Andy Grove: Patents Are Like Mortgage Backed Securities
from the and-innovation-will-suffer dept
Intel co-founder and former CEO Andy Grove gave quite a speech this weekend at the National Inventors Hall of Fame, where he explained how patents are looking increasingly similar to the sort of financial derivatives that have brought down today’s economy:
The true value of an invention is its usefulness to the public. Patents themselves have become products. They’re instruments of investment traded on a separate market, often by speculators motivated by the highest financial return on their investment….
The patent product brings financial derivatives to mind. Derivatives have a complex relationship with an underlying asset. While there’s nothing wrong with them in principle, their unfettered use has damaged the financial services industry and possibly the entire economy.
Do these patent instruments put us on a similar road? I fear our patent system increasingly serves those who invest in the patent products… It may be time to use Jefferson’s principle as a test and ask if we meet it.
It’s an interesting comparison and one that does seem apt the more you think about it. In separating out the “security” from the underlying asset, we tend to distort things. It was that distortion that resulted in the financial crisis, as it enabled those who wanted to sell risky things to obscure the actual risks and pretend that their securities were safer than they were. With patents, the system has been distorted to present the patent itself as being valuable, rather than the ability to execute and implement an idea in a manner that the market appreciates. It’s definitely an area that could stand further thought and scrutiny.