Nobel Winning Economist Rips Apart Innovation Harming Patent Process

from the he's-got-a-bit-of-credibility dept

For a while now, we've been pointing out how the misuse of a badly implemented patent system is doing more to harm innovation than to help it. The problems are pretty clear to many people. Patents grant a monopoly -- which is usually quite dangerous to innovation. When the patent system in the US was first laid out by Thomas Jefferson, he noted this problem and believed that patents should only be granted in the rarest of circumstances. Second, patents reward invention, not innovation -- and it's innovation we should be rewarding. It seems that those of us who support fairly massive patent reform may have some pretty strong support from someone who clearly understands these issues. Boing Boing points to a terrific column by Nobel prize winning economist Joseph Stiglitz, who anyone who ever learned about adverse selection and moral hazard should thank for the concepts. Stiglitz's column clearly points out why the patent system is problematic and how it's being abused not just to harm innovation, but to leave many people around the world without medication that would save their lives.

He explains how the idea that innovation wouldn't occur without patents is completely false: "In fact, many of the most important ideas - for example, the mathematics that underlies the modern computer or the theories behind atomic energy or lasers - are not protected by intellectual property." He explains how patents create monopolies which throw up barriers to innovation: "an intellectual property regime rewards innovators by creating a temporary monopoly power, allowing them to charge far higher prices than they could if there were competition. In the process, ideas are disseminated and used less than they would be otherwise." He also discusses even the fear of patents being stockpiled can harm innovation: "the fear that some advance will tread on pre-existing patents, of which the innovator may not even be aware - may also discourage innovation. After the pioneering work of the Wright brothers and the Curtis brothers, overlapping patent claims thwarted the development of the airplane, until the United States government finally forced a patent pool as World War I loomed." He then goes on to discuss the problem of determining obviousness for a patent: "The creation of any product requires many ideas, and sorting out their relative contribution to the outcome - let alone which ones are really new - can be nearly impossible." He also agrees that many of our patent laws are more influenced by powerful lobbyists, rather than what's best for the people: "I served on the Clinton administration's Council of Economic Advisors at the time, and it was clear that there was more interest in pleasing the pharmaceutical and entertainment industries than in ensuring an intellectual-property regime that was good for science, let alone for developing countries." In many ways, he's simply saying what many of us have been saying for years -- but he does so with obvious credibility and puts it all down in a very easy to understand manner.

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  1. icon
    Mike (profile), 24 Apr 2008 @ 11:18pm

    Re: Re: Re: Wrong. Try again.

    That's totally wrong. What data do you have to back it up.

    Where would you like me to start? There's the research of Bessen and Meurer. The research of Levine and Boldrin. The research of Petra Moser, Eric Maskin, even Milton Friedman showed part of the problem. And the list only goes on from there...

    You fail to explain why Switzerland and the Netherlands brought back a patent system after they got rid of it.

    Oh sure, that's easy. They brought back the patent system for two reasons: (1) The innovative industries in both countries now wanted patents to protect their innovations, rather than having to compete. As Bessen and Meurer found, all of the evidence shows that stronger patent protection *trails* innovation rather than proceeds it. Once it's put in place it doesn't increase innovation at all. (2) Pressure from other countries who were upset at seeing companies increasingly move operations to the Netherlands and Switzerland (more Switzerland than the Netherlands). So there was political pressure from other nations who couldn't keep up.

    Patents even up the unfairness between big companies with large resources and creative individuals with fairly limited resources.

    Actually, if you look at the research you'll find that smaller companies tend to do much better than big companies in innovating, because they're faster and more nimble. Big companies are slow and cumbersome. So, I don't see how you can claim that big companies have the entire advantage.

    Take patents away and watch the progress of innovation dwindle to the rate experienced between the stone age to dark ages.

    Unfortunately, there's simply no proof to support that, but thanks for trying...

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