Do patents help or hinder innovation Instinctively,
they would seem a blessing. Patenting an idea gives its inventor a 20-year
monopoly to exploit the fruit of his labor in the marketplace, in exchange for
publishing a full account of how the new product, process or material works for
everyone to see. For the inventor, that may be a reasonable trade-off. For
society, however, the loss of competition through the granting sole tights to an
individual or organization is justified only if it stimulates the economy and
delivers goods that change people’s lives for the better.
Invention, though, is not innovation. It may take a couple of enthusiasts
working evenings and weekends for a year or two-not to mention tens of thousands
of dollars of their savings-to get a pet idea to the patenting stage. But that
is just the beginning. Innovations based on patented inventions or discoveries
can take teams of researchers, engineers and marketing experts a decade or more,
and tens of millions of dollars, to transfer to the marketplace. And for every
bright idea that goes on to become a commercial winner, literally thousands
fall by the wayside.
Most economists would argue that,
without a patent system, even fewer inventions would lead to successful
innovations, and those that did would be kept secret for far longer in order to
maximize returns. But what if patents actually discourage the combining and
recombining of inventions to yield new products and processes-as has happened in
biotechnology, genetics and other disciplines
Or what about
those ridiculous business-process patents, like Amazon.com’s "one-click" patent
or the "name-your-price" auction patent assigned to Priceline.com Instead
of stimulating innovation, such patents seem more about extracting
"rents" from innocent bystanders going about their business. One thing has
become clear since business-process patents took off in America during the
1990s: the quality of patents has deteriorated markedly. And with sloppier
patenting standards, litigation has increased. The result is higher transaction
costs all ronnd.
It is not simply a failure of the United
States Patent and Trademark Office (USPTO) to examine applications more
rigorously. The Federal Circuit has been responsible for a number of bizarre
rulings. Because of its diverse responsibilities, the Federal Circuit-unlike its
counterparts in Europe and Japan-has never really acquired adequate expertise in
patent law.
To be eligible for a patent, an invention must not
just be novel, but also useful and non-obvious. Anything that relies on natural
phenomena, abstract ideas or the laws of nature does not qualify. The USPTO has
taken to requiring a working prototype of anything that supposedly breaches the
laws of physics. So, no more perpetual-motion machines, please.What can we learn from the first paragraph
