points us to the news that the UK is working to lower taxes on patent income
in an effort to encourage greater patenting. Well, they claim it's to encourage more innovation:
Darling said in his speech that the UK "has a remarkable record of ideas and innovation. We’ve won more Nobel prizes than any country of our size. We need to do more to support this ingenuity and ensure this creativity is harnessed in this country. I want to encourage research and development in the pharmaceuticals and biotech industries. So, following consultation with business, I will introduce a 10% corporation tax rate on income which stems from patents in the UK."
But all such things really do is encourage more patenting, but less actual innovation
. That's because the tax rate on actual innovation -- actually bringing these products to market successfully -- remains significantly higher. So, if you do any research at all, you have every incentive in the world to try to just gain income from the patents directly (such as by threatening any company that actually does any innovation and demanding licensing fees) rather than doing the work of actually implementing the product yourself. After all, that's exactly what the government is telling you to do. It's saying that if you actually produce an innovative product, we'll tax you at a very high rate. If all you do is patent it and then squeeze money out of others, we'll tax you at a much lower rate. I don't see how that encourages innovation at all. It seems like it would do the opposite.