Ideas fuel the economy. Today’s
patent systems are a rotten way of rewarding them
IN 1970 the
United States recognised the potential of crop science by broadening the scope
of patents in agriculture. Patents are supposed to reward inventiveness, so
that should have galvanised progress. Yet, despite providing extra protection,
that change and a further broadening of the regime in the 1980s led neither to
more private research into wheat nor to an increase in yields. Overall, the
productivity of American agriculture continued its gentle upward climb, much as
it had before.
In other
industries, too, stronger patent systems seem not to lead to more innovation
(see article). That
alone would be disappointing, but the evidence suggests something far worse.
Patents are supposed to spread knowledge, by obliging holders to lay out their innovation for all to see; they often fail, because patent-lawyers are masters of obfuscation. Instead, the system has created a parasitic ecology of trolls and defensive patent-holders, who aim to block innovation, or at least to stand in its way unless they can grab a share of the spoils. An early study found that newcomers to the semiconductor business had to buy licences from incumbents for as much as $200m. Patents should spur bursts of innovation; instead, they are used to lock in incumbents’ advantages.
The patent
system is expensive. A decade-old study reckons that in 2005, without the
temporary monopoly patents bestow, America might have saved three-quarters of
its $210 billion bill for prescription drugs. The expense would be worth it if
patents brought innovation and prosperity. They don’t.
Innovation
fuels the abundance of modern life. From Google’s algorithms to a new treatment
for cystic fibrosis, it underpins the knowledge in the “knowledge economy”. The
cost of the innovation that never takes place because of the flawed patent
system is incalculable. Patent protection is spreading, through deals such as
the planned Trans-Pacific Partnership, which promises to cover one-third of
world trade.
The aim
should be to fix the system, not make it more pervasive.
The English patent
One radical
answer would be to abolish patents altogether—indeed, in 19th-century Britain,
that was this newspaper’s preference. But abolition flies in the face of the
intuition that if you create a drug or invent a machine, you have a claim on
your work just as you would if you had built a house. Should someone move into
your living room uninvited, you would feel justifiably aggrieved. So do those
who have their ideas stolen.
Yet no
property rights are absolute. When the benefits are large enough, governments
routinely override them—by seizing money through taxation, demolishing houses to
make way for roads and controlling what you can do with your land. Striking the
balance between the claim of the individual and the interests of society is
hard. But with ideas, the argument that the government should force the owners
of intellectual property to share is especially strong.
One reason
is that sharing ideas will not cause as much harm to the property owner as
sharing physical property does. Two farmers cannot harvest the same crops, but
an imitator can reproduce an idea without depriving its owner of the original.
The other reason is that sharing brings huge benefits to society. These spring
partly from the wider use of the idea itself. If only a few can afford a
treatment, the diseased will suffer, despite the trivially small cost of actually
manufacturing the pills to cure them. Sharing also leads to extra innovation.
Ideas overlap. Inventions depend on earlier creative advances. There would be
no jazz without blues; no iPhone without touchscreens. The signs are that
innovation today is less about entirely novel breakthroughs, and more about the
clever combination and extension of existing ideas.
Governments
have long recognised that these arguments justify limits on patents. Still,
despite repeated attempts to reform it, the system fails. Can it be made to
work better?
Light-bulb moment
Reformers
should be guided by an awareness of their own limitations. Because ideas are
intangible and innovation is complex, Solomon himself would find it hard to
adjudicate between competing claims. Under-resourced patent-officers will
always struggle against well-heeled patent-lawyers. Over the years, the regime
is likely to fall victim to lobbying and special pleading. Hence a clear,
rough-and-ready patent system is better than an elegant but complex one. In
government as in invention, simplicity is a strength.
One aim
should be to rout the trolls and the blockers. Studies have found that 40-90%
of patents are never exploited or licensed out by their owners. Patents should
come with a blunt “use it or lose it” rule, so that they expire if the
invention is not brought to market. Patents should also be easier to challenge
without the expense of a full-blown court case. The burden of proof for
overturning a patent in court should be lowered.
Patents
should reward those who work hard on big, fresh ideas, rather than those who
file the paperwork on a tiddler. The requirement for ideas to be “non-obvious”
must be strengthened. Apple should not be granted patents on rectangular
tablets with rounded corners; Twitter does not deserve a patent on its
pull-to-refresh feed.
Patents also
last too long. Protection for 20 years might make sense in the pharmaceutical
industry, because to test a drug and bring it to market can take more than a
decade. But in industries like information technology, the time from brain wave
to production line, or line of code, is much shorter. When patents lag behind
the pace of innovation, firms end up with monopolies on the building-blocks of
an industry. Google, for instance, has a patent from 1998 on ranking websites
in search results by the number of other sites linking to them. Here some
additional complexity is inevitable: in fast-moving industries, governments
should gradually reduce the length of patents. Even pharmaceutical firms could
live with shorter patents if the regulatory regime allowed them to bring
treatments to market sooner and for less upfront cost.
Today’s
patent regime operates in the name of progress. Instead, it sets innovation
back. Time to fix it.
No comments:
Post a Comment