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Hi, I’m Brad Feld, a managing director at the 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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Do Patents Slow Down Innovation?

Comments (61)

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.

  • http://www.businessmoneytoday.com phanio

    Great post. In my opinion, I think it really depends on what is done with the patent. I am sure that some people want to protect their work and profit from it. But, if they do not intend to do either – they should license it to other who can use it and maybe improve on it.

  • http://tinyHippos.com Dan Silivestru

    Great post as always. I share your thoughts on software patents, I'm against them However, I have to wonder how one can protect one's idea without a patent. My partner and I are currently in the process of building a product that will help mobile web and widget developers build better mobile websites and widgets. However, it's just the two of us, we're set to go into beta shortly and want to start sharing our product with the world. Our advisers are encouraging us to pursue a patent before moving forward. I'm finding that the process itself is slowing down our innovation and development effort since we now have to focus on mitigating the risk of a competitor "stealing" our idea. The act of allowing early beta testers to start providing us with feedback could actually prevent us from getting a patent should disclosure happen. And yet, it's that very act that will help us mature our product and move it forward!

    I'm torn about the benefits of a patent to begin with, but this is our first time being faced with acquiring one. I guess at the root of it I have to wonder… if we put out a product but then someone else comes along and builds a better one, with more features, better performance, etc. Don't they deserve to win?

    My gut is telling me to focus our energy on building our product, bringing it to market, and making it more valuable to our customers then what the market offers today rather then getting a patent. There is much more I can write, but I think I've already taken up a lot of space here :-)

  • http://havemyshift.com Sean Corbett

    Hey! I'm sure there were gangsters in Boulder Co. running protection rackets in the wild wild West days. Al Capone has been dead for 60+ years!

  • http://intensedebate.com/people/bfeld bfeld

    Well – my perspective is simple – you should spend all of your time innovating and building your business.  My guess from the brief description of what you’ve listed is that the magic is in the execution, not in the initial idea.  So – focus on the execution!

  • http://tinyHippos.com Dan Silivestru

    Thank you! That's one piece of advice I think I'll take to heart. Hope we'll get an opportunity to show it to you very shortly. Should you be interested, of course :-) All the best.

  • Pingback: Should you patent your idea? « tinyHippos

  • http://twitter.com/entrep_thinking @entrep_thinking

    Brad- there is also research that suggests pretty emphatically that if innovation = creativity + entrepreneurship (the 'ICE' model), the limiting factor is never the ideas but the implementation.. (more 'A' ideas than 'A' entrepreneurs).

    However, the most recent evidence is that the number of ideas that get implemented 'pulls' the number of new ideas. IOW, the number of new ideas pushed into the pipeline matters much less than the pull from ideas getting turned into reality. (Just as it's easier to pull fluid through a small, kinked-up hose than to push it through…)

    It's a bit weird to think that while there's a loop, entrepreneurs appear to be causally prior to ideation (but time series analysis shows that the # of business exits predicts future business entries…)

    What patents are *supposed* to do is encourage implementation – what they too often do is slow it down or even block it. If I have a patent but the product that actually delivers value to customers is not very protectable by that patent… so do I go ahead and protect my IP by other means or do I keep finagling to find a product that *is* protected by my patent? Investors might encourage the latter – yes?

  • http://watkinslaw.blogspot.com Josh

    Interesting for discussion, but getting rid of patents is problematic in implementation, especialy in industries with a large capX.

    A good example, I had a startup biotech client a couple of years that found a very large secondary use for an existing compound, unfortunately it was covered in an unrelated patent that had expired some 10 years prior without ever having been turned into an actual product.

    The real crime was, that since the client had no way to protect themselves and their discovery from Big Pharma, it was shelved and has never been introduced.

  • http://Www.philippmoehring.de Philipp Moehring

    Another excellent book on the issue is ‘gridlock economy’ by Michael Heller. He focuses on overall effects of patents, copyrights and other commons vs. anticommons issues. Highly recommendable.

  • http://twitter.com/frederickcook @frederickcook

    Pretty crazy we are a couple of centuries after the introduction of the patent system, and still debating it's usefulness. I'm with you in principal, but I have to press a bit more, do you discourage the companies in your portfolio from pursuing patents??

    A provisional patent costs $99, can be put together in a day, and gives you a year to decide if you want to pursue a full or not. If these are the rules of the system in which we do business, aren't we fools not to play by them??

  • http://intensedebate.com/people/bfeld bfeld

    Do you have an examples of this research – I’d love to read more about it.

  • http://intensedebate.com/people/bfeld bfeld

    I’m not totally sure I understand this example.  Are you saying the startup decided not to go to market because it was concerned that a big pharma company would simply copy its go to market strategy and crush it?  The problem here is I’m not sure there is any “innovation” going on – I get the value of using an existing compound in a new area, but if there isn’t anything other than a different go to market application, where is the actual innovation?  I’d assert there was nothing defensible.And – if the startup decided not to do anything with it, why didn’t the CEO call one of his friends at big pharma and say “I’ve got an idea for you – no strings attached.”  The value of this – long term – would be non-trivial based on various theories of information sharing.

  • http://intensedebate.com/people/bfeld bfeld

    Um – we are many centuries after the creation of democracy and still debating its usefulness!I don’t discourage my portfolio companies from pursuing patents.  I encourage them all to aggressively operate within the current business context.  That – unfortunately – includes what I believe to be a horrific patent system.  As a result, the companies I’m an investor in waste a lot of time and energy filing patents. A provisional patent has very little value.  All it does is buy you a year on the time to file rule.  So I’m not sure why that’s an important part of the discussion.

  • http://twitter.com/frederickcook @frederickcook

    The reason I bring up the provisional is because Dan could spend a day on a provisional application before his beta introduction and then at least have one year from that point to file for a non-provisional patent. If he doesn't, and he publicly discloses his product or method, he likely has no chance of ever having a patent. A year is a long time for a startup.

    Now I hate people who are argumentative with bloggers on their own blog, but I find it somewhat irresponsible (if not hypocritical) for you to be giving the kind of advice you did to Dan, while you advise your portfolio companies differently.

    I think that your advice to spend time "building your business" for Dan may well include him taking measures to protect his IP. As you well know, if he finds himself a few months from now in a position to take on capital or be acquired, he will surely be asked about IP, and if he passed on the opportunity, why? Given the current business context this should not be dismissed so quickly.

  • http://intensedebate.com/people/bfeld bfeld

    I encourage disagreement on this blog so your points (and different perspective) is appreciated and welcomed. I don’t mean to be hypocritical.  More importantly, I wouldn’t encourage any of the companies I invest in to patent the kind of thing Dan was describing as it simply doesn’t sound patentable.  I was specifically reacting to the phrase “building a product that will help mobile web and widget developers build better mobile websites and widgets” – the chance of there being patentable IP there is very low.  I said that indirectly in my comment to him (re: “my guess from the brief description …” but I wasn’t direct enough.)  In addition, even thought a provisional patent only costs $110, it’s generally worthless unless it is sufficiently detailed.  This requires real work and needs to be taken seriously.  If you simply toss out a provisional that is vague, lightweight, and doesn’t directly cover all the requirements of the patent process (non-obviousness, uniqueness, new) then there is no point in this filing.

  • les

    You will be sorry you didn't get a patent when someone sees what you have done and whips out a me-too version without the investment in design and development that you made and is therefore able to undercut your price….

  • les

    Of course not. You get another patent for the version that "delivers value", if your first patent is so narrow that it doesn't cover the final version….See now why patents are broad?

  • http://www.facebook.com/profile.php?id=665050887 Michael McGrath

    While I agree that for the most part patents can hinder innovation, there is a great pilot program in place to innovate the patent process itself:

    http://www.peertopatent.org/

    This one was started and is run by my law school with full approval by the USPTO. This is just one way to speed up the patent process considerably by having peers in that field from around the globe poke holes in the claims.

  • http://twitter.com/entrep_thinking @entrep_thinking

    I'll dig up some good references & email -most of it is written by economists so it's not exactly in English, LOL. The most recent is a pending dissertation so i'll need permission to share (only a formality).

  • http://intensedebate.com/people/bfeld bfeld

    I love the Peer To Patent initiative and wish it was more widespread.  Huge fanboy.

  • http://intensedebate.com/people/steve_bergs2127 steve_bergs2127

    Even if patents slow innovation, aren't they necessary to protect the investments made in producing patented innovations? Who would pay for pharmaceutical research if the inventing companies didn't have patents to ensure that they received a return on their R&D investments?

  • http://intensedebate.com/people/bfeld bfeld

    There are other ways to protect innovation, including trade secrets and copyright.  In addition, one of the arguments starting to emerge is that there is an economic net negative benefit to society of patents (as a whole.)  I’m starting to pay attention to this more closely as up to this point I’ve mostly just thought about the issue in the context of software.

  • http://twitter.com/frederickcook @frederickcook

    Thanks for the clarification, Brad, and for encouraging this kind of discussion.

  • http://www.facebook.com/profile.php?id=665050887 Michael McGrath

    Like many good ideas that was started to protect the small guy, it ends up degenerating into a monopolistic acquisition spree and litigation strategy. Something tells me that pharmaceutical companies would still make money even without patents… There is no inherent right to make a profit from R&D – they have to find the best way to be competitive and strategic like every other business. Bottom line: any kind of monopoly stagnates innovation

  • Antone Johnson

    Great post, Brad! At eHarmony we were besieged by patent trolls throughout the time I served as GC: Five patent suits in three years, all of them asserting dubious software patents regarding relatively obvious approaches to things that had become common sense and/or standard practices among Web 2.0 companies: Dynamic Web page generation from information in a database; regulating access to user info in a database using a password login system (come on!) and so forth. Combined with the unfairly slanted local rules in the Eastern District of Texas that drag so many companies into Marshall or Texarkana, these patents act as a tax on innovation — at least in the consumer Web/social media world with which I'm most familiar.

    I do advise new startup clients to explore patentability of truly innovative, breakthrough technologies that they've developed, but fervently wish that I could tell them not to worry about the morass of crappy patents and related defense and licensing costs into which their new enterprise might sink if and when it grows large enough to become an attractive target, with dollar signs painted on its forehead. I come out on the side of abolishing software patents; most other countries seem to do OK without them. Pragmatically, I don't see that happening, but at least the Supreme Court has started reining in the most obnoxious excesses in In re Bilski and other recent patent cases.

  • http://intensedebate.com/people/bfeld bfeld

    Thanks for the conceptual support – what you experienced at eHarmony is a great example of the problem.  Well said!

  • http://twitter.com/leonardkish @leonardkish

    If the goal of patent protection is to promote development of ideas to marketable products and reduce risk of early stage investment in those ideas, then the protection should be related to the risk involved: Software 1-2 years (and a very quick review time,) novel drugs 15 + years.

    Additionally, (if goal of IP is to promote development and reduce risk,) protection should be contingent on active investing and development of the idea. I imagine something like the homestead act. The intellectual property "exists" out there somewhere. If you can lay claim to it and define it, you can own it so long as you continue to develop it and make it useful within a reasonable amount of time.

  • http://twitter.com/Jugglenaut @Jugglenaut

    I chuckle at the thought that banishing patents related to computer implemented inventions would unleash creativity and value in the software industry. Most other countries do OK with mediocre GDP growth too. My point is, that patents place a value on, and affirm that an inventor has created something truly innovative. If you take away the carrot of the patent (and rewards of a short-term monopoly), you basically tell the innovators to go innovate in a country that _will_ give them the fruits of their labor.

    To illustrate my point, name the biggest 5 software-related companies in the U.S. and then compare them to the biggest 5 software-related companies in Europe. Which has the bigger market capitalization? Europe has long ago tightened the restrictions for computer related inventions — nearly snuffing out all opportunities to patent computer implemented methods. Result, no Google's in Europe. No Microsoft's in Europe.

  • Jonas Maebe

    Actually, if you talk to people in the industry, patents don't show up in the list of main weaknesses when discussing Europe's ICT research or economic growth. Have a look at e.g. the HiPEAC Roadmap (page 48-49) for what they do consider to be the main weaknesses: http://www.hipeac.net/system/files/lr_3128_hipeac

    In case you wonder what HiPEAC is and why anyone would care about what they say: it is a so-called Network of Excellence (NoE), funded by the Seventh Framework Programme of the European Commission. An NoE brings together people from academia and industry in order to improve international and academic-industry cooperation on research. Industry members of HiPEAC include people from Intel, IBM, ARM, Microsoft, SAP, Nokia, Sony-Ericsson, STMicroelectronics, Thales, …

    On a related note, you might also be interested in the fact that Europe has much more extensive support for protecting database rights than the US. This was introduced at the request of publishers such as Elsevier, who claimed that this would strengthen EU companies' competitiveness vis-à-vis their US competitors.

    Result: when the effect of the directive was evaluated 8 years after it went into force, it turned out the EU:US database production went from from 1:2 in 1996 to 1:3 in 2004 (see http://ec.europa.eu/internal_market/copyright/pro… for links to the PR, evaluation and stakeholder replies). So much for the argument that adding more "protection" can be equated to adding more carrots and increased economic activity.

    And let's not forget that each patent at the same time is also a land mine for every other innovator, which can completely rob them of the fruits of their labour (even if they never heard of the patented "invention" before).

  • http://twitter.com/Jugglenaut @Jugglenaut

    Mr. Maebe make two points. First, that the enhanced European protection for databases has accelerated development of databases in Europe. Second, that patents operate as a 'gotcha', to catch unwary innovators in an expensive trap after the innovators innocently made their creation.

    Addressing the first point, I agree that enhancing protection for any class of intellectual property will necessarily attract talent (brain drain) to the industries that rely on such IP in countries where such enhanced protection exists. Enhanced protections for software creates a robust software industry in the U.S., while enhanced protections for databases creates incentives, and in fact, causes better production of databases in Europe.

    Addressing the second point, the 'innocent infringer' is a feature of all patents, and not merely limited to software patents. If one wanted to stear around such infringements, a modest cost of vigilance would need to be established, which for US is about $500 (360 EUR) per innovation. Once aware of a patent that might block progress along an innovative front, the innovators would be encouraged to detour around the innovation. Sometimes, the detour leads the innovators to a better alternative. In those instances where no alternative is present, a license may be taken. A third option can be, to exchange licenses between innovating companies to form a cross-license.

    The presence of a patent should not be interpreted as a road-block, but rather, an impulse to innovate still further, and perhaps, discover something even more useful than the original patent that seemed, initially, to be an impediment.

  • http://watkinslaw.blogspot.com Josh

    Yes, you arfe on the right track, they discussed the options and were advised by their industry connections (not my area) that it wasn't going to be economically viable to forge the FDA trail only to have the other major players follow them into the market.

    As for if it was true innovation, that is certainly debatable, but I will say when they told me the application for the drug (which I had heard of already) I laughed out loud, thinking they were kidding.

  • http://twitter.com/JohnReaves @JohnReaves

    Is it possible to use IP tools like patents to speed up innovation, rather than slow it down? In my experience, the thing that most slows down innovation is secrecy and fear. Without some kind of IP, it's common to treat your idea as a secret with liberal use of NDAs; we've waited months to get an NDA signed with one potential partner, when I'd rather be shouting out the idea from the rooftops and talking to dozens of collaborators. There are certainly other forms of strategic leverage which make IP protection necessary (like access to venture capital, exclusive relationships, brand identity or a large following) but in some cases these take almost as long to accumulate as it takes to get a patent. I like the Creative Commons approach, which is based on copyright law, and makes it possible to give content away without losing ownership and attribution. Is it possible to have an IP Commons arrangement based on patent law, so that we can allow use of ideas to encourage adoption, while retaining enough control to develop a business plan?

  • Jonas Maebe

    You might want to re-read what I wrote about the database directive. The ratio of databases produced in the EU to those produced in the US went from 1:2 (1 EU database produced for every 2 US databases) at the time of the directive's introduction to 1:3 eight years after the directive was introduced. I.o.w., the situation became worse rather than better for the EU with the increased "protection".

    On the patents front: the "innovating around" and "cross-licensing" arguments are well known and extensively discussed in e.g. the 2003 FTC report on patents and innovation: http://www.ftc.gov/os/2003/10/innovationrpt.pdf (it has separate sections of both the semiconductor and software industries)

    In short:
    1) cross-licensing is basically a form of MAD (mutually-assured destruction). It's a way to avert some of the negative effects, but
    a) is pure overhead (brokering such deals costs time and money)
    b) doesn't generally work with non-producing entities
    c) doesn't generally work in an optimal way when you have a small vs. a large company. See e.g. http://www.forbes.com/asap/2002/0624/044.html

    2) the "design around" theory generally doesn't really work in the software industry:
    a) "In some settings design-around may be technically impossible." (remark made in the context of ICT)
    b) "design-around may be economically impossible" (in case of standards or existing technology lock-ins that have to be conformed to) (remark made in the context of ICT)
    c) "In still other contexts the design-around may add little value, merely requiring that competitors “work harder to get to the same place.”" (remark made both in the context of ICT and the patent system as a whole)
    d) "Indeed, analysts emphasize that design-around is not costless, but rather consumes resources that, absent the initial patent, might be more fruitfully employed" (remark made in the context of the patent system as a whole)
    e) "Others observed that programmers can only design around those patents that are published, and the absence of a publication requirement for all patent applications means “it may be years beyond the time that a particular piece of technology has hit the marketplace before it is evident that it, in fact, is covered by a form of patent protection.” (obviously in the context of ICT)

    The hypothetical "$500 vigilance fee" might or might not help in some cases, but it sounds unlikely to me at least that it would fundamentally change anything to the picture (how much R&D can one really do for $500?).

    To conclude, a quote from a statement given by Robert Barr (back then vice-president and IPR director at Cisco Systems) during the consultation process that preceded the aforementioned FTC report:

    "My observation is that patents have not been a positive force in stimulating innovation at Cisco. Competition has been the motivator; bringing new products to market in a timely manner is critical. Everything we have done to create new products would have been done even if we could not obtain patents on the innovations and inventions contained in these products. I know this because no one has ever asked me "can we patent this?" before deciding whether to invest time and resources into product development."

    I guess that sums things up quite nicely, and it's also reflected by the industry input to the HiPEAC report I mentioned earlier.

  • Pingback: How to defend against infringement of patents? | Patent Law

  • http://www.hallingblog.com Dale B. Halling

    The interesting thing is that there is no empirical evidence that patents slow down innovation. There are specific papers on the biotech industry that show it took off when it was made clear that patents would cover genetically modified products. The papers show that employment expanded, number of start-ups expanded, amount of VC money expanded and the number of FDA product trials expanded. A similar analysis would show the same thing for Software.

  • http://www.hallingblog.com Dale B. Halling

    The countries with the strongest patent laws have the most innovation and the greatest diffusion of technology. Every major downturn in the US economy is associated with an attack on the patent system and a decline in the number of patents issued to US inventors. In the 1930s and 1970s the government used antitrust law to gut the patent system. In this decade we have weakened out patent laws significantly. In the 1980s we strengthened our patent laws and this trend continued into the 1990s – both decades were associated with a burgeoning VC and technology sector.

  • http://www.hallingblog.com Dale B. Halling

    The evidence is overwhelming that providing legal title to inventions spurs innovation and the economy. Those people who suggest otherwise not only have the burden of proof, but most provided extraordinary evidence for their extraordinary claims.

    If you thing about it patents are property rights or title to an invention. If you cannot obtain title to your invention, it is very difficult to obtain financing to develop the invention and it is difficult for the inventor to invest the time perfecting the invention. If you could not obtain title to land or a house, how much would you invest in your house? Countries with weak real property rights have shanty town houses. The reason why this is the case is you cannot obtain financing, you cannot sell the house – all money spent on the house is a sunk cost, and you cannot even call the police to kick people out of your house. The same is true if you do not have property rights in inventions – you end up with the equivalent of shanty town levels of innovation.

  • http://www.hallingblog.com Dale B. Halling

    Dale B. Halling, Author of the “Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.” http://www.amazon.com/Decline-Fall-American-Entre

  • http://twitter.com/leonardkish @leonardkish

    Dale. You make some good points. I'm a big fan of Hernando de Soto, who writes about this topic and I believe he's right that property rights are often what differentiates the developed world from the third world. Patents do have a important place in promoting investment.

    As we enter the digital age, however, we have to recognize that digital assets and inventions are very different from real world assets and inventions. Real property cannot be copied. It is by definition unique. We can't transport a house across the world in an instant (yet.) Transportation, production and storage costs for digital assets approach zero. Digital assets and inventions have half lives that are relatively short and take a relatively short time period (and investment) to develop.

    Creative Commons is an effort to advance copyright law for a connected, digitized world. Patent laws covering digital inventions need to advance as well.

  • http://www.facebook.com/hbramlet Henry Bramlet

    The interesting thing is that I don't see why people want to shoot down the Patent System, when they CAN adapt to it.

    http://volokh.com/posts/chain_1240849478.shtml

    This was a posting symposium from a guest blogger on The Volokh Conspiracy. He hearkens back to the Sewing Machine Patent Wars that took place in the Mid 1800's. Like the internet, sewing machines were some of the first steps in an economy-changing revolution.

    You can read through all the details (which are very interesting), but in a nutshell, the proliferation of Patents had driven the industry to a litigated, stilted morass. So what you found was that mechanisms like Patent Pools freed the wheels of innovation again. Those who insist that schemes like "cross licensing" wouldn't work should look closely at these previous examples that prove (empirically) otherwise.

    I don't deny that execution is as important as innovation, but Patents prevent large companies (with larger capabilities) from just shutting down the little guys through copying. Many people insist that large companies are not more innovative than the small start-ups. But this just isn't true. Geoffry West of the Santa Fe Institute has researched this stuff and found that (much like biological organisms and cities) larger companies can innovate better. Although the Goog is famed for its Search Innovation that made it a huge company, today it is turning out much more innovative ideas- from mail to phones to operating systems. Likewise think of Apple, Xerox Park, Bell Labs, etc. We perceive Startups as being more innovative because we see them rocketing out into the market with market-changing ideas, but don't see the hundreds that failed in the mean time. Those larger companies can easily put more eyes on the market to turn out second-mover innovations before the little companies can attain significant market share.

    If you are one of those hundreds of startups that has a good innovation, one of the only things that can save you from those large companies is a title to your innovation. Just look at TiVo. They weren't the first into the DVR market-space, but they had a bunch of key innovations that actually MADE DVR's a viable consumer product. But they went up against powerful TV-Providers. At first those providers did everything they could to shut out Tivo. Then, when they realized the way things were headed, they just tried to copy them.

    The only thing protecting TiVo was its patents on time shifting and other innovations. They were going up to monopolies who stood atop massive barriers to entry. They clearly executed better than the big companies, but those companies had privileged access to customers, command of the set-top boxes, etc. But TiVo survived the onslaught (barely) because all the big companies couldn't put out DVRs with such great UI and functionality…And why couldn't they? Because they were patented.

    In a patent-less world, little guys would have less chance. Today, it is very hard to go IPO, so these little companies need to have tangible assets for a buyout exit strategy. Big companies will always be tempted to buy the entire company, but without patent protection, the large companies would certainly weigh the company's cost against the cost of just shamelessly copying them.

  • Jonas Maebe

    Actually, there is in fact empirical evidence that patents slow down innovation, at least in the software world. See e.g. http://www.researchoninnovation.org/swpat.pdf and http://www.researchoninnovation.org/softpat.pdf

  • Jonas Maebe

    There are many documented cases in history showing that when patent rights are weak in a country, the local industry and innovation flourishes. Once some of these new players become big, want to consolidate their market position and protect their newly gained market share from new competitors, then these compaies start lobbying for stronger patent protection.

    As a result, in quick succession you get stronger patent laws and a flurry of patenting activity by these companies. That does not mean that these patent laws stimulated any innovation though.

    Here's a nice summary with some examples from the Netherlands and Switzerland: http://www.commondreams.org/views02/0312-06.htm (along with a ton of basic inventions that were done there during times with of little or no patent protection, such as milk chocolate, margarine, chocolate fondant and powdered soup.

    It is dangerous to equate correlation with causation.

  • http://twitter.com/antonejohnson @antonejohnson

    Jonas, thanks for your valuable contributions to this discussion. I agree that it's a fallacy to blame the gap between US and EU tech entrepreneurship on the availability of software patents in America. There are many other factors contributing to capital formation and entrepreneurship in the US that are more challenging in Europe, such as size of domestic market, language and cultural issues, inefficient labor markets constricted by inflexible employment laws, etc.

    Brad made an excellent point that software has always been protectable through copyright and trade secret. The vast majority of software written by the vast majority of developers will never be patented. Software patents were essentially non-existent in the US until court decisions changed things in the 1980s. The Google example is an excellent one: Google's dominance has absolutely nothing to do with patents. I believe that the only reason Google bothers to patent anything is defensive; for a competitor to replicate Google's spidering and page ranking technology would involve a tremendous amount of work reinventing the wheel that Google has already perfected.

    The arms race analogy is appropriate here: Google and Microsoft each stockpile patents the way the US and USSR stockpiled nuclear weapons during the Cold War — and each situation was a vast waste of resources that could have been deployed more productively for the common good.

  • chrisper

    It looks to me like many of the comments critical of the patent system are coming from academics, economists, or other abstract "researchers" – what I would call armchair generals. If you have a truly new idea and try to go for funding yourself you will experience the blowback from investors if there is no IP. No consideration. I would suggest these insightful individuals take a shot at being a bona fide inventor/entrepreneur and then report back.

  • Tom Fitzsimons

    Full Disclosure: I work in a university tech transfer office.

    The purpose of a patent, IMHO, is not to promote innovation, but to protect the innovator. Innovation is promoted by the genetics of the marketplace. Innovation is the act of starting something for the first time; introducing something new. As such the innovation itself has no intrinsic value; its value derives from its utility, and the patent protects the value of the utility. How important patents are varies greatly as a function (again IMHO) of the cost of going to market. The greater the cost, the more protection someone paying the cost requires to put up the money. That is a function of the market, not the patent law.

    I find it interesting that a professor at MIT thinks patents slow down research. Professors, in my experience, are quite oblivious to existing or pending patents by others when conducting their research. A notable exception is when the professor or one of his students wants to commercialize their research (their innovation) and finds out it has already been done. That changes the picture, and removes it from the abstract, at least for that professor/student. That is not the fault of the patent, it is a consequence of the genetics of innovation. Obviously, if it is a significant innovation with real utility the owner of the patent should be interested in licensing the innovation to improve their own product offering. In many cases they simply don't; they infringe the innovation and tell you to sue.

    If you want to have radical patent reform make it inexpensive and easy for patent holders to enforce their rights. That will dramatically increase licensing activity and bring useful innovations to the market. As an aside, the patent examiner who approved the anti-eating device obviously didn't see "Silence of the Lambs".

  • http://intensedebate.com/people/bfeld bfeld

    Agree with both of the points – limited time duration on patents in areas like software is a good intermediate solution (if one doesn’t get all the way to eliminating them).  Equally important is the idea that the patents have to be used to be legit – no more non-practicing entities, patent trolls, and patent thickets.

  • http://www.michaelbernstein.com Michael Bernstein

    TiVo isn't that good of an example. In order to curry favour with the networks and carriers, they eventually added support for anti-consumer 'features' like preventing a show from being recorded, remotely deleting recorded shows, and so on. They've also removed features that their customers liked.

    Meanwhile, no other DVR upstarts can improve on TiVo's ideas with pro-consumer features because of TiVo's patents. Innovation in DVRs has now largely stalled (unless you want to build your own).

    Oh, and of course, now Microsoft is suing TiVo. Over violating some ludicrous patents related to 'displaying programming information' and 'secure purchase and delivery of video content programs'.

    Yeah. Software patents in this area have worked out JUST FINE, haven't they?

  • http://www.michaelbernstein.com Michael Bernstein

    "The purpose of a patent, IMHO, is not to promote innovation, but to protect the innovator." This is exactly backwards. The only legal justification for 'protecting the innovator' ie. granting them a government-enforced time-limited monopoly, is that this will presumably "promote the progress of science and useful arts". If that presumption is not true (and we have growing evidence that it is not, in many circumstances), then we need to re-examine patent law.

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  • http://www.blog.beevok.com YST

    Do patents slow innovation?
    I heard in one country that doesn't allow pharmaceutical patents (Italy?), there are basically almost no new drugs in that field. It seems like the lack of patents stomped innovation in that field.

  • 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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