11/01/2010

Patents Constrain Innovation and Preserve Monopolies

Apple continues to bully its competition to preserve its monopoly, not that there’s anything wrong with that, other than the fact in highly innovative industries patents constrain innovation.

This past Friday, Apple filed two lawsuits against Motorola declaring that its Android Smartphone infringes upon six of their patents.

The problem is, tech companies can file extensive claims against one another because patents exist for every new innovation, like: mobile e-mail, syncing e-mail and calendars, and multi-touch etc.

So now the basic idea of competition in the market for Smartphones, and other computing devices, is up to the decision of the courts…prepare for maximum inefficiency.

When it comes to software, there’s a variety of solutions to every problem, that’s why Dana Blankenhorn believes patents “should cover how things are done, not the act of doing them.”

The duration of a patent in any tech industry is terribly inclusive and would last longer than the life of the rapidly changing market. If the courts enforce such patents, then without a way to side-step their decisions, innovation will decay.

2 comments:

MIA said...

Patents create the incentive for new products not hinder them. Why invent something if you cannot capture a large market for doing so? Would apple create the smart phone if there was no protection from competitors instantly stealing the invention?

Patents do hinder a free market in that there will be less competition creating monopolies. Laws need to balance out both the good and the bad of patents in order to protect the inventor as well as protect the general public.

Dave said...

-1 on MIA for poor capitalization.

Sheesh ... patents ... what a mess. There are good reasons to be on both sides of the issue, it's critically important, getting more important, and no one has the right answer. Any one of you could make a career in just about any field out of patents.

What we really need an answer to is how to measure how important patents are, and how we should set the patent length correctly.

The problem is that inventions create positive externalities: think about how much you've benefited from file sharing.

The criteria that's appropriate is that the private benefit to the inventor should match the benefit to society, if we measure both as rates of return. Social benefits to inventions often have extraordinarily high returns - on the order of 50% per year for things like cellphones, television, and radio. Private returns to inventing those things are much lower (everyone in Utah knows how much Philo Farnsworth made off his invention).

So, patents can be viewed as a way to boost private returns by shifting some of the returns to society back to the inventor.

These numbers are very hard to measure. But, for major inventions they appear to be wildly out of whack, indicating that our patent protections are not nearly strong enough.

Hard to believe, I know.