Patents and Innovation: Evidence from Economic History [pdf] | Hacker News Reader

Patents and Innovation: Evidence from Economic History [pdf]

pubs.aeaweb.org

37 pointsasdf33327 comments

Patents provide the incentive to invest in R&D by providing a form of guarantee on their investments.

Generally speaking, the countries with the strongest patent rights produce many of the innovative companies.

> Generally speaking, the countries with the strongest patent rights produce many of the innovative companies.

The article suggests that the available evidence does not support this conclusion. It seems that in historical technology fairs, countries with a weak or no patent system in place performed as well as other countries, both in terms of numbers of inventions they presented, and awards they received.

The article also describes some instances where patents clearly inhibited innovation - for example in the US in 1916, aircraft production halted due to patent disputes between Wright and Curtiss.

That's assuming the article is right, but a look around the world shows the opposite - generally speaking the stronger the patent rights, the stronger the innovation. Weak IP African countries vs strong IP in American, European, Japan, Korea.

What came first, though, strong IP or innovation? I could see strong IP laws growing out of existing innovation.

Oh come on, you can't seriously be using Africa as an example here. Most African countries lack basic infrastructure and many haven't had a peaceful decade in the last 50 years. IP is a type of law, so countries with weak rule of law probably have weak IP. But I think there is a solid case to be made that the other rule of law issues swamp IP in terms of suppressing innovation.

not so long ago (few hundred years) the new world (America) was behind African infrastructure and yet pulled itself up.

One common sense argument is that as industry developed and competition increased, the dominant players were able to perform regulatory capture to ensure that they could rule the market through easily-gamed IP laws.

Except advancement of western civilization was much more due to technological innovations than 'gaming IP laws'.

Call me crazy, but I don't think a lack of strict patent law is the only thing holding African countries back.

IP laws not only thing holding them back. But it ain't helping either. No incentive to spend resources (be they $money, or time inventing).

Exactly, this correlation definitely proves that strong IP rights are the reason for the innovation. It's rock solid, just like this chart[1] that reveals the true cause of global warming.

[1] http://en.wikipedia.org/wiki/File:PiratesVsTemp(en).svg

About as hard to prove direct correlation as for you to prove the opposite. However, use common sense. The data is overwhelmingly in my favor.

Where's the evidence to that? In fact the evidence shows the contrary. Also, US does not have the strongest patent laws.

1) Where is the evidence of the opposite? The data is overwhelmingly. 2) U.S. is certainly in the top tier of strongest patent laws.

Same journal, also from Vol. 27, No. 1, same subject: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.3

TOC at http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1

I'm less anti-patent than most people here, but I think that's a very good article. In particular, the treatment of pharmaceuticals is not the absurd "if we just got rid of patents, innovation would continue at the same rate" argument that some patent opponents advance, but a more nuanced take on what other changes could be made to the larger system to maintain appropriate incentives.

When it comes to pharmaceuticals, one has to remember that the vast majority of the costs involved are with the late stage trials that society mandates. That medicine is properly tested is not a bad thing, but there may be other ways to finance such tests without having to resort to monopolies.

You can't lump all clinical testing into the approval process. Drug companies have to do a certain amount of clinical testing just to see if the drug does anything. To make a computer comparison: just because you don't get your OS POSIX certified doesn't mean you don't need to run any tests.

This graphic suggests that pre-FDA clinical trials still account for about 30% of the cost of developing new drugs: http://blogs-images.forbes.com/aroy/files/2012/04/fda_05t2.j.... Even if you assume that all of the costs after that are allocable to the regulatory process (which is a liberal assumption--it's unlikely that drug companies would need to do zero human trials in the absence of regulation), developing a new drug is still a billion dollar endeavor.

The reason drugs are such a great example of the applicability of patents is because they're the worst case scenario for the economic issue (free riding) that patents address: high capital costs for a product that is trivially reproduced. That dynamic exists independent of the regulatory process, and exists in other capital-intensive areas too (Tesla has a raft of patents on its technology, and Google has patents on self-driving cars, etc).

The reason patents often seem ridiculous in the software context is that by and large they are not a bad scenario for free-riding. The capital requirements for software inventions tend to be very small.

Looking at capital requirements also exposes a weakness in the article, which uses historical data. Capital requirements for new inventions was much lower in the past than they are today. The era of "lone inventors" is largely dead outside the software realm. We live in the era of "big science" where it costs $1 billion to get anything done. Patents are a lot more relevant in the face of high capital costs than in the face of low capital costs.

Note that I was commenting on the article from the parent to my comment, not to the one from the OP (which I found much less persuasive, and where the historical focus does seem like a real weakness). Even if a monopoly is the best way to incentivize pharma research, patents aren't the only way to achieve it - even today there is a complex set of mechanisms outside of patents, such as clinical trial data exclusivity for FDA approval.

Also, there are indications pharma spends about twice on marketing what it spends on research: http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%... (2001), http://www.plosmedicine.org/article/info:doi/10.1371/journal... (2008)

Just another link in this subject: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016968 - the problem with patents is the scalability of the system. It can work reasonably when there is an index - like in the chemical patents now - but without efficient search it is a minefield for inventors.

from the article:

    "In countries without patent laws, inventors depend entirely on secrecy, lead time, and other alternatives to patents in protecting their intellectual property."

This has been shown time and again, remove patents and you remove the incentive to disclose.

Who cares? With so many patents issued in the US there is basically no disclosure anyway, at least as far as a small company or individual is concerned. In addition, many modern inventions are so complex that it is almost impossible to identify every patent they might violate. Even large companies get hit by this sort of thing, just look at video codecs.

That's a cop-out given the abundance of search tools, regexp, CTRL-F, etc...

That's one of the dumbest things I've ever seen posted in this forum. I can't tell if you're genuinely ignorant or just trolling. You're saying that the reason patents covering a given product are so difficult to identify is that nobody knows about regular expressions? That has absolutely nothing to do with anything.

The difficulty isn't in finding patents based on keywords or patterns (Google patent search can do that all day long), the difficulty is in identifying patents that might cover a given device or product. If you've created a cell phone you can't just search the patent database for "cell phone". A patent could cover some piece of the device and never even reference cell phones, or a patent could cover a method of doing something that you didn't even realize was novel enough to warrant patent protection.

This requires careful study of a given patent, by lawyers but also by engineers. It is an expensive process with potentially tens of thousands of patents to sift through for a reasonably complicated product.

Given your example of cell phones, there's a lot more costs to bringing a new type of cell phone to market than the ~$50k on patent searches.

Since we're talking about driving innovation, someone who genuinely advances the technology is able to gain some protection on their investment in R&D by applying for (and hopefully obtaining) a patent(s).

If all you're doing is bringing another same-old cell phone to market then the question is what benefits are you bringing - or rather, does society benefit more from your same-cellphone than the someone who is innovating and introducing something new and novel.

But even an innovative cell phone is covered by thousands of existing patents, many of them unknown until someone sues. That's the problem. There is no such thing as "pure" innovation. All new technology somehow involves older technology, and in many cases it isn't clear which existing patents cover a particular device or product so the only thing to do is wait to be sued or not release your new (an innovative) product at all.

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