If Patents Are So Important To Innovation, Why Do Innovative Companies Keep Opening Up Their Patents Rather Than Enforcing Them?

from the questions-to-ponder... dept

To hear many politicians (and, tragically, many academics) tell the story, patents and patent policy are keys to innovation. Indeed, many studies trying to measure innovation use the number of patents as a proxy. For years, we’ve argued that there is little evidence that patents are in any way correlated with innovation. Indeed, in practice, we often see patents get in the way of innovation, rather than being a sign of innovation. If anything, an influx of patents seems to indicate a decline in innovation, because as the saying goes, smart companies innovate, while failed companies litigate. Litigating patents tends to happen when a more established company no longer is able to compete by innovation, and has to bring in the courts to block and stop more nimble competitors.

Indeed, over and over again we seem to see the most innovative companies eschewing the anti-competitive powers that patents give them. I was reminded of this recently with the announcement that payments company Square had agreed to put all of its crypto patents into a new non-profit called the Crypto Open Patent Alliance to help fight off the unfortunate number of crypto patent trolls that are showing up.

Of course, we see this throughout the companies generally considered to be the most innovative. A decade ago, Twitter came up with a very clever Innovator’s Patent Agreement, which effectively would block patent trolls from ever being able to use Twitter’s patents, should they somehow fall into trollish hands. A bunch of other top internet companies including Google, Dropbox, Asana, and Newegg launched the License on Transfer network, as a basic poison pill to, again, stop patent trolls.

And, most famously, Elon Musk flat out gave away Tesla’s patents and encouraged anyone else to use them to compete with Tesla, license-free.

If patents really were so vital to innovation, why would all of these innovative companies be so quick to give them up? And why is it so incredibly rare that any of them assert patents against competitors? Instead, so much of the patent litigation we see is against those innovative companies coming from a variety of patent trolls (frequently lawyers who never innovated at all) or also ran companies which may have been innovative in the past but have long since seen their innovative days in the rearview mirror.

It would be nice if policymakers, the media, and academics finally started recognizing the idea that patents are not just a bad proxy for actual innovation, but often antithetical to innovation, and we can see all the evidence we need for that in the fact that the most innovative companies are “devaluing” in their own patents to improve the ecosystem, rather than enforce those patents.

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Companies: square

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Comments on “If Patents Are So Important To Innovation, Why Do Innovative Companies Keep Opening Up Their Patents Rather Than Enforcing Them?”

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9 Comments
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Scary Devil Monastery (profile) says:

Re: Re: Re: Re:

I always like the example of US aviation where the US did apply patent law with the effect that in world war 1 the US literally couldn’t build a plane their own to save their lives.

So the solution was that government forced every aviation patent into a patent pool from which every inventor could draw. As it turns out the US effectively abolishing the lock-in of aviation patents by ubiquitously enforced compulsive licensing catapulted the country into the top position of aviation within scant years.

So much for patents being useful to further the progression of science and the arts.

OGquaker says:

America Invents Act 2011

The Leahy–Smith act "no longer concerns itself with actual inventorship" (Madstad Engineering Inc. v. USPTO)
In late 2012 i sat through a six hour tag-team dog&pony show put on by the USPTO in the local library, "zoomied" for everybody in America. The audience was 99% lawyers and corporate hacks, in those 6 hours i was probably the only inventor present. Hours were spent on how to work around a reticent inventor, establish their death, loss of contact, or a sudden employment agreement found after filing Your Patent application. IP was discussed solely as real estate, pharmaceutical and life patents dominated the hours. A good friend died last month, cordless telephone US3644681 1969, mobile decoder US3979562 1974, worth nothing to him. So he made millions in actual real estate, Fuk Um.
2011 AIA: An Entity can file an application on behalf of an inventor who assigned or is under an obligation to assign the invention rights to the Entity (OR if the Entity otherwise has financial interest in the invention), without seeking the inventor’s execution of the application.
Disclaimer: My nephew has 22 worthless GUI patents with Microsoft, he works for Google.

Coyne Tibbets (profile) says:

Creating vs. Milking

Innovators create new things to sell, and are well aware others will jump to imitate (imitation is what we do best). They never stop creating; ignoring imitators; profiting before the imitators come out in force.

IP lawyers find something to patent, and milk imitators until it all turns to dust, creating nothing. If it were up to IP lawyers we’d still be living in frigid caves, because warmth is patented.

arp2 (profile) says:

Intent too hard to define

I don’t think patents are antithetical to innovation. Some innovations take a lot of time and money. While first mover may provide some advantage it may not provide sufficient incentives to make the "big bets" if it can be copied quickly. The problem (IMO) that you mention is that many companies that aren’t really a going concern or merely exist to extort royalties. So, how do you reshape a law that requires/incentivises actual use rather than stockpiling. Perhaps you can borrow from TM law and require or offer greater damages if there’s actual or attempted use in commerce? Or, only offer injunction if there’s actual competitive use? Other options: if no products/services are created using that patent within X period, it becomes dormant and only nominal damages are granted (and no injunctions). While these aren’t perfect, it seems we’re advocating taking a chainsaw to a scalpel problem.

Anonymous Coward says:

Re: Intent too hard to define

Patents have little or nothing to do with the success of a company. That is down to the management building a successful business, and that has a lot to do with customer relationships. Where patents enable a market monopoly, a bad company can survive, but is likely to fail as soon as the patents expire, and competition arrives. Similarly a natural monopoly, Telcos, allows companies to survive while hated by their customers.

Anonymous Coward says:

31 changed the world, but buy you nothing

Mitchell Camera, Senator Charles Percy (Bell & Howell) & Hazeltine (RCA, ) all said "We have more lawyers than you can imagine", EX-CELL-O (milk cartons & fiber optics) "Sorry", TRW said "So sue the DOD, not us", US airlines (a single market) said "We don’t care, stuff your fire-proof seat stuffing", 1962 power-wire TV transmission & the State passed a new law outlawing. Ed Reinecke dumped the patent to become a congressman, Northrop wrote a check for $100 and tested the Patent 35 years later. My nephew got 22 inscribed 2" blocks of black granite from Microsoft for his 22.

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