The Role Of Abundance In Innovation
from the it-increases-it... dept
A few weeks back, Dennis wrote about a recent Malcolm Gladwell article in the New Yorker about innovation, but I was just shown another article from the same issue, by Adam Gropnik, which may be even more interesting. Gopnik points to evidence challenging the idea that “necessity is the mother of invention,” by noting that more innovation seems to occur in times of abundance, rather than times of hardship. The idea is that in times of hardship you’re just focused on getting through the day. You don’t have time to experiment and try to improve things — you make do with what you have. It’s in times of plenty that people finally have time to mess around and experiment, invent and then innovate.
This makes a lot of sense… and certainly fits with plenty of other things we’ve seen in recent research. Innovation tends to occur not because of one brilliant idea from one brilliant individual — but as an ongoing process, with lots of folks tossing different ideas at the wall, and seeing what sticks. Invention is the beginning process, but then people innovate around various inventions to improve it and make it acceptable to the market. In fact, this is why we tend to think that the long run impact of investment bubbles isn’t usually bad. Historically, the impact of bubbles has actually been quite good, and it’s for exactly these reasons. Within the bubble there is tremendous abundance, and that allows for many different ideas to get tested incredibly quickly. The bad ones fail, but plenty of good ideas (and infrastructure) stick around. It’s bad if you get caught up in the investment bubble, but it’s good for the overall economy in the long run.
This also should (again) get people to rethink some issues surrounding patents. If it’s that abundance and experimenting that leads to all that innovation, aren’t we holding back that innovation by enforcing artificial scarcity, and allowing one company to entirely block others from doing the necessary experiments? In Chris Anderson’s latest book, he builds on Carver Mead’s idea about transistors becoming so abundant that it makes sense to “waste” them. This makes a tremendous amount of sense if you start to follow through the economic implications of “wasting” goods that are effectively infinite. When “wasted,” they create new opportunities where none existed before. The innovation that comes out of abundance comes from such “waste.” It comes from the ability to invent and tinker and experiment and see what sticks — and you can’t do that when you have massive scarcities — real or artificial. So why is it that our innovation policy is still focused on enforcing scarcities when that’s the exact opposite of what’s needed to encourage innovation?
Filed Under: abundance, innovation, invention, patents
Comments on “The Role Of Abundance In Innovation”
“So why is it that our innovation policy is still focused on enforcing scarcities when that’s the exact opposite of what’s needed to encourage innovation?”
Because artificial scarcity is what’s needed to maintain the profit margins of rich and powerful corporations that lobby for that scarcity.
Re: Over 30% Domestically Filed Patents
Over 30% domestically filed patents are by small entities. Well over 90% of job creation is by small entities.
It is big companies lobbying to weaken patents. It is big software companies manipulating the software community to promote their agenda for weak patents.
It is the American people who will lose jobs and prosperity in a big way if transnational corporations are allowed to steal American ingenuity.
Ronald J. Riley,
Speaking only on my own behalf.
Affiliations:
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:
You tell them Bettawrekonize! The “artificial scarcity” enforced by Toyota’s patents are maintaining their profit margins. Oh, wait. Toyota LOST money last quarter. If the “rich and powerful” corporations that have patents are losing money in spite of “artificial scarcity,” then either the artificial scarcity does not exist (and considering the number of unsold cars on dealers lots, and the MASSIVE discounts by those dealers – I would say that artificial scarcity does not exist even though cars are covered by hundreds, if not thousands, of patents), or it is not working the way that the “rich and powerful corporations” think it does.
Doesn’t this abundance come at times when we are rich, and doing well, and knew things are being created? If patents were that restrictive, we would be rich but with a paucity of new products or services. That we have abundant choice pretty much means that the system is fairly well balanced.
Your argument would only work if we only had (based on the article) a single razor blade company, a single cola, etc. That we have abundant choices and new choices appearing all the time seems to suggest that we aren’t being strangled by patents, copyright, or trademarks.
Abundance (choice and wealth) isn’t really the same as the ability to produce transistors. Wasting transistors is more to do with the fact that the costs to set up the process to make an IC is the bigger part of the cost than the actual material involved.
Re: Re:
I agree with you. In fact, the explosion of patents while times were good seems to support your point, as well as supporting Mike’s point, in a way. The period of time from the late 1990’s up to 2008 saw the greatest number of patent applications and patents in history, which precisely coincides with one of the greatest economic expansions in history. So, where is the blocking? Where is the stifling? In fact, we were bringing in tens of thousands foreign engineers and farming technical work out to multiple countries because we no longer had the resources to exploit our newly developing technologies. Again, how can this be possible? We have the greatest number of patents in history, and yet our expansion was so fast that we outstripped our people resources. Seems like stifling is a poorly defined word in this environment.
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We do have only one company producing any given patented invention for the first 20 years (until the patent expires) so then you must agree that the argument is correct during the duration of any given patent. The existence of abundant choices and new innovation on things that no longer fall under patent protections (like cola and razor blades) is entirely irrelevant.
It’s “Gopnik”
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Oops. Fixed. Thanks.
Re: Re: Re:
Fixed one use, but not the other. 😉
Re: Re: Re:
One more Gropnik in there.
Parents
Necessity is the mother of invention, and abundance is the father. This really makes sense in a weird kind of way when you look at how the different reproductive systems work and how both necessity and abundance lead to innovation in different ways.
Constraing + Abundance
Here’s an interesting post about how innovation may occur at the intersection of constraint and abundance: http://www.fastcompany.com/blog/robert-fabricant/design-4-impact/innovation-crossroads
And I like Ethan Z’s thoughts on innovation from constraint: http://www.ethanzuckerman.com/blog/2008/11/10/innovation-from-constraint-the-extended-dance-mix/
Too big to fail
I think I have to disagree here. During a time of abundance, it is very easy to get big and fat. When people have money falling out of every orifice, it’s relatively easy to bend down and pick it up even if your business plan is poor. So if you start at the beginning of a bubble with a mediocre idea and you know how to take advantage of it, you can grow really fast. If you’re lucky, by the time the bubble bursts, you’re too big to fail. So the government bails you out of your own mediocrity and here comes the endless cycle of throwing good money after bad. (CF the auto industry for an example of that kind of cycle) Expansion is good, but it needs to be real. People spending money they don’t have on things they don’t really want diverts resources away from real innovation.
Re: Too big to fail
People spending money they don’t have on things they don’t really want diverts resources away from real innovation.
I can only say, Huh? Seems like a definition of stupidity.
Re: Re: Too big to fail
Unfortunately, it’s also the definition of what a lot of people do.
Invention is Scarce Due to Mindset
Mike’s faulty reasoning never ceases to amaze me. When times get tough, and people lose their jobs more turn to inventing then would otherwise be the case. If people are fighting for their very survival then all their efforts go towards shelter and food. But loss of a job often means lots of time to invent.
While most people are probably at a fundamental level capable of becoming inventors it is a fact that relatively few do so because of their mindset. I think that you are a good example of this. It does not have to be this way, all you need to do is shed your narrow mindset about inventing and actually develop and patent inventions.
I realize that it is easier to sit around and rationalize why you should not roll up tour sleeves and actually work at inventing but if you did so you might find you actually like what you were doing.
While some products may not be scarce it is a fact that inventor who follow through are scarce. One reason for this is that they have to face theft of most of the value of their inventing efforts. You can set an example and rather than advocate theft of the fruits of inventors work you could actually help increase the number of inventions which are developed by rewarding those who do the development.
Even better would be to demonstrate through deed that that you can do your bit to make invention less scarce. Are you up to the task? Or are you to lazy or narrow minded to actually do some good by inventing and above all else teaching your invention to others as real inventors do?
I do not think you have what it takes but would love to see you prove me wrong. Moreover, if by some chance you make the grade http://www.PIAUSA.org will be ready to lend you a hand when some parasitic patent thief tries to rape you.
Ronald J. Riley,
Speaking only on my own behalf.
Affiliations:
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: Invention is Scarce Due to Mindset
Mike’s faulty reasoning never ceases to amaze me. When times get tough, and people lose their jobs more turn to inventing then would otherwise be the case. If people are fighting for their very survival then all their efforts go towards shelter and food. But loss of a job often means lots of time to invent.
It wasn’t my reasoning, it was explained in the article. Are you saying that the evidence presented in the article is faulty?
While most people are probably at a fundamental level capable of becoming inventors it is a fact that relatively few do so because of their mindset. I think that you are a good example of this. It does not have to be this way, all you need to do is shed your narrow mindset about inventing and actually develop and patent inventions.
Why would I ever want to limit my inventions?
Even better would be to demonstrate through deed that that you can do your bit to make invention less scarce. Are you up to the task? Or are you to lazy or narrow minded to actually do some good by inventing and above all else teaching your invention to others as real inventors do?
We have invented plenty of things, and then we put them into practice. It’s lots of fun.
Btw, Ronald, what products have you brought to market?
This is an important story for Mike, but not because he truly believes it all, but because it will the basis of other stories in the future.
The technique is simple. Write a sort of general, semi-unfocused piece that comes with a zinger ending. IN this case, “So why is it that our innovation policy is still focused on enforcing scarcities when that’s the exact opposite of what’s needed to encourage innovation?”.
Later on, Mike will right another more “important” story focused on something like the RIAA or BSA or movie studios, and he will link to this story saying “we have shown how patents stifle innovation”, when he has done no such thing.
It’s bootstrapping ideas. It’s almost like Mike is trying to write a new section to one of his MTV generation presentations, and is looking for 200 more flashy slides to use. This one would allow him to use a “PATENTS STIFLE INNOVATION” slide.
WTG Mike!
Re: Re:
This one would allow him to use a “PATENTS STIFLE INNOVATION” slide.
Heh. Considering we’ve discussed a bunch of studies showing that patents stifle innovation, I think those represent a lot better examples of that. This particular post doesn’t prove that patents stifle innovation, but explain *why* the stifling (that’s already been long proven) happens.
Re: Re: Re:
Mike, if you look hard enough, you will find a bunch of studies (including one recently) that says the World Trade Towers were taken down by controlled demolition.
Here’s the question: What is innovation? Innovation is creating something new, advancing the art as it were. Creating something that hasn’t been done before. Yet, if there is a patent on something, is there any innovation in doing it again? That would be a derivative work, no?
Further, if patents stopped innovation, why would there be thousands of different patents for mousetraps?
What I have seen on this blog is that you stand up for people who want to take something already made, and edge it forward very slightly and claim to be a great inventor, artist, or whatever. That isn’t innovation, that is just going over the same tired ground again and again.
Re: Re: Re: Re:
Mike, if you look hard enough, you will find a bunch of studies (including one recently) that says the World Trade Towers were taken down by controlled demolition.
There’s a difference between a conspiracy theory posted online and a WHOLE SERIES of peer reviewed journal articles from some of the top names in the field.
But nice try at equating such things rather than dealing with any of the evidence…
Here’s the question: What is innovation? Innovation is creating something new, advancing the art as it were. Creating something that hasn’t been done before. Yet, if there is a patent on something, is there any innovation in doing it again? That would be a derivative work, no?
Invention is creating something new.
Innovation is successfully bringing it to market.
Or, as many folks have said, invention is turning money into ideas, and innovation is turning ideas into money.
Further, if patents stopped innovation, why would there be thousands of different patents for mousetraps?
I never said it “STOPPED” innovation. I said it stifled — as in slowed down the pace of innovation. That’s pretty well confirmed by nearly every study on the subject.
Re: Re: Re:2 Re:
Again, I know you hate it when I can show parallels in the way you think, but the trade tower thing is very true. What you call a conspiracy theory others call “based on fact”.
Peer reviewed journals are nice, but if the peers reviewing an anti-copyright article are themselves against copyright, it really isn’t much better than a conspiracy theory, now is it?
I am sure that i you looked as hard for evidence on the other side, you would be able to find plenty of peer reviewed artcles with the opposite opinion. But those you would dismiss as people who have “succumbed to the entertainment industry’s twisted logic”.
“Innovation is successfully bringing it to market.”
Nope, innovation is bringing something new to market. Success isn’t part of the picture, but being NEW is. Making a duplicate of another product and bringing it to market (successfully at that) would not be innovation. It would be duplication.
Bringing something that already exists (or is already patent) to market without the rights to that patent isn’t innovation either, it’s just cheating (working off of someone else’s notes).
So again, innovation isn’t stifled, the only things stifled are either copying other people’s ideas and bringing them to market or copying other people’s existing products and bringing them to market again.
“That’s pretty well confirmed by nearly every study on the subject.”
Every study that supports the concept only.
I’m of the opinion that true innovation is hard to nail down. I’m not sure about this abundance theory either – if I have say 87 ways to do the same thing then why invent something new? Innovation happens when there is a need for it, not because someone decided to mashup a couple of the existing 87 ways of doing something. Besides abundance and hardship are extremes, what about all the other times in between?
Check out the book Myths of Innovation. Constraints foster innovation by forcing your hand into doing things you might not have otherwise considered.
And I love this part:
aren’t we holding back that innovation by enforcing artificial scarcity, and allowing one company to entirely block others from doing the necessary experiments?
Patents do not stop experiments, they might stop actual products but they do not stop experiments or innovation. Patents are said to teach a process, maybe this actually saves some experiments and lets one stand on the shoulders of other while innovating.
Forcing people to try to work around.
A big part of what drives the next step in invention is someone who does not want to pay to use someone eases invention. So they develop an alternative, sometimes a much better alternative, patent it and collect royalties from others.
What we see on TechDIRT are the people who resent having to compensate those who invent coupled with laziness and no gumption to produce an alternative.
From what I can tell most of the anti-inventor sentiment on TechDIRT comes from the software community, actually second and third rate types who resent always being late to the invention party.
Ronald J. Riley,
Speaking only on my own behalf.
Affiliations:
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.
BS
Bullshit !!!
No further comment
Recession may be the mother of invention
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/30/BUE517SN4N.DTL&type=business
This was handy so I am offering it of others consideration.
Mike constantly drones on about his citations. The problem is that the vast majority are from fringe types and utter drivel.
If I thought it would make a difference I would spend the time to look up the legitimate stuff. But over a year of watching Mike’s responses to those who have tried to educate him convinced me that this is futile.
Ronald J. Riley,
Speaking only on my own behalf.
Affiliations:
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: Recession may be the mother of invention
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/30/BUE517SN4N.DTL&type=business
Ah, right, an article written by an organization focused on convincing more people to get patents… yeah, that’s “proof.”
Mike constantly drones on about his citations. The problem is that the vast majority are from fringe types and utter drivel.
Yes, “fringe” types like the 2007 Nobel Prize winner in economics. Or the 2001 Nobel Prize winner in economics. Or the 1998 Nobel Prize winner in Physics. Fringe types indeed.
And who did you quote in response? Oh, wait… no one. You did insult my parents though the last time I brought up evidence of the problem.
Guess which one is more convincing?
How to make money ... and ... Abundance In Innovation
Personally I use the “jetable Mach 3” no Idea what jetable means only that it lasts 5 shaves… wish someone would come up with a razor that has a resharpening station that lasts a month.
Most people sat back and thought… two blades very cool … adding another blade isnt innovation its obvious.
The new yorker Article is about the stupidity of marketing the obvious, and branding, its that simple.
Re: How to make money ... and ... Abundance In Innovation
Except, three blades was INNOVATIVE!!! Even better, making them vibrate was INNOVATIVE!!! Incidentally, they had to admit in court that the vibrations were NOT shown to be any better, but they were INNOVATIVE!!! They had to re-word their advertisements in compliance with truth in advertising laws. All hail INNOVATION – I am waiting for the book “Is it Innovation, or Is it a Lie?”
With all due respect ...
To Mike and to Gopnik, and all the commenters, tell that to the people who led the extraordinary technological development during two world wars last century. Those were not times of abundance, and they were most definitely times of necessity. And many of the inventions at the time found other novel applications during peace-time …
I think the relationship might be a little more complex that this simplistic tripe describes.
Re: With all due respect ...
To Mike and to Gopnik, and all the commenters, tell that to the people who led the extraordinary technological development during two world wars last century. Those were not times of abundance, and they were most definitely times of necessity. And many of the inventions at the time found other novel applications during peace-time …
No one said that there is NO innovation in times of need. There certainly is. But the point he was making is that there appears to be a lot more during times of abundance.
this simplistic tripe
Heh. You start out “with all due respect” and finish with that. Somehow I imagine that you didn’t mean the first part.
I agree, this seems like far too simplistic a proposal for my tastes.
As with anything else in life, there are far more variables involved with innovation than “Do we have the extra stuff kicking around?” and “Can we get some help starting out?” There are a myriad of things that might stifle innovation, and the one that comes to the forefront of my mind is the old phrase, “If it ain’t broke, don’t fix it.” Sure, I understand that for things we use every day, there will always be someone who has a financial interest in making something better, and that, Mike, is why innovation will never truly stop. Money makes the world go ’round, after all. It’s not that difficult to reverse engineer a process – I could take apart a vacuum cleaner, and, never having built one myself, tell you exactly what you need to build one just like it. The plastics may not be exactly the same, and the metal bits may be a slightly different alloy, but I guarantee you I can tell you how to build a vacuum cleaner given a model and a modicum of quiet time. I could probably even rig a way to give it more sucking power by sticking an electric weedeater motor on it. (Disclaimer: I have never been a vacuum inventor or manufacturor, nor have I ever actually had the time or desire to take mine apart, but I’m smart enough to know there’s a motor in there somewhere and that would be my starting point if I wanted to overclock the S.O.B.) However, what Ronald needs to realize is that your average Joe on the street simply doesn’t care that much if his bedsheets have a 1200 thread count or his alarm clock can record his wife’s voice yelling at him to get out of bed (I think those are actually out there somewhere, and all I can say is, why would anyone want that kind of torture?). So why would he take time out of his busy life, with work, the loud wife, the kids, grilling in the backyard, watching that Cowboys game and having a few drinks with the boys to invent a loom that will weave a sheet that tightly? There is a reason why basement inventors are the catalysts in so many comedy films. It’s because they end up having no life. At the same time, that fancy new grill (that someone got PAID to design) probably cost enough that Mr. Joe wouldn’t have the money, like so many others, to invent that loom, even if the loud wife DID want silkier sheets. You have to remember that while the economy may be good, it is very rarely so good as to allow people to throw money away on the first ten attempts before old Joe realizes that the thread actually has to be strong enough to hold with the tension involved in weaving it that tightly. Your average middle-class American lives somewhere between tightening the belt a notch or two tighter and comfortably depositing in his kids’ college funds. He might buy his wife some fancy new perfume for her birthday, sign his oldest boy up for little league, try to convince his daughters that they don’t need boys, they need degrees from good universities, and try to make sure there is something to leave to them all when he finally gets to go have a chat with St. Pete. And then maybe, if his kids do the same, a generation or two down the line, there will be enough money to allow for tinkering in the basement while the kids are at camp.
I know that was a bit of a rant, but I guess what I’m trying to say is that you have to look at the bigger picture and the priorities involved. For people that get paid to make things better, it will always be a greater priority to take apart the vacuum cleaner and find out what makes it tick (I would suggest a Dust Devil or a Dyson), but for office types or blue collar workers, there are just more important things going on. So Mike, you can’t try to condemn the patent system that protects the lives and livlihoods of so many because you’re too lazy to break out the wrench and screwdriver and recreate the vacuum cleaner yourself, if it’s that important to you, and Ronald, you’ll have to excuse me if I don’t take time away from my husband and children, and money for food, gas, and entertainment away from the family, so I can go play Dexter and make myself a softer sheet.
And one more thing guys…
Seriously? Call it an outsider’s perspective looking in, but can’t we all play grown-ups and have a polite intellectual discussion, or do we need to separate you two? Some of your comments remind me of politicians, my four and six year old boys poking each other at the dinner table, or both.
Courtney
Working wife and mother of two, and the girl that turned down MIT to serve her country.
Re: Re:
Nice post Courtney!!!
You touched on a significant point that I did not see above. It might be possible that patents “stifle” innovation. However, “innovation” as defined by Mike is but one aspect of patents (and copyright). Other aspects are economic growth and obtaining more inventions. There have been several studies that show that patents have driven economic growth, yielded more chemicals and medicines than we would have had without patents, and provided MASSIVE growth in plant varieties.
Now, Mike has argued that these are DISTORTIONS in the economy. Probably. However, ANYTHING we do has consequences to the economy. There have been several outstanding papers written that show that a totally free market would be worse than a modestly regulated market (who woulda thunk it?). The question is not do we want the market distorted, because that will happen the moment we regulate the market, but is the market distorted in ways we deem beneficial to our society. Harder question to answer.
I loved your vacuum cleaner example.
Re: Re: Re:
Now, Mike has argued that these are DISTORTIONS in the economy. Probably. However, ANYTHING we do has consequences to the economy. There have been several outstanding papers written that show that a totally free market would be worse than a modestly regulated market (who woulda thunk it?). The question is not do we want the market distorted, because that will happen the moment we regulate the market, but is the market distorted in ways we deem beneficial to our society. Harder question to answer.
Wow. So because you say “we can’t figure it out” we just throw up our hands and support the provably worse system? You are wrong. There is significant evidence of exactly how the patent system distorts and harms innovation, slows down economic growth, and LIMITS the ability to innovate. It’s not some theoretical “oh, it may harm some things it may help some things.” We can look at the evidence of exactly the harm it does, and compare it to situations with weaker patent protection.
Re: Re: Re: Re:
You are inferring a conclusion from my words that I did not intend. In fact, I asked a question, I did not make a statement. Re-read what I said.
In terms of patents, I offer the following information:
Patents help provide greater dispersion of technology than non-patented products.
Sokoloff, Lamoreaux and Kahn showed that patented innovations “tend to be traded more than those that are not, and therefore to disperse geographically farther away from the original area of invention.”
Patents encourage foreign investment.
Boldrin and Levine provided a summary of 23 studies on patenting and innovation, “strengthening IP increases the flow of foreign investment in sectors where patents are frequently used.”
Patents can lead to more spending on R&D as a portion of R&D.
Kanwar and Evanson have data for 31 countries in the period 1981-1990. They found a correlation between higher patent protection and increases in R&D as a fraction of GDP.
Park and Ginarte studied 60 countries from 1960 to 1990 and found that the strength of IPR (including pharm) led to growth of R&D in developed countries.
Chun-Ya Tseng and Cheng-Hwai Liou in “Valuation of R&D and Patent: An Economic Value Added Perspective,” found a positive correlation between R&D and patents and the financial success of 219 Taiwanese electronic companies sampled from 1990-2003. This paper also provides references to quite a few other papers supportive of the value of patent to the economic health of companies.
Patents have been shown over and over and over and over again to help some small businesses to become established in the market place.
Hall and Ham noted “The results suggest that stronger patents may have facilitated entry by firms in niche product markets…”
Though authors disagree as to the scope, study after study after study has said that patents are an important part of providing motivation for investing.
Cohen et al/Levin et al found that patents were not important for securing returns on innovation, except in pharmaceuticals.
A study by Edwin Mansfield (I believe this paper is “Patents and Innovation: An Empirical Study,” Management Science, Vol. 32, No. 2. (Feb., 1996). pp. 173-181) concluded that 60% of pharmaceutical inventions and 38% of chemical inventions would not have been developed without patents. Mansfield also concluded that while 86% of all inventions would have been developed without patent protection, the reverse is true as well. 14% of all inventions would not have been developed without patent protection. Furthermore, Mansfield did not study the relative value of the 86% and the 14%.
Arora et al also found that increasing the “patent premium” does not increase R&D except in pharm and biotech.
Bessen and Meurer: “the patent system provides positive incentives in some industries like pharmaceuticals.”
Bessen and Meurer: “we find that small publicly traded firms get small positive R&D incentives from patents. This is also very likely to be true for small, non-publicly traded firms and non-profit inventors.”
Ruth Suehle in Redhat Magazine: “I have to admit, it’s easy for me, and I suspect others, to forget that patents can work quite well outside of software.”
Roberto Mazzoleni and Richard R. Nelson: “The collection of small and medium sized firms in the American biotechnology industry is, of course, a striking example of enterprises that would not have come into existence without the prospect of a patent, and which depend on patent protection to make their profits, and to attract capital, through one or another of these strategies.”
I also have found it interesting that at least one researcher has pointed out the flaw with many of the studies that conclude that patents add no value to companies.
Mazzoleni and Nelson, on reviewing an array of studies that concluded patents were not helpful to studied companies:
“On the other hand, as we also noted, an important limitation of the studies reported above is that they all have been focused on a particular class of innovators, typically large firms with an established presence in their product markets and thus having access to the complementary assets needed to commercialize the end-product of their innovative efforts.”
“Nor do these studies get at the question of whether the prospect of patents motivates firms and other organizations outside of a particular industry to undertake inventions which would be used inside that industry. This class of inventors, call them industry-outsiders, is likely to lack the complementary assets needed to appropriate the returns from innovation by being first to market or by rapidly moving down the learning curve. Studies such as that by Jewkes et al. (1969) have documented the importance of such outsiders to technical advance in a number of industries. For such outsiders, the prospect of a patent may be essential if there is to be incentive to invent.”
These two researchers also concluded:
“In some areas, patent rights certainly are economically and socially productive in generating invention, spreading technological knowledge, inducing innovation and commercialization, and providing some degree of order in the development of broad technological prospects.”
Patents tied to economic growth:
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/04/AR2007050402691.html
06 May 2007
The notion that patents are tied to growth is not entirely new. A study published last year by the Federal Reserve Bank of Cleveland found that the single best predictor of how a state’s income will grow is the number of patents in the state per capita. Education ranked second.
From:
http://www.clevelandfed.org/research/trends/2008/0308/03regact.cfm
14 Mar 2008
Education and innovation contributed more to income growth at the state level than other potential factors, according to research conducted at the Federal Reserve Bank of Cleveland. Educational attainment, for example, increased a state’s average per capita personal incomes relative to other states by 8 percent, but innovation “measured by patents per capita” boosts personal income nearly 20 percent. Given the importance of innovation to economic performance, we investigate patenting activity in the Fourth District and compare District trends with those across the nation.
Albert G.Z. Hu and I.P.L. Png, in their extremely well researched paper “Patent Rights and Economic Growth: Cross-Country Evidence,” found a positive mathematical relationship between patents and economic growth. From their conclusion:
Using an ISIC 3-digit industry level database that spans 54 manufacturing industries in 72 countries between 1981-2000, we found evidence that stronger property rights were associated with faster industrial growth measured by value added. The impact of stronger patent righs was both statistically and economically significant in three of the four periods we analyzed: 1981-85, 1991-95, and 1996-2000, and had become stronger in the 1990s compared to the in the 1980s.
Our analysis also showed that the stronger patent rights promoted industrial growth through technical progress in the 1981-85 and 1996-2000 periods and through more rapid factor accumulation in the 1991-95 period.
In another, related area, here is a study showing the incentives from the Plant Act:
http://www.patenthawk.com/blog/2005/04/patent_economics_part_5_theori.html
As an example, the Plant Variety Protection Act of 1970 provided patent protection for sexually reproducing plants. In the 1960s, about 150 new plant varieties were developed in the U.S. In the 1970’s, after providing patent protection, over 3000 new plant varieties were developed. Truly, patents provide the seeds for innovation.
Mike Masnick likes to speak about economic distortions. Discussion of economic distortion was part of a huge paper titled “Anticipating the 21st Century: Competition Policy in the New High-Tech, Global Marketplace,” a report by FTC staff, May 1996. One of the interesting parts of this discussion was on page 161 of this document, where two opposite viewpoints on R&D were presented. Economists debate whether we have too much R&D or too little, either of which would cause a distortion to the economy. The two sides disagreed with each other on whether we have a socially optimal level of innovation and neither could they agree on how to determine whether patents, R&D and innovation are too much or too little to be socially optimal.
So, when I hear people talk about how there is all this “proof” that patents are “bad” for the economy, how they are “bad” for innovation, etc., I look at all these papers showing that patents have value and can only conclude that the answer IS somewhere in the middle.
I should also point out that I have reviewed many of the pieces of “proof” that Mike Masnick has cited over time. Some of that “proof” brings up good points. Yes, there have been abuses of patents (one reason the FTC conducted their big study, because they were worried about the anti-competitive effects of patents, either real or imagined).
However, what many of the anti-IP researchers fail to do is be objective in their research. They look for failures of patents and (OH MY GOD! A SHOCKER HERE!) they FIND THEM!!! There is a truism in science and statistics: You will always “find” what you are looking for. On the other hand, if you propose a hypothesis, seek evidence to test the hypothesis, and draw a conclusion, you have a much more powerful result. How often does the “proof” cited by Mike Masnick meet this standard? Not very often.
Do I throw up my hands and say “do nothing.” Oh, please. On the other hand, there should be some real evidence of the macroscopic effects of what we are doing. Correcting a problem on a microeconomic scale may lead to worse results on a macroeconomic scale. I have yet to see an objective conclusion from any paper supporting the hypothesis that patents are a net negative to society (the corollary is true as well – I have never seen an objective conclusion supporting the hypothesis that patents are a net positive to society).
What do we have in reality? Patents do cause microeconomic distortions. Easily proven. I believe that. However, that does not mean patents are macroeconomically “bad” or fail to provide societal value, or that they provide microeconomic distortions uniformly or at all across the spectrum of industries (in fact, more than one researcher has struggled with measuring the impact of so-called “monopoly rents” because not all patents do or command “monopoly rents” for a variety of reasons; what do many of these researchers do? For convenience and not dealing with what they consider to be troubling – since the vast majority of patents do NOT command “monopoly rents” – they throw them out from consideration in their studies; unfortunate, because this omission is a big mistake and a flaw in any objective study).
Patents are like any other activity. They have been shown objectively to serve an economic purpose. When misused, they can harm innovation. Does the harm outweigh the benefit? The numerous studies cited above seems to conclude that the benefit outweighs the harm. Can improvements be made in the system? Of course. However, throwing the system out the window would eliminate all the PROVEN benefits of the system, which would eliminate the PROVEN benefits society has obtained from that system.
Re: Re:
Courtney, excellent post. A neat snap to reality.
One of the things that I have learned is that people with extreme opinions will often either focus very, very narrowly on a small part of the big picture, or pull back so far from it as to make the details undetectable. But real life happens every day in the trenches, not in someone dissertation, not in some first year MBA’s first business case study, and certainly not in an opinion based blog.
It’s baby with the bathwater mentality around here, there are certain parts of copyright and patent law that are not loved, and as a result, we are expected to toss it all out the window without consideration of what replaces it. No consideration at all for the large percentage of the process that works, and works for real people.
We can all focus close and find extreme cases on both sides of the coin, or we can pull so far back and lose sight of the reality of real people and real companies doing real business.
It’s easy to take a flame gun to ideas you don’t agree with. it is signficantly more difficult to propose the replacement.
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Hi Courtney,
I have to admit I don’t quite get the point of your comment here. The crux appears to be:
So Mike, you can’t try to condemn the patent system that protects the lives and livlihoods of so many because you’re too lazy to break out the wrench and screwdriver and recreate the vacuum cleaner yourself
What gives you that idea? It has nothing at all to do with my own preferences. It has everything to do with the simple fact — as proven over and over again — that the patent system does more damage than good to the economy. This has been proven from so many different angles and in so many different studies that it’s not even an open question any more.
And you want to know the reason why? It’s in exactly your comment above. “protects the lives and livelihood.” We should never be aiming to “protect the livelihood” as a gov’t policy. That is (by definition) “protectionism” and one thing that is clearer than clear, is that gov’t protectionism limits growth and *decreases* competition and innovation.
The gov’t should be focused on breaking down the walls to protectionism.
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Mike, just to clarify, I really couldn’t give half a shit less about the giant corporations fighting like small children over who had the idea first (i.e. Mattel vs. MGA Entertainment in the news recently). As far as I’m concerned, they can all go hang. I’m talking about the guy that came up with the idea. If he’d been working out of his garage and got started selling the dolls at the local flea market, who’s to say someone else wouldn’t stroll by his little table and say, hey, now that’s a good idea, and go make money off of someone else’s idea? You have to realize that the patent system isn’t supposed to stifle or stop innovation itself; that’s an unfortunate side effect that may or may not come to pass, depending on who holds the patent and who’s willing to do the work to figure out their process regardless of that fact. (I won’t comment further than that, as I have not read your studies, nor any that contradict them, to judge for myself. Get me a list and I’ll be glad to give you an opinion on that too. I’m a woman; I always have one.) The patent system is in place to PROTECT inventors and creators from people who would steal their ideas and use and market them as their own.
Put yourself in their shoes. If you were good Mr. Bryant and just trying to sell your dolls at the flea market, and the fellow that walked by and liked the idea worked for, say, MGA Entertainment, how pissed would you be to see YOUR dolls turning into the billion-dollar-plus franchise of a corporate giant and you don’t see a penny of it, or even get credit?
One of the things I’ve noticed about you is that you’re always quick to point out that you simply give credit where credit is due with your citations. Right there, in that very sentiment, you demonstrate the idea of patent and copyright law. Yes, it gets abused. So does aspirin, but are we throwing Bayer out the window? No.
The system itself – the infrastructure upon which our society clings – is not what is flawed – in this case. But money makes the world go ’round, and in case you haven’t figured it out by the reaction to our good President (note: sarcasm) bossing around companies like GM and Chrysler, the government does not run this country. It’s the giant corporations and THEIR leadership that uses the government like puppets, and the only reason they have the ability to do that is because they have the money to line the pockets of whosoever they feel can make things go their way.
It’s bullshit that Mattel was even able to sue MGA for those dolls and not get laughed straight out of the courtroom, but that has nothing to do with patent law and everything to do with the retarded shit those companies put into the contracts of their employees.
As far as your position that we should never aim to “protect the livelihood” as a government policy, there isn’t really a way around that without starting a war. There just happens to be this little line, almost inconsequential really, in the Declaration of Independence (remember that document?) that a lot of people take very seriously. Matter of fact, Will Smith did a movie about it. The pursuit of happiness? Sorry, the government has to protect that pursuit. Furthermore, the people of this country may be sheep, but they are only sheep insofar as they believe that their government is taking care of them.
The Law, when executed properly, is nothing more than a framework upon which our country builds its society. People that push and test the limits and boundaries of that law could be equated to the weight on the steel frame of a building. The catalyst for the frame becoming twisted and warped is always, and will always be, the greed and corruption of men that can be likened to a blowtorch. Take away the people that want to take advantage of the law and the framework stands strong, but if you take away the framework itself the whole construction collapses.
And there’s your problem. It’s not the law. It’s the people using it.
Get me that list. I’m interested to see if you’ve got a point as far as the whole stifling thing, or if you’re just full of wind, but I don’t offer uninformed opinions as a matter of practice.
Courtney
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Courtney:
“Scientific” studies regarding negative effects of patents are few and far between. There are many “studies” (kind of like what you would find in People Magazine or Weekly World News. Some are hilarious: “We set out to prove that patents are bad for the economy.” I thought, “This has to be a joke. No scientist would ever make such a moronic statement.” I guess lack of objectivity is what passes for science these days. Yet another innovation. Skip objectivity and prove your beliefs.).
On the other hand, note (see post 40 above) that there are MANY studies that point out in a relatively balanced fashion the pro’s and con’s of patents.
gobbledygook
“If it’s that abundance and experimenting that leads to all that innovation, aren’t we holding back that innovation by enforcing artificial scarcity, and allowing one company to entirely block others from doing the necessary experiments? “
what an utter mishmash of nonsensical gobbledygook. look at historical innovation in countries who have weak or nonexistent patent systems and see how much innovation came out of them…precious little. that’s why it took humankind so many years to evolve from primordial slime. why bother!
patent reform is a fraud on America…
please see http://truereform.piausa.org/ for a different/opposing view on patent reform
Re: gobbledygook
I couldn’t just let this one pass on by:
Are you really stating that the reason “it took humankind so many years to evolve from primordial slime” is weak patent systems?
O.k., fascetiousness aside, the answer to “why bother” is to excel, to achieve. Patents do not accomplish this goal, they provide over-arching protections that many believe lead to less competition — which is the situation that really should beg the question “why bother”. If *someone* is going to sue you no matter what you try to do, nobody will try to do anything.
Re: Re: gobbledygook
You have almost opposite positions in your comment. The “innovation only happens because of patent” (which is untrue) and the “we need patents [to recoup our investment],” which is somewhat true.
As with all things, the truth is in the middle. Do patents stifle “innovation”? Perhaps, but only in some businesses, certainly not all businesses. Do patents allow companies to recoup significant investments that require many years to pay back? Yes, in industries that require significant up front investment to establish a product with 5 or 10 or even more years of payback, patents do provide incentive to invest.
There is an old saying that figures lie and liars figure. The fact of the matter is that there are a lot of studies that support both positions. Are these studies flawed? Most of them are for a variety of reasons. The biggest flaw, which is almost systematic, is lack of objectivity. A lot of people have axes to grind with patents and copyright, so many of those studies are MASSIVELY biased. However, some of the studies, particularly those related to copyright, are just as massively biased for copyright.
The truth is likely somewhere in the middle. Patents have generated more inventions – in some industries. In spite of what seem people seem to believe, parallel or simultaneous invention has not been proven to happen “almost all the time” (one study has been cited to “prove” this statement, but that study is related to scientific and mathematical discoveries, which are completely different animals). Almost perversely, patents have (or may have – it is a bit uncertain exactly how much) stifled some progress in some industries for some time.
The two example you will hear over and over again are the steam engine and the Wright Brothers. Interesting that there have been extensive analyses of these two cases in patent related magazines and the authors essentially pointed out that what James Watt and the Wright Bothers did was not particularly smart and was darn near suicidal. However, people always have the right to be stupid.
The bottom line: Patents do favor some industries and for a time were too generous to patent holders. On the other hand, completely eliminating the patent system is probably not only impossible, but would significantly stifle investment in certain businesses, causing progress in those businesses to slow dramatically.
Likely the best option: A modified patent system that reduces the scope of patentability and increases novelty standards – both of which are currently under way.
Re: gobbledygook
what an utter mishmash of nonsensical gobbledygook. look at historical innovation in countries who have weak or nonexistent patent systems and see how much innovation came out of them…precious little. that’s why it took humankind so many years to evolve from primordial slime. why bother!
Except… that’s not even close to true. If you compare similar countries at the same time and era, the ones without patent protection often show much MORE innovation and FASTER economic growth than those without. Eric Schiff and Petra Moser’s research is highly instructive here. What it shows is that patents *distort* the types of market focused on, but do not create more innovation or economic growth.
As for the question of “why bother”? Why that’s easy. It’s to sell products in the market. You seem to think that the reason to invent is to get a patent. It’s not. It’s to bring new products to market and satisfy demand.
Re: Re: gobbledygook
I notice you were careful to state that countries without patent protection “often” show much more innovation and faster growth. Often is not always, and you also neglected to point out that there are other factors associated with why particular countries had more innovation and faster growth.
Some of those reasons are not transportable to all other countries and (similar to patents) what might work for one country would not necessarily work for another, and might not even work for that same country again in the future.
You also state that the reason to invention is to “bring new products to market and satisfy demand.” Yesssss…as long as you include highly successful independent inventors whose sole goal is to invent and sell their inventions, but assuring they have something to market by obtaining a patent. Quite a few people have made a decent living by inventing, patenting and selling the rights to their patents. In their mind, the goal is to obtain the property right (the patent) so that they can sell the right to someone; that someone will then bring new products to market and satisfy demand.