Patents Create Incentives For More Patents, Not Innovation
from the the-two-are-not-the-same dept
While many people (especially politicians and the press) like to equate patents and innovation (often falsely suggesting that fewer patents means less innovation), studies have shown that patents are actually a really bad proxy for innovation, in that there’s simply no direct link between the two. And that’s a problem, considering that the patent system is supposed to be about creating more incentives for innovation. In fact, however, it often appears that the patent system is actually creating incentives to get more patents.
If you want a clear example of this, just look to China. Just recently, we noted that patenting was on the rise by Chinese companies, but a closer look at what’s happening in China suggests that it’s very much about incentives to increase patents, rather than incentives for greater innovation. In fact, it’s quite direct:
The Chinese government has created an ecosystem of incentives for its people to file patents.
Professors who do so are more likely to win tenure. Workers and students who file patents are more likely to earn a hukou (residence permit) to live in a desirable city. For some patents the government pays cash bonuses; for others it covers the substantial cost of filing. Corporate income tax can be cut from 25% to 15% for firms that file many patents. They are also more likely to win lucrative government contracts. Many companies therefore offer incentives to their employees to come up with patentable ideas.
And, as in the US at times, the incentives for the patent examiners is also skewed towards simply approving more patents (which has a snowball effect, in encouraging more people to file weaker and weaker patents):
The bureaucrats in Chinese patent offices are paid more if they approve more patents, say local lawyers. That must tempt them to say yes to ideas of dubious originality.
Incentives are funny things. If you actually believe that patents are correlated to innovation, then such strategies make sense. But if the reality is that patents are simply correlated to patents, then it’s a huge dead weight loss to focus so much on patenting, rather than actual innovation.
Filed Under: china, incentives, innovation, patents
Comments on “Patents Create Incentives For More Patents, Not Innovation”
Once again
It’s the lawyers who win.
Those who are afraid of China should rejoice...
…since the surge in patents will hinder innovation there too, making the USA competitive again.
Re: Those who are afraid of China should rejoice...
Remains to be seen. They seem to be min/maxing it. Foreign patents get clucking noises, while the domestic ones are actively protected. Win-win!
Re: Re: Those who are afraid of China should rejoice...
I was thinking something similar. This is an anti competitive move by china to restrict the enforcement of foreign patents in China.
Re: Re: Re: Those who are afraid of China should rejoice...
They learned from us. We didn’t enforce foreign copyrights (not clear on patents) in our early days. It wasn’t until the publishers thought they had more to gain from excluding cheap (non-copyrighted) foreign works that we started to police them.
The Chinese seem to have gamed that system. Nominal enforcement of foreign claims, but vigorous enforcement of their own. Berne has left us vulnerable to just such an attack.
Who needs CYBERWAR when you can just do East Texas?
Re: Re: Re:2 Those who are afraid of China should rejoice...
With all the lobbying in the US, the politicians just don’t see how bad their protecting entrenced monopolies is for us. Instead of having a system where bad businesses fail and are replaced slowly over time by better business models. We have a system in place that is going to fail all at once. Scary … I wonder what we can do to change that outcome.
Re: Re: Re:3 Those who are afraid of China should rejoice...
“…a system where bad businesses fail and are replaced slowly over time by better business models.”
But what about businesses that are “too big to fail”…?
Re: Re: Re:4 Those who are afraid of China should rejoice...
“But what about businesses that are “too big to fail”…?”
Prevent them from getting to large in the first place. But that still doesn’t solve the problem of stupidity being contagious among business types.
Take Six Sigmas for example. It is something that corporate america has gone hog wild over. With it being required for all personel. Eventually you reach a point where companies are cut to the bone, have outsourced everything because it looks good on paper, and have set themselves up for failure.
Or take a look at the banking crisis. Where insurance was used with extremely high leverage to insure loans that whould have never been made 5 years earlier. It was an example of systemic business stupidity.
Its something we can’t prevent. But we can limit the size of corporations, Create new corporation types, and standards that will be less prone to failure.
Re: Those who are afraid of China should rejoice...
You’re missing the point. Patents stifle innovation in the market they’re used to suppress, not the people who get them.
These patents are only enforced against foreign companies. This selective enforcement will not harm China’s companies, but the innovation and finances of US (and other non-Chinese) companies who constantly lose patent lawsuits. That will not make US companies competitive.
Uh...what?
“But if the reality is that patents are simply correlated to patents”
It seems like a pretty sure thing that anything correlates quite strongly with itself.
Re: Uh...what?
simply. as in, solely.
Re: Uh...what?
Ooh… a subtle grammar Nazi… respect!
I think this other sentence from the post is more clear:
(emphasis mine)
Re: Re: Uh...what?
Indeed. A thing will ALWAYS correlate to itself. However, what he’s suggesting is that, while people claim patents correlate to innovation, that in fact they correlate to nothing other than themselves. If patents only exist to glorify themselves, what good are they?
Re: Re: Re: Uh...what?
Uhm… does making a mistake correlate to more mistakes being made, or does it correlate learning from those mistakes and not making them again?
Re: Re: Re:2 Uh...what?
correlate to *
Re: Re: Re:2 Uh...what?
(then again, I suppose it depends on who you are. If you’re an average individual with average intelligence, it correlates to learning. If you’re an idiot bureaucrat it correlates to more mistakes).
Patents have always been a dumb measure of inventiveness
All the presence of a patent does is show that some joker knows how to file a form.
There has to be a better method for measuring the amount of productive innovations a nation creates. Then again, I’m sure hours could be spent arguing over what a “productive innovation” is.
Re: Patents have always been a dumb measure of inventiveness
OK I’ll bite.
What’s a “productive innovation”? 😛
Re: Re: Patents have always been a dumb measure of inventiveness
How’s this for opening a can of worms?
A productive innovation is an invention, (which according to Wikipedia is a new composition, device, or process which may be derived from a pre-existing model or idea, or may be independently conceived), that has been produced or distributed at the commercial level.
What I like about this definition is that it emphasizes not just coming up with the invention, but actually introducing the invention to the market whether it succeeds or not*.
*Needless to say if an invention reaches the market and fails, there is plenty room to argue that the invention wasn’t very productive, but I still like the applied dimension of my definition.
Re: Re: What's a “productive innovation”?
Something that leads to a net increase in GDP.
Re: Re: Re: What's a �productive innovation�?
Something that leads to a net increase in GDP.
You know, that’s actually not bad. All you have to do then is filter which products are actually inventions as opposed to established products.
Free markets verses patent examiners
History has proven that free markets are a much more efficient and accurate gauge of innovation than patent examiners. Just look at the number of patents issued as compared to the number of businesses demonstrating innovation. Just because some patent examiner rubber stamps your form, doesn’t mean you were innovative.
Royal Governors
In colonial America Royal Governors appointed by the crown would hire writers to submit letters anonymously to the press in an effort to convince the populace that England’s imposing taxes on them was legal and fair. In essence they tried to convince colonists that a sow’s ear was a silk purse. It appears you are doing the same for infringers with patents. Sure, patents discourage innovation. Right!
Re: Royal Governors
Wow, well, let me start by saying, kudos for studying! Keep that up and you’ll get a gold star Mr.
But, let me just highlight a few chapters you might have missed. The fact is, that many a patent attorney have said the same exact thing. In fact, I’ve yet to hear a lecture by anyone that’s studied economics, that doesn’t acknowledge the fact that monopolies are a hindrance to innovation. The reason we’ve had a technical boom (in the last 200 years, as you put it) is because the US disregarded the IP of old Brittan. You see, without the pile of innovation blocking patents (leases in ye ol’) held by the King, we were able to start producing devices to machine parts were once too expensive, or even made unavailable to colonists, for fear of a revolution. Once those restraints were lifted, the manufacturing of factories, steam engines ( another of the kings patents BTW.).
Anyway bla bla bla … you’re going to ignore the truth and continue to troll the web, pretending to be a teary eyed patriot who thinks he’s under attack by some radical communist left wing organization who wants to undermine innovation in the US… as long as your paychecks don’t bounce anyway.
We may disagree on many points, but at least through all of our disagreements there is one point upon which we agree:
The number of patent applications filed and the number or patents issued bear no relationship to inventive activity, and for those who may believe otherwise my response is to note that this realization comes with experience.
Nevertheless, I can attest to the fact that in many business situations I have faced the presence of a pending application and/or issued patent has proven extremely helpful in facilitating business negotiations. Please bear in mind, however, that their importance is such negotiations is very fact specific. The same can be said of other so-called IP rights.
Re: Re:
“I have faced the presence of a pending application and/or issued patent has proven extremely helpful in facilitating business negotiations.”
How so? You don’t have to name anyone specific. I would just like to hear someone that managed to derive an actual benefit from the modern patent system.
Re: Re: Re:
Imagine, if you will, a scenario wherein a sophisticated and expensive system is procured from a developer/manufacturer by an agency of the federal government. Not wanting to be locked in to a single source of supply and product support, the agency insists that the developer engage in a full transfer of all technical resources (technical data package, special tooling and test equipment, subcontractors, know how, show how, etc.) necessary for another company to manufacture the system and compete for future procuments of the system.
Almost invariably the other company (known as a second source) has on its staff a marketing type who gets the bright idea to low-ball the price quote for the next procurement so as take over the entirety of future procurements (usually by options added to the procurement), and then look to entry into the foreign market to make a “killing” for the benefit of its bottom line.
In the meantime the original developer is left out in the cold…unless by sheer blind luck domestic and foreign IP rights are available that can be asserted against the second source. Whenever such rights are identified, they almost always have a very “chilling” effect that causes the second source to totally rethink its business strategy, with the usual result being that the original developer takes over the international market for the system.
Now, lest someone speak up and say “there goes competition”, in the foreign market this is virtually never the case. A system developed in the US must compete against a host of somewhat similar systems developed by foreign companies.
The somewhat similar scenario many times plays out when the customer, the federal agency, decides to take over manufacture and support itself so that it can keep government employees on the federal payroll to the exclusion of those employed by the private sector. The rationalization is typically “Hey, we can do it for less, so why not?” Unfortunately, this is in most instances a very short sighted view since the expertise for the development of such systems resides within the private sector. When the private sector loses such business, the first people to go are the engineering staff who have the requisite expertise to perform R&D for the next generation system. No business? No charge numbers. No charge numbers? No engineers (and others) can be paid, so their prompt exit from employment is an industry norm, as anyone who has ever followed the aerospace industry is well aware.
These are just a couple of examples, but in each instance the developer/manufacturer would have been up the creek without a paddle were it not for legal rights that could be forcefully asserted to secure a satisfactory business outcome.
Re: Re: Re: Re:
mmm yeah some might say that’s a favorable outcome. But for the sake of argument, what if the shoe were on the other foot. What if the company that invented the product were in Germany and the procurement outlet was in the US. Would it be safe to assume that since the distributor was the one with the relationship (which is at least 3/4 the value of any deal with the Govt.) that they would have the right to seek a new manufacturer?
Re: Re: Re:2 Re:
Your hypothetical is not clear. Can you restate it?
If you’re gonna stay true to the correlations you propose, then you have to play it out to the logical end. We happen to live in an era that is universally regarded as the most rapid in innovation ever. That is all the while that patents are also growing at a rapid rate.
So we can debate if patents create innovation, but at the very least they don’t seem to have any inhibiting effect – except perhaps on a small minority that seems to whine incessantly when they aren’t allowed to steal something they think they should get for nothing.
Re: Re:
Patents don’t have an inhibiting effect?
Have you seen the smartphone field and all the litigation going on there?
What about the car industry where patents slowed down Toyota’s independent research?
I believe you’re dismissing the evidence. Perhaps we should bring back the baby with the bathwater there?
Re: Re: Re:
Toyota was caught red handed with their sticky fingers on American inventors property. This is something Japanese companies have been doing since WW II. Look at how they destroyed whole American industries by selling products below cost in order to take over industries.
Toyota’s carefully polished image has taken a beating. It appears that Toyota knowingly put their customers at risk of maiming and death in a vain attempt to cover their problems.
I hope that I am not alone in disapproving of companies who are willing to maim and kill customers.
Ronald J. Riley,
Speaking only on my own behalf.
President – http://www.PIAUSA.org – RJR at PIAUSA.org
Executive Director – http://www.InventorEd.org – RJR at InvEd.org
Senior Fellow – http://www.PatentPolicy.org
President – Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Washington, DC
Direct (810) 597-0194 – (202) 318-1595 – 9 am to 8 pm EST.
Re: Re: Re: Re:
“This is something Japanese companies have been doing since WW II. Look at how they destroyed whole American industries by selling products below cost in order to take over industries.”
That comparison is truly hogwash.
First, if we’re looking at Toyota’s 1970s and 80s, you see that there was effectively an embargo placed upon them by the American auto industry. There was an Import quota which lead to higher prices overall for consumers and deteriorating quality from the Americans. So saying that they were selling products below cost is showing an ignorance of what truly happened.
With that import quota, Toyota did the smart thing in bringing over their luxury line of cars: Lexus, Toyota Corolla, etc. While doing that, they also continued to tinker with their cars and make them lighter, less parts intensive, and overall worth the luxury price. In effect, after 10 years of this embargo and very good practices, their cars (along with Honda) have risen to a standard that none of the Big Three can compete with. Compare that with Ford, who was doing quite well with trucks until the economy destroyed them.
What’s funny is that GM bought one Toyota car, took it apart, and were amazed at what happened on the inside. Standardized bolts, lighter alloy… I could go on. In effect, without patents, Toyota became (rightfully so) a beast of a car maker.
Now this:
“Toyota’s carefully polished image has taken a beating. It appears that Toyota knowingly put their customers at risk of maiming and death in a vain attempt to cover their problems.”
It was an engineering problem, with a few electrical issues.
I notice that you haven’t discussed the Firestone debacle that Ford had a few years ago. I lost a good friend to faulty Firestone tires that were standard. But if you want to focus on Toyota, I’m glad that they moved forward and admitted the issue and the problem, something that even Ford did not do until lives were lost. Toyota recalled their vehicles and found a solution. Furthermore, they incentivize teams of engineers to come forth and fix these problems. Something that I doubt the Big three did save for the look at their “efficiency wage” of $70 to workers.
So no, I have a hard time believing they “destroyed” American industries. Especially when those very industries placed the embargo in the hopes of stopping competition.
But to try to make it sound like it was something far more sinister on their part is really poor form in a debating forum.
Final thing:
“Toyota was caught red handed with their sticky fingers on American inventors property.”
Mike already addressed this so I have nothing further on this. I agree that Toyota is punished for first patent liability, stifling innovation in the hybrid field.
Re: Re: Re: Re:
I hope that I am not alone in disapproving of companies who are willing to maim and kill customers.
Wow! Patent infrigement is about maiming and killing customers? Really? Damn and I was just going to backward engineer Windows Mobile 7 and start my own phone company, but now I see that I have to kill people to do it I guess I better not.
Do you think if we’re going to debate patent law we might base it in reality please? Otherwise I understand there are plenty of comedy clubs where you could get a stand-up act going.
Re: Re: Re: Re:
I hope that I am not alone in disapproving of companies who are willing to maim and kill customers.
Wow! Patent infrigement is about maiming and killing customers? Really? Damn and I was just going to backward engineer Windows Mobile 7 and start my own phone company, but now I see that I have to kill people to do it I guess I better not.
Do you think if we’re going to debate patent law we might base it in reality please? Otherwise I understand there are plenty of comedy clubs where you could get a stand-up act going.
Re: Re:
So we can debate if patents create innovation, but at the very least they don’t seem to have any inhibiting effect
You are comparing two different things. The first is whether or not there is innovation, and the second is the rate of growth (a derivative of the first). Our concern is about the rate of growth. Arguing that growth proves that patents do not hinder innovation is wrong, because it is not the absolute growth that concerns us but the rate of growth.
Handle It!
Patents encourage innovation, both from the inventor who reaps a reward and wants to continue reaping rewards and from the potential infringer who must innovate a way around the patent or perish. For the non-innovator, patents will be a business-killer as the innovators design better and better patentable ideas and better and better ways to get around them and leave the non-innovator in the dust of obsolescense. The encouragement patents give to design-around innovation seems to be ignored in all 28 comments and the main post, but its a great economic benefit. When you get stuck in the rut of the false assumption that patents are bad, you can miss the things that are obvious to those of ordinary skill in the art of logical analysis who are travelling the high road envisioned by our founders for patents. But, hey, all you Don Quixotes on this list battle that patent windmill and knock yourself out on this list. Patents are here to stay. What you say here will not be long remembered. Patents will still be here long after you are all gone.
Re: Handle It!
> The encouragement patents give to design-around innovation seems to be ignored in all 28 comments and the main post
“Design-around innovation” is a waste of time which could instead be used to incrementally enhance the original design. If the alternative is better, it will be discovered eventually with or without patents; however, patents would prevent combining the best features of both designs in an even better design.
Re: Handle It! -- it will be!
Here is some ‘logical analysis’ for you:
It is easy to see that patents (as any IP) create a restriction on information flow and use — which is detrimental, yet is their essential mechanism. But creativity has no essential dependency on restricting info — quite the opposite.
So, being necessarily partly counterproductive where there is no necessity to be, patents must be imperfect, sub-optimal, and so leave room for the possibility of some better system.
Given sufficient attention and evolution that superior alternative might well be found — in which case, goodbye patents! (Of course, your community may decide to stick with patents anyway, while eveyone else doesn’t — in which case, goodbye your community!)
Re: Re: Handle It! -- it will be!
It is easy to see that patents (as any IP) create a restriction on information flow and use — which is detrimental, yet is their essential mechanism. But creativity has no essential dependency on restricting info — quite the opposite.
You must not understand how patents work. Patents require the applicant to publicly disclose the invention so that anyone with an interest may read the disclosure and learn about the invention. In such circumstances, patents do the opposite of restricting information flow: patents, in fact, facilitate the free flow of information.
You are correct in saying that patents create an obstacle to using the inventions described therein. But they certainly do not restrict the free flow of information.
Re: Re: Re: Handle It! -- it will be!
The instances of the invention are themselves information. The patent descriptions are like metadata — information about information.
Re: Handle It!
Patents encourage innovation, both from the inventor who reaps a reward and wants to continue reaping rewards and from the potential infringer who must innovate a way around the patent or perish.
I love the faith-based reasoning. I’ve posted nearly 3 dozen studies that have looked for proof of such encouragement of innovation and they can’t find it. Comparing like:like countries with different levels of patenting (or no patenting at all) and comparing countries immediately before and after changes to their patent systems has *consistently* shown no increase in innovation from a patent system, or from increases in patent coverage.
The encouragement patents give to design-around innovation seems to be ignored in all 28 comments and the main post, but its a great economic benefit.
If that were true, there would be evidence to support it.
So I have to ask, why isn’t there any?
When you get stuck in the rut of the false assumption that patents are bad, you can miss the things that are obvious to those of ordinary skill in the art of logical analysis who are travelling the high road envisioned by our founders for patents.
This has nothing to do with a rut. It has to do with evidence. Can you present some to back up your position?
What you say here will not be long remembered. Patents will still be here long after you are all gone.
People said that about slavery once too.
'Incentives' is a bit of a propaganda word
Really, the word ‘incentive’ is not the right one to begin with. It suggests we are trying to make up for a lack of wanting — that we don’t want something enough and need to boost the want. But this just doesn’t apply to innovation, or probably any of the subjects of intellectual monopoly.
It is like suggesting that you incentive your listening to music. If you want to listen to music, you already want to, you don’t need further encouragement.
The real purpose is to make the current commercial/market system support what we want to do anyway. It is not an incentive, it is a fix, for a particular defect or weakness in the current system.
The orthodoxy likely would not want to see it that way because then it seems less of a good in itself, and more part of a whole system that is patchy and open to criticism.
Perspectives
We would love to give you the opportunity to interview some of our writiers/scholars on the topic of patents. Shoot me an email or DM on twitter (@TAPolicy)http://techpolicy.com/Issues/Intellectual-Property-Patents-and-Licensing/Patents.aspx
Patent nuclear arms race
The original article doesn’t mention the original way that patents encourage more patenting: the patent nuclear arms race.
In fact, China’s behavior here is undoubtedly deliberate; and the reason is that it views itself as in a patent nuclear arms race with the US.
Why?
Because the US has put pressure on China to start respecting US patents. If China doesn’t do that, the US might start talking trade embargoes.
On the other hand if it does, then US companies suddenly in effect have a battery of warheads aimed at Chinese companies.
What does a country do if another country has, or is about to have, nukes aimed at it? Aim its own back. Presto: arms race.
So China acts to get Chinese companies to patent like crazy and catch up the “missile gap” with US companies.
Yes, folks, patent nuclear war has now gone international.
And sooner or later someone’s gonna push the big red button. Some company in one country is going to file a lawsuit against some company on the other and before we know it the world’s biggest consumer economy and the world’s biggest manufacturing economy will be melting down in a morass of multiplying lawsuits.
And then we can probably kiss a 21st century full of flying cars and commercial flights to the moon and Mars good-bye.
Of course, if dumbass US politicians hadn’t started rattling the saber at China over IP enforcement to begin with, we would not now find ourselves in this situation.
Apologies for the double post
No idea why… and BTW in case any litigeous MS employees are litening in I was only joking about the Mobile 7 thing…. I’d base it on something better.