Study: Sharing Patents, Rather Than Blocking Others, Encourages Innovation And Market Success

from the well-duh dept

There's been plenty of research over the years (much of which we've pointed to here) showing that the sharing of information and knowledge -- including information and knowledge that leads to innovation breakthroughs -- can actually help companies thrive. Studies on the early success of Silicon Valley by Annalee Saxenian focus heavily on how information sharing among companies -- even those in competition with each other -- helped make Silicon Valley so successful. That's because the breakthroughs opened up new markets and expanded them in ways that allowed multiple players to thrive. To put it another way: if, by sharing information, companies were able to reach major market-changing breakthroughs faster, there would be more than enough benefit to go around as the new markets expanded. Thus, the "cost" of having competitors with the same knowledge was dwarfed by the "benefit" of having the innovation and the resulting market expansion.

Gene Cavanaugh points us to a new study that appears to reiterate this basic point, but focusing directly on situations with patents. The research, by economist Gilad Sorek, found that the free-licensing of patents to competitors actually increases the likelihood that a company's profits will grow as the result of a particular innovation. In other words, contrary to what many believe (that the best thing to do with a patent is to restrict others from using it), this research suggests that openly sharing that information for free actually tends to help the patent holder in the long run by opening up new opportunities that increase their profit.
The study, to be published in a forthcoming issue of Economics Letters, shows that the benefits of giving up patent protection outweigh the risks of surrendering a share of the market. By inviting further research, Sorek says, the original innovator is able to stimulate demand for its product. The company may lose a share of the market, but its product ultimately becomes more valuable as a result of the extended innovation effort.
The research points out that such open and free licensing acts as a way to get free research and development from other companies that help expand the original innovator's market. This paper certainly seems to match what we've seen in other research in the past and, yet again, raises significant questions about the way many companies today manage their patent portfolios, as well as how they view the process of innovation itself.

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  1. identicon
    Anonymous Coward, 15 Apr 2012 @ 8:16am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: ... and all studies reaching differing conclusions ...

    When you look at something like "artist income", in the past you would be looking at a net number. The artist would get paid for the concert net the expenses, so the actual artist income was X.

    Now, the "sky is rising" methods have the artist actually running the show and paying the expenses themselves. So what is reported is the concert gross, less only promoters fees. So it appears artists are making more money. The reality is the artists still have to pay all the expenses of the show, but since that happens after the artist gets paid, it is said that artist income is increasing.

    There is also a common misconception that increased ticket and merchandise revenue means more direct artist income. It's less true than it was before, as more artist are getting into 360 deals, where their label and promoter also gets a significant take on things like merchandise sales and such.

    Also, as Jesse pointed out in his "best of the week", the amount of creativity going on is somewhat misleading. "It's an important reminder that people are creating content and uploading it to various social networks & platforms every second. But the piece of this that rings wrong to my ears is the glib jab at "copyright industries and cultural commentators"-- sure a twitter novel or YouTube webisodes are new, "real" content, but it's not a stretch to make a value judgement that my 10 word Facebook post is not as creative as, say, the latest album by your favorite band."

    The measurements used to arrive at the sky is rising require a fair bit of suspension of disbelief. The cherry picked facts are often correct in narrow ways, but when looked at in their full implications, they are far from painting a good picture.

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