Legal Issues

by Mike Masnick




The Case For Patents Harming Innovation

from the fleeting-competitive-advantage dept

Last year, we noted that SAP was one of a few big tech companies that had mostly avoided stocking up on software patents, claiming that the company was in the business of selling products, not intellectual property. It appears things may be changing. Patrick Ross at PFFI (huge supporters of software patents) points to a quote from SAP talking about how they're now increasing their patent activities with this quote that goes against what we heard just a few months ago: "Those who drive innovation need patents. Those who don't imitate." Tim Lee rips this logic to shreds beautifully by saying: "In the past, SAP was an innovative company that was able to stay ahead of the competition by virtue of their superior technology. However, now that they're a fat, lazy incumbent, they're discovering the joys of using patent law as a club against their more innovative competitors." What's much more likely, is that it's not this rush to innovate that's driving SAP's newly discovered love of patents, but the recognition that with patent litigation today, software patents are all about nuclear stockpiling. You need to have as many patents as possible, so that when you're sued, you can sue back. What that has to do with innovation is well beyond us.

However, the more important point comes later in Lee's analysis. He basically picks up on the point we've been suggesting for a while. Companies and investors love things like patents because they think it gives them a "sustainable competitive advantage." However, a really sustainable competitive advantage means you don't have to innovate, and society ends up losing out because the fat, lazy incumbent isn't driving any new innovation. Competition drives innovation, and it's an ongoing process. Instead of a sustainable competitive advantage a successful business is really about repeatedly innovating to build continual fleeting competitive advantages. That is, you keep innovating and it no longer matters if your competitors are just copying you -- you have the advantage in the marketplace by actually innovating. This keeps innovation going, rather than stagnating, and it brings to market much better products. All without the need for patents. As Lee correctly points out, this might mean the original creator doesn't get to squeeze every last right out of something -- but that's actually better for everyone. It drives the companies to continue to be innovative, creates real competition, a real market, and better products for everyone.


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  1. identicon
    Tyshaun, 18 Jan 2006 @ 7:44am

    Re: No Subject Given

    I disagree with you Jose Gandullia:
    The basic problem with a pure free-market system that you are proposing is that innovation is tied to potential profits. What I mean by that is that a company (say a pharmaceutical) will be far less likely to dedicate billions to R&D for a new drug if they know that there's no legal protection from that product once it reaches the market. Your arguement is based around the assumption that if someone can figure out how you did something, they should be able to do it to. Well, that works well when you're talking about a black box system, like computer code, but what about a pharmaceutical compound where there are well established procedures in place for reverse engineering it, and in fact, the company MUST publish the formula as part of the distribution process. By your arguement, generic drugs would automatically be made, and no company would ever bother putting money into R&D to make new drugs that they know will be copied and sold more cheaply by another company (the other company not having to re-coup the cost of R&D).

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