Economists say copyright and patent laws are killing innovation; hurting economy

Mar 05, 2009 By Melody Walker

(PhysOrg.com) -- Abolishing patent and copyright laws sounds radical, but two economists at Washington University in St. Louis say it's an idea whose time has come. Michele Boldrin and David K. Levine see innovation as a key to reviving the economy. They believe the current patent/copyright system discourages and prevents inventions from entering the marketplace. The two professors have published their views in a new book, Against Intellecutual Monopoly, from Cambridge University Press.

"From a public policy view, we'd ideally like to eliminate patent and copyright laws altogether," says Levine, John H. Biggs Distinguished Professor of Economics. "There's plenty of protection for inventors and plenty of protection and opportunities to make money for creators. It's not that we see this as some sort of charitable act that people are going to invent and create things without earning money. Evidence shows very strongly there are lots of ways to make money without patents and copyright."

Levine and Boldrin point to students being sued for 'pirating' music on the internet and AIDS patients in Africa dying because they cannot afford expensive drugs produced by patent holders as examples of the failure of the current system. Boldrin, the Joseph Gibson Hoyt Distinguished Professor in Arts & Sciences and Chair of the economics department says, "Intellectual property is in fact an intellectual monopoly that hinders rather than helps the competitive free market regime that has delivered wealth and innovation to our doorsteps."

The authors argue that license fees, regulations and patents are now so misused that they drive up the cost of creation and slow down the rate of diffusion of new ideas. Levine explains, "Most patents are not acquired by innovators hoping to protect their innovations from competitors in order to get a short term edge over the rest of the market. Most patents are obtained by large corporations who have built portfolios of patents for defense purposes, to prevent other people from suing them over patent violations."

Boldrin and Levine promote a drastic reform of the patent system in their book. They propose the law should be restored to match the intent of the U.S. Constitution which states: Congress may "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writing and discoveries."

They call on Congress to reverse the burden of the proof on patent seekers by granting patents only to those capable of proving that:

• their invention has social value

• a patent is not likely to block even more valuable innovations

• the innovation would not be cost-effective absent a patent

The authors acknowledge that such drastic reform is unlikely and outline an incremental approach for Congress to gradually reduce the scope of patents, regulation and licensing.

Nevertheless, their call for changing the system is urgent. The economists compare intellectual monopoly (patents) to medieval trade monopolies which were proven to be economically detrimental. They write, "For centuries, the cause of economic progress has identified with that of free trade. In the decades to come, sustaining economic progress will depend, more and more, on our ability to progressively reduce and eventually eliminate intellectual monopoly."

More information: Professors Boldrin and Levine maintain a blog on this topic: www.Againstmonopoly.org

Provided by Washington University in St. Louis

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NeilFarbstein
1.4 / 5 (7) Mar 05, 2009
Where do they come from, Mars? Nobody told me washington university is hotbed of communism.
I'm a professional inventor. Nobody is going to work for the betterment of mankind or social justice unless you pay them for it. It takes an awful lot of guts to find a new way to do something and if the people who invent are not paid for their efforts, they wont do it. Tell them to put their money where their mouths are and give up their publishing royalties.
moebiex
5 / 5 (5) Mar 05, 2009
Even according to Albert Einstein: The secret to creativity is knowing how to hide your sources.

We all share a heritage of knowledge and wisdom developed in the past which we all then use to build our own new understanding of reality and yet we are not obliged to acknowledge that heritage. I think it is becoming more obvious that patent and copyright laws have formalized that disregard and are retarding innovation just when we need it most.
gopher65
4.3 / 5 (6) Mar 06, 2009
NeilFarbstein: Did you even read the article? They specifically stated that no one would innovate without a financial incentive. Their concern is that patent law has become so screwed up that it is driving up the costs of development, while simultaneously hindering innovation.

Anyone who has looked at the situation can tell you that much. It is inherently obvious. Now you can debate about *what* needs to be done to fix the situation, but the fact that something needs to be done isn't in question.

Disney should not still hold a copyright to Mickey Mouse 800 years after its creation, and RIM shouldn't have been sued for hundreds of millions by a patent holding company that had had an extremely broad preemptive patent granted to it before it ever came up with a product (and it never would have, since the sole purpose of those companies is to hold patents forever in order to prevent others from using them).
denijane
5 / 5 (3) Mar 06, 2009
A very good example is provided by Linux development. A distro is started as fun in the spare time, and later, someone starts paying the developers to work on it. But the product is still free and open source.

That's why I don't think the ideas in the article are so odd. Of course, everyone should be paid for their work. But in the most cases, the inventors are working for a corporation and all they get is their salary, while the corporation holds the patent and profits from it. Sure, they must earn too, otherwise they wouldn't invest in the project, but there are many ways to earn and also, there should be some reasonable time-limit to those patent.

Like those rumours that a biotech company is patenting genomes of plants. It's absurd...right?! But let's consider something else-a company obtain a stimulus and produces something. Why it should hold the patent over the product when it's the taxpayers money who actually invested in it? Hm?
jjurbanus
3 / 5 (4) Mar 06, 2009
This is nonsense. First, if you invent something that can be shown novel and non-obvious from prior art, you can get yourself a patent. Granted, this is currently often too expensive for those innovators trying to get their foot in the door (as I'm currently biting the bullet in getting patents instead of other life necessities), and this is where focus should be.

One way significantly reducing patent rights will even further stifle innovation, is that startups will have no way of competing against large corporations in many instances.

Second, a utility patent lasts for 20 years, which is really not that long, just enough for a company to get some value out of it (perhaps there should be some requirements on the technology needing to be exploited in a reasonable amount of time).

Any reform needs to be done with common sense, in that it is principally start-ups that drive innovation.



gopher65
4.5 / 5 (8) Mar 06, 2009
jjurbanus: My dad works as an engineer for an oil company. He has, IIRC, 12 patents. Because he works for the company, he has to sell each patent he gets to them for 1 dollar (which they do in the form of a silver dollar on a plaque).

Know how much his patents are worth? More than 100 million dollars. This is not an uncommon situation for inventors. Where do you think all those trinkets that Sony and Apple create come from? They come from from contracted engineers.

Patent rights DO NOT protect inventors in any way shape or form. They protect patent holding companies, and that's it. Nothing more.
jjurbanus
4.7 / 5 (3) Mar 08, 2009
gopher65, I respect your dad for his innovation. Unfortunately the scenario you mention is an issue of modern corporate structure, not patent law.

A early step in innovation is patent protection once something has been sufficiently developed, whether for a individual/startup or an established company. The next very big step is commercially exploiting this innovation and protection, which for the individual/startup is a big step indeed. That's where the focus should be.

The fact that companies force employees to sign contracts relinquishing their patent rights is wrong, and the Japan corporate model relating to this should be looked at, as I plan to do.
KBK
4 / 5 (4) Mar 08, 2009
Actually.. REMOVE the bastardization of the copyright and patent system enacted by government paid (by corporations) stooges that has taken place.

Then the copyright and patent law system will work as it is supposed to work:To protect the individual inventor and to NOT give that away as a power to corporations.

That is the 'fault' in the system..that has taken place in the USA.
Damon_Hastings
5 / 5 (4) Mar 08, 2009
I think it is possible to preserve the legitimate patents by actual inventors (which is now a tiny fraction of all patents) while still eliminating the rest.

The vast majority of patents today are obtained defensively by corporations for the sole purpose of protecting themselves against the great hordes of newly created "patent troll" companies whole sole purpose (and sole source of income) is exploiting patent law to litigate their way to a huge profit over patents for things that they didn't even invent themselves. They trade these patents like commodities, each valued according to its potential for being abused to generate profit. They know that it's nearly impossible for any big company to avoid infringing at least a few patents any time they do *anything*. Big companies' only resort is to obtain huge numbers of defensive patents, which are completely inane and useless for any practical purpose other than defense. Well, okay, they do have one other purpose: offense. Because when a company goes bankrupt, they sell all their "defensive" patents -- and guess who buys them? ;-) Thus the cycle feeds itself.

This is especially a problem in my profession (software development), as there are only so many good algorithms to solve a given problem, and the best ones are often obvious, so that a hundred programmers might come up with the same algorithm at the same time, independently. These algorithms are all being patented -- so a programmer is highly likely to infringe randomly. (For example, Xerox patented the concept of making a cursor blink using XOR -- which is a "patently" obvious approach.) Now, patent law does have protections against patenting "obvious" things, but apparently someone in the patent office thought that XOR was nonobvious (which is understandable, given that he/she was not a programmer). I've had to rewrite my own software several times due to accidental infringement, and my company spends millions of dollars each year finding these infringements before the trolls do. My company also refuses to contribute to open source partially because it increases our exposure to the trolls.

Patent law protects against "frivolous" patents, but the majority of such cases are settled out of court, since settlement is usually cheaper than proving frivolousness. Thus, patent abuse is extremely profitable and relatively risk-free (the penalties for frivolousness are laughable.)

If we get rid of the trolls, then the cycle of abuse will be broken. Companies will no longer need to waste billions of dollars a year seeking hundreds of thousands of defensive patents, many which ultimately end up in the hands of trolls. And the software industry will no longer have to worry about accidental infringement in a world where all the most obvious, most trivial algorithms have been patented. These trolls need to be taken *down* before they destroy my industry.
jjurbanus
5 / 5 (1) Mar 08, 2009
Quoting http://truereform...tml#menu (had to highlight to see text):

Real Reform %u2013
If there are changes needed to the patent system, they are not addressed in the bill. From a small entity perspective what we need is 1) shorter patent pendency, 2) patent prosecution based on law %u2013 not politics, 3) competent and qualified management of the patent office free of political appointments, and 4) restoration of the teaching, suggestion, motivation basis for determining patentability. We must also restore court ordered injunctions in support of our exclusive right to practice as mandated by the US Constitution in all cases when infringement is found as was previously the established law for over 100 years. A strong and effective patent system must be predictable and available to all innovators regardless of their size. We must always remember today's market leaders were yesterday's start-ups.

Until these measures are enacted and secured, there can be no true reform. Recent changes in patent law have skewed the scale in favor of large infringers. Without a strong patent system, small entities cannot afford to innovate. Without creative small entities there will be no one pushing the big corporations who will then rely on their sheer size to secure their market share %u2026 and the public in the end will be the big loser as they will pay higher prices for inferior products and continue to lose jobs to overseas as that is the trend for the big companies. Job growth in the US has always been fueled by small firms and start ups. Unless we restore a sound patent system they and their promising new discoveries will fail and America will fail at engineering its way out of this troubling economic morass.
jjurbanus
3.7 / 5 (3) Mar 08, 2009
The reason the United States is falling behind Japan and Germany in technology and
industrial competitiveness may be because Germany and Japan have mandatory
compensation for employed inventors, whereas in the United States, employed inventors
are forced to sign contracts relinquishing any rights to their inventions. The scientist is a
calculating man, just like the businessman or accountant, maybe even better with figures.
He thinks, "What if I bust my neurons and come up with a great invention, like the light
bulb or transistor? The most I could hope for from my tightwad employer would be a
dollar as a legal consideration for assigning the invention. Maybe I should just take it
easy and do basic research, or hack work in product and process improvement." This may
be why Thomas Edison was drenched in perspiration 99 percent of the time (a patent
every two weeks). Edison had incentives: He could earn a hundred grand or so from an
invention - good money in those days. The reader might ponder whether it is more
important to be first in science and technology, or in business management. The Gulf
War demonstrated the efficacy of technological superiority. Perhaps the founding fathers
were right in giving Congress the power to grant inventors the exclusive rights to their
inventions, and perhaps it is time for Congress to exercise this prerogative.
HI. SUN-TIMES, June 22, 1994, at 40.
Jim Benson & Irving Park, Editorial, C
gopher65
4 / 5 (4) Mar 08, 2009
jjurbanus: Edison wasn't an inventor. He was a marketer (and a very good marketer at that), and he was also one of the first people to learn how to exploit the patent system. He didn't even invent the light bulb; the tungsten filament light bulb was invented by two Canadian inventors, who were then forced to sell the patent to Edison for a pittance.

That's why Tesla hated Edison so much. The man was a thief, and he stole several of Tesla's significant inventions.

The mythos that has grown up around that lying SoB is unfortunate.
LariAnn
3.3 / 5 (3) Mar 09, 2009
Patent reform is sorely needed, especially because as it stands now, it is nearly cost-prohibitive for an independent inventor to afford to obtain the patents needed for a new invention. The system, as it now stands, favors the well-heeled and the corporations, not the individual inventor. The individual inventor needs to be given priority in protection and the big businesses/corporations subordinated to the inventor. Only in this way will the inventor realize any fair compensation for his/her efforts.
lengould100
3 / 5 (2) May 01, 2009
Damon Hastings - The vast majority of patents today are obtained defensively by corporations for the sole purpose of protecting themselves against the great hordes of newly created "patent troll" companies whole sole purpose (and sole source of income) is exploiting patent law to litigate their way to a huge profit over patents for things that they didn't even invent themselves. They trade these patents like commodities, each valued according to its potential for being abused to generate profit. They know that it's nearly impossible for any big company to avoid infringing at least a few patents any time they do *anything*.


Agreed completely. My solution to your problem is to disbar software "patents" altogether, as is being promoted in Europe. What purpose exactly do patents on software serve? Is that the economically correct means to the end?
lengould100
3.7 / 5 (3) May 01, 2009
Having a US patent and a dollar might get you a coffee (except in Starbucks). Legal costs etc. to gain proper protection worldwide for a novel concept now amount to well over $1 million. Its ridiculous.