The Case for Abolishing Patents

Our patent system is a mess. It’s a fount of expensive litigation that allows aging companies to linger around by bullying their more innovative competitors in court.

Critics have suggested plenty of reasonable reforms, from eliminating software patents to clamping down on “trolls” who buy up patent portfolios only so they can file lawsuits. But do we need a more radical solution? Would we be possibly be better off without any patents at all?

That’s the striking suggestion from a Federal Reserve Bank of St. Louis working paper by Michele Boldrin and David Levine, professors at Washington University in St. Louis who argue that any patent system, no matter how well conceived, is bound to devolve into the kind of quagmire we’re dealing with today.

Here’s the (slightly jargony) core of their argument, which we’ll unpack together in a moment:

A closer look at the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side-effects, strong patent systems retard innovation with many negative side-effects. Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely [emphasis mine] through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.

In plain-speak, the authors are arguing that, yes, the evidence suggests that having a limited amount of patent protection makes countries slightly more innovative, presumably by encouraging inventors to cash in on their great ideas without fear of being ripped off. But patent protections never stay small and tidy. Instead, entrenched players like intellectual property lawyers who make their living filing lawsuits and old, established corporations that want to keep new players out of their markets lobby to expand the breadth of patent rights. And as patent rights get stronger, they take a serious toll on the economy, including our ability to innovate.

We can see that cost today as tech companies like Google spend billions on “defensive patents,” which are essentially useless other than as a protection against lawsuits. We see it whenever a cool startup firm is forced to license a bogus patent from a litigious troll. And we see it in the untold dollars spent on legal fees and unnecessary patent filings for ludicrously broad or impractical ideas. The authors’ extreme case in point: Somebody out there actually patented a method for moving information through the fifth dimension. As in the Bruce Willis movie. As in faster than the speed of light.

What do we get from all this? Precious little, the paper argues. They find virtually no statistical evidence that rising patent applications actually make our economy more productive.

Eliminating patents altogether, Boldrin and Levine say, would also have fewer negative consequences than most of us assume. Most industries, they argue, only resort to patent litigation once their pace of innovation has slowed. As long as they still cranked out out new, popular products, companies like Apple would continue to profit by being the first to market, which often confers a long-term advantage.

The poster child for strong patent protection is usually the pharmaceutical industry, as drugs are easily copied and can cost upwards of a billion dollars to develop. Here, Boldrin and Levine admit that the government would likely need to step in. But rather than giving companies a legal monopoly over their formulas, the authors suggest we should modify the drug approval process to let makers start recouping their costs faster. They would also set up a prize system to reward companies that invent the new medicines we need.

Because ending all patent protections immediately would be impractical, Boldrin and Levine advocate several transitional steps, such as shortening patent terms. “The aim of policy, in general, should be that of slowly but surely decreasing the strength of intellectual property interventions,” they write, “but the final goal cannot be anything short of abolition.”

Again, it’s a somewhat radical idea — but maybe one that deserves a place in the debate.

Via: The Atlantic