarded patent #5,495,143, which can be viewed at http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fne tahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=5495143.PN.&OS=PN/5495143&RS=PN/5 495143.
    Now I am independently working on another invention: the most kick-ass vaporizer in the world. Without the prospect of patent protection, I would be considerably less motivated.

    It is the promise of financial gain that causes patents, after innovation has taken place. So, essentially, future patents inspire innovation. Patents (already awarded) have less such effect.

     

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    another, Jan 10th, 2007 @ 6:21am

    Mike, thats not quite right

    Mike, in terms of cost for bringing a drug to market, you really can not consider advertising in the R&D equation. You can't advertise a drug until it is approved. The cost is actually not in the research of the drug, its in the development of the drug. Its actually pretty cheap to research something (well, how expensive can it be to have some eggheads work on something?) but proving to the government that the drug does what you say it does and then doesn't hurt people is what costs money.

    With the marketplace being responsible for the production of new drugs, of course the drug companies go after the big markets. That is what the marketplace is for. India might have had a thriving drug production industry, but they didn't have a thriving drug discovery industry. They didn't invent new drugs, they just copied others. Now they have begun to research new drugs, and guess what, now they recognize patents. Why do you think they started doing that? Because they know that in order to research drugs, they need patent protection.

    I agree, the application of the law by governmental agencies need to be improved, but to say that the ideas of the laws are bad is wrong.

     

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    another, Jan 10th, 2007 @ 9:27am

    "Since I recognized I was playing god here and distributing wealth to individuals I deem deserving, then I may as well give a better solution: if a drug inventor agrees, I will permit it to have a patent on the IP up to the point at which it breaks even on the product, at which point the patent expires and they take their chances in the market."

    Why would I choose to spend a billion dollars to bring a drug to market? Its easy to reverse engineer a drug and then begin manufacturing it. There would be no difference in the drug, and I would not be able to sell my drug at much of a profit. A drug that is cancelled in Phase III trials still cost a hell of a lot of money. Very few drugs discovered actually make it to the market. How does your scenerio cover those lost costs?

    Without reward, R&D would drop, there is no question about that. Some of those "me too" drug profits pay for research into other products.

    If you don't believe patent protection increases profits, take a look at what happened to Prozac when it went off patent.

     

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    Bernard Swiss, Jan 10th, 2007 @ 7:46pm

    Re: Big Pharma, R&D & costs

    You guys are aware that the pharmacuetical industry is the most profitable sector of the US economy, right?

    And that most of the expensive, innovative, risky medical research is done by the public sector (universities, etc) at public expense, and that "Big Pharma" picks up on the promising lines of research only after it looks potentially profitable?

    And that these corporations (naturally) decide to develop products based on profitability, rather than medical need? This results in life-saving medicines that were shelved (on the grounds that the third world couldn't afford them) being revived as high-end anti-wrinkle cream ingredients. (if anyone remembers what the product was called, and what disease it treated, please chime in -- my googlng efforts are being swamped with cosmetic-company hits).

     

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