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. identicon
    Jeff, 17 Aug 2005 @ 10:30am

    Wrong. Try again.

    I stopped reading after the massive error in the first sentence. Patents do not grant a monopoly -- at all. Patents grant a limited monopoly that expires after twenty years. That is why you will never see an antitrust case based solely on having patents. Once twenty years pass, the competitor can copy the system exactly.

    The reason that the patent system was founded was so that it forces companies to publicly disclose what they are doing in exchange for 20 years of exclusivity of a product. Without patents, everything would be a trade secret and innovation/invention would slow -- period. As a reward for sharing knowledge, you get 20 year exclusivity.

    Now you come to the idea of litigation. For big business, IP litigation is a business expense -- period. Big companies rarely complain about patents. I mean yes, IBM gets sued almost daily on patents, but they make $3 billion a year on licenses. That alone motivates IBM to innovate and disclose. And, big companies that are sued by other big companies just cross license -- no big deal.

    Turning to the sole inventor ... one patent can easily turn into 8 figures of income ... regardless if a company is started or not.

    The main problem is the lack of education about patents and the common misconception that they hurt things. The truth of the matter is that IP is an industry in itself, the loss of which you would see a decline in technology development. This can be seen in the least developed nations. Whenever Big Pharma gives up their patent rights to help the country (which the U.S. is against because then under GATT any country can raise tarriff's on the nation's products for that nation not following GATT IP laws) ... Big Pharma loses money. If 40% of Big Pharma revenue goes back into research ... Big Pharma just lost a large amount of reserach money by losing patent rights.

    FYI to Dan's comments. The IEEE is IBM's way of disclosing subject matter it has decided not to patent (i.e., to add invalidating prior art to the publication stream).

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