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Do Patents Slow Down Innovation?

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I had a very interesting meeting yesterday with an MIT Professor who I’ve known for a long time.  He is anti-software patent, as am I.  However, he suggested something I hadn’t really spent much time thinking about, namely that patents slow down innovation.  Some very credible folks have been talking about this for a little while, including James Bessen and Michael Meurer in their excellent book Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk. 

In my conversation Friday, I heard a very interesting example.  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’m just starting to read some papers about this stuff, including those by MIT Professor Fiona Murray.  If you are interested, Stuart Macdonald’s paper When means become ends: considering the impact of patent strategy on innovation frames the discussion nicely.  And Stephan Kinsella’s excellent essay Reducing the Cost of IP Law absolutely nails this.

I’m still obsessed with my mission to “abolish software patents” especially after receiving yet another email from a new startup that claims to be a “Patent Insurance Company.”  A number of these have popped up recently in the past few years, including several that are funded by VCs.  Their pitch is that you pay them an annual fee, license any patents you have to them, and they will “protect you” against any patent litigation.  Whenever I hear this pitch, all I can think about is Al Capone walking the streets of Chicago going door to door offering “protection” to all of the local businessmen if they will pay his vig every week.

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January 30th, 2010     Categories: Patents     Tags: ,
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  • Griffin Boyce

    Pharmaceutical patents seriously impact and restrict the medical field. I always bring up AndroGel — a simple testosterone base in a simple alcohol gel. The concept of AndroGel is older than modern testosterone-replacement therapy, but Solvay has a patent on the 10mg/gm formulation (and no other).

    The effects of this is are profound: you'll pay $250/month (no lie) for AndroGel, but anywhere from $40-$170 for compounded testosterone (depending on markup). To give a good comparison, people can easily buy a testosterone base for $20/100g (tops). Add in a small cost for the gel base and you have a recipe for a huge market in illegal steroids, since you have about 30 months of medicine made for under $50.

    The nearest (legal) competitor is generic injectible, which costs around $10/week plus syringes. More guys use it because it's weekly and costs less, but it requires deep muscle injections which can be really painful to do to yourself.

    And the truly sad aspect of this is that it lures in people who really need the medicine. $250/month is totally unreasonable, and Solvay is seeking an extension because they are making so much money off of people.

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  • http://www.thrasherassociates.com Stephen

    Leave it to academic-types to wonder if what works in the real world works in theory. Two hundred years of world-wide experience demonstrate that rewarding innovations with temporary monopolies (ie–the profit motive) always results in more innovation. This is also true for software companies.

    Without the “unfair advantage” of intellectual property, no rational investor would risk their money creating code that could be clean-room copied.

    I’ve heard the cited antidotes before, and, frankly, I think that they are bunk. There are simply too many developed libraries of code that are open-source and documented & vetted for IP issues, as well as too many patent resources available to check for infringement issues (which, is a large part of my patent practice). The USPTO website as well as PatentStorm.us are free. Such belly-aching about it being “risky” and “difficult” are cop-outs for the lazy, unimaginative, or corrupt. Those that don’t have the funds to pay for a patent search (a knock-out search, without an opinion can cost under $1000) either don’t take their business seriously, or need to move out of their parent’s basement.

  • The Badger

    So original, Stephen: “their parent’s basement”. How about doing a “knock-out search” for some new rhetorical instruments?

    If the behemoths like Microsoft can get stung by patent trolls and companies with extensive patent arsenals, I guess that either their legal people are vastly overpaid or that $1000 ceiling is a bit low by several orders of magnitude. And thanks for the laughable remarks implying that business gets stuff done while the academics fiddle in their ivory towers – if that were so, you wouldn’t have everyone and their dog trying to patent academic discoveries and skim the cream off publicly funded research.

    It’s refreshing to see a venture capitalist spell out the deficiencies of patents. Unlike the likes of Stephen, who presumably claim that they’re “pro-capitalism”, I guess actual capitalists don’t need an entire bureaucracy dedicated to corporate welfare to get stuff done “in the real world”.

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Brad Feld

Hi, I'm Brad Feld, a managing director at Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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