

Patents and Innovation: Evidence from  Economic History [pdf] - asdf333
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.23

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M8R-fhlcjm
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.

~~~
conanite
> 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.

~~~
M8R-fhlcjm
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.

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glesica
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.

~~~
M8R-fhlcjm
not so long ago (few hundred years) the new world (America) was behind African
infrastructure and yet pulled itself up.

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mullingitover
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.

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M8R-fhlcjm
Except advancement of western civilization was much more due to technological
innovations than 'gaming IP laws'.

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Someone
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>

~~~
kvb
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.

~~~
yxhuvud
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.

~~~
rayiner
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...](http://blogs-
images.forbes.com/aroy/files/2012/04/fda_05t2.jpg). 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.

~~~
kvb
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.

------
zby
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.

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M8R-fhlcjm
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.

~~~
glesica
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.

~~~
M8R-fhlcjm
That's a cop-out given the abundance of search tools, regexp, CTRL-F, etc...

~~~
glesica
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.

~~~
M8R-fhlcjm
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.

~~~
glesica
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.

