Authors Michele Boldrin and David K. Levine, in “The Case against Patents” (Journal of Economic Perspectives – Volume 27, Number 1 – Winter 2013) raise many issues in their analysis of patents and patent systems. Below, in point counterpoint format, are points (P:) raised by these authors in making their case, and questions (Q:) which come to mind.
P: “there is no empirical evidence that they [patents] serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded”
Q: Are there any studies comparing a model where there is a patent system in place and a model where there is no patent system in place? It would be interesting to explore the differences.
P: “weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects.”
Q: Do weak patent systems or nonexistent patent systems correlate with stealing of ideas? While such might increase innovation by some measures, would this decrease incentive to invest in research and thus decrease innovation by other measures?
P: The explosion in number of patents issued since 1983 is associated with oscillation of US research and development expenditure in a narrow band at around 2.5% of gross domestic product (GDP). The explosion of patents “has not brought about any additional surge in useful innovations and aggregate productivity.”
Q: Do we not see a large number of new, innovative products constantly being introduced? Have there not been entire new industries and areas of technologies introduced since 1983? Could it be we have gotten really efficient at innovating? Could other factors affect the number of patents applied for, while still allowing for patenting having a positive influence on innovation?
P: “patents are mostly used for arms races… if all firms get counterbalancing patent portfolios and all innovate, then they would all have innovated in the absence of patents”
Q: Doesn’t this argument have the not-so-hidden assumption that all firms are about the same size and have equal levels of innovation? What about startups? Shouldn’t they have patent protection while they are vulnerable to intellectual property copying or theft? Wouldn’t depriving them of same discourage innovation? What about companies that innovate as compared to companies that buy innovation? Don’t patents, as intellectual property, serve as assets to counterbalance physical assets (i.e., buildings, equipment) of a company? Would a company be less likely to buy another company if the intellectual property didn’t come with it?
P: The purported communication about ideas from patent disclosure is negligible, and companies may have policies to never search, view or speculate about patents. The “notion that patents are a substitute for trade secrecy fails in the simplest model.”
Q: Are there any studies that show whether or not reverse engineering would increase if trade secrets were preferred over patents? Would that increase or decrease innovation? Does the body of issued patents, as published, serve as a record of technology advances and state of the art?
P: First-mover advantages in marketplaces may outweigh patent protection advantages. Patent litigation “takes place when innovation is low.”
Q: Would deleting the patent system result in companies that are low innovators over a time period having a lower survival rate? If so, would dismantling companies more frequently result in greater innovation?
P: Reforming the US patent system to become an optimal patent system is essentially impossible given political and economic pressures, therefore dismantlement of the patent system is the proper solution.
Q: Isn’t this called throwing the baby out with the bathwater?
P: Reforms that could be easily implemented include: phasing in shorter patent durations, stopping extension of the set of what can be patented, limiting patents that hinder innovation, applying caution in international trade negotiations that affect patents, tailoring patent length and breadth to different sectoral needs in the US economy, awarding patents on economic grounds, opening results of federally subsidized research to all, and revisiting government policies regarding pharmaceuticals.
Q: In today’s political climate, the word “easily” might be misleading. Could we add to this list, reforms that include: bright line clarification as to whether or not, or when, software is patentable subject matter (software in both standalone and embedded forms is and will continue to be a major growth market), and lowering of barriers for individual inventors and small entities?