How Patents Harm Biotech Innovation

from the scaring-people-off dept

Patent defenders often claim that patents are necessary because top venture capitalists would never invest without patents. And yet, we keep pointing to examples of some of the best venture capitalists in the business who are quite skeptical of patents. For the most part, those have been limited to software patents, but Brad Feld seems to have jumped the hurdle to recognizing it's not just software patents that are the problem, and is digging into the research on how much patents have held back innovation in lots of other fields as well (Brad: if you want a list of more such research, let us know...). He's written up a post about some upcoming research concerning patents in the biotech field, where he explains how patents are hindering innovation in that field as well by scaring off research into certain areas:
Regularly, patent advocates tell me how important patents are for the biotech and life science industries. However, there apparently is academic research in the works that shows that patents actually slow down innovation in biotech. The specific example we discussed was that there is increasing evidence that when a professor or company gets a patent in the field of genetics research, other researchers simply stop doing work in that specific area. As a result, the number of researchers on a particular topic decreases, especially if the patent is broad. It's not hard to theorize that this results in less innovation around this area over time.
I can't wait to see the final results of that study, as it would fit in well with a few other studies that have found similar results.

Filed Under: biotech, brad feld, innovation, patents, vcs

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  1. identicon
    Michael Lockyear, 8 Feb 2010 @ 8:47am

    Re: Re: Re: Re: Re: Re:

    To avoid confusion on my part I will respond in piecemeal fashion...first Italy:
    I must apologize for any inaccuracies on my part, I made the assumption that the Italian pharmaceuticals industry was indeed "decimated" (as you said) after 1978, and simply tried to explain it. I apologize for this - I should have studied the facts more closely. Here they are:

    Before patents were introduced:
    1. In 1967 the Bank of Rome estimated that 90% of Italy's pharmaceutical companies were imitators (sorry for calling them pirates).
    2. It was quite common for these imitators to take 25% of an innovators market share immediately after introduction.
    3. In 1975 over 60% of pharmaceutical sales in Italy were by foreign firms.
    4. In 1964, only 39 firms of the Assofarma association had research labs of any kind. (Assofarma firms accounted for 98% of basic pharmaceutical materials actually made in Italy).
    5. Between 1961 and 1964, research expenditure by these 39 firms amounted to US$61m. By comparison the 4 major Swiss players spent US$220m in 1966 alone.

    After patents were introduced.
    1. Before 1978, there were no Italian pharmaceutical companies in the list of top 100 pharmaceutical companies, 10 years after introduction of patents there were 7.
    2. Between 1978 and 1993 employment in the Italian pharmaceutical industry increased by 9%, a significant chunk of this due to increases in R & D.
    3. After adjusting for inflation, the Italian pharmaceutical industry spent approximately 3 times more on R & D in 1993 than in 1978.
    4. Between 1978 and the early 1990's Italian pharmaceutical revenues increased more rapidly than GDP.
    5. Between 1978 and 1987 the market share of foreign firms in the Italian pharmaceuticals market decreased.
    [source for much of the above: Intellectual Property Protection and Industrial Growth by George Korenko]

    Suggesting that the Industry was decimated as a result of the 1978 laws is therefore not accurate at all. Suggesting that innovation was impaired in some way does not appear to be accurate either. That you choose to ignore these facts is odd, but telling :)

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