Patents are often used as indicators for economic and innovative progress. The assumption is that many patents represent innovation, and also that many innovations are patented. Patent records thus correlate with innovation.
A fascinating new paper, “Reassessing patent propensity: evidence from a data-set of R&D awards 1977-2004,” by Roberto Fontana, Alessandro Nuvolari, Hiroshi Shimizu, and Andrea Vezzulli (Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon, Working Papers series number 2013/09; Mar. 2013), carefully examines this issue. The authors studied the innovations from the ”R&D 100 Awards” competition organized by the journal Research and Development, which, since 1963, “has been awarding this prize to the 100 most technologically significant new products available for sale or licensing in the year preceding the judgments.” I.e., this is a list of important and “technological breakthrough” innovations over almost 3 decades.
The authors searched the patent records for all of these innovations to determine which of them were patented or not, and conclude “a relative low number of important innovations are patented“. In particular, they found that only about 10% of “important” inventions are patented (this number varied a bit based on the industry). This implies that most important innovations are not patented. For most innovations, the innovating companies rely on trade secrecy, lead time/first to market advantages, or other strategies, instead of on the patent system.
One obvious conclusion to be drawn from this study is that patents are not a significant driver of most innovation, if 90% of important inventions are never patented in the first place. Proponents of the patent system often claim that patents are necessary to provide an incentive to innovate; some even (ridiculously) claim that without patents, all innovation would grind to a halt (the truth is the opposite: if patents were made universal and had a perpetual term, all human life would grind to a halt; no offense Galambosians). But even if the 10% of innovations that are patented would never have resulted without the incentives provided by a patent system (an absurd assumption), the great bulk of technological innovations and breakthroughs in modern times would still have come about. [click to continue…]
My article Intellectual Property Is “Evil”-And Businesspeople Should Oppose It was published today in BAMSouth.com, my good friend Jack Criss’s new publication. This was a Q&A conducted by Jack.
A Q&A with Houston Attorney Stephan Kinsella
(Stephan Kinsella, a patent attorney in Houston, Texas, is Executive Editor of Libertarian Papers and Director of the Center for the Study of Innovative Freedom (C4SIF). A registered patent attorney and former adjunct professor at South Texas College of Law, Kinsella has published numerous articles and books on IP law, international law, and the application of libertarian principles to legal topics and has lectured all over the world on these topics. He received an LL.M. in international business law from King’s College London, a JD from the Paul M. Hebert Law Center at LSU, and BSEE and MSEE degrees from LSU. Kinsella has made an international name for himself as a leading exponent of libertarian theory and as an outspoken critic of patents and intellectual property. He recently spoke with BAMSouth.com Publisher Jack Criss from his home in Houston about why he believes the concept of intellectual property is one of the most dangerous threats to freedom and progress in the world today.)
BAMSouth.com: First, define for us what Intellectual Property really means—and how is it primarily used by and for businesses?
Kinsella: Intellectual property is a term used by lawyers to refer to laws that protect the products of the intellect, for example copyright (which gives authors a right in original works such as novels or paintings), patent (which gives inventors rights in practical inventions, like a mousetrap), trademark (which gives companies rights in names used to identify products, such as “Coca-Cola”), and trade secret. Trademark is said to have its basis in protecting consumers from deception and fraud by unscrupulous vendors who falsely use others’ names and reputations.
Patent and copyright became more prominent in Western countries about two hundred years ago, and emerged from older mercantilist practices where the crown would grant monopolies to court favorites (patent, which is rooted in the Statute of Monopolies of 1624), and censorship of prohibited books (copyright, rooted in the Statute of Anne of 1710). Free market economists were suspicious of or even hostile to these laws, so defenders of patent and copyright started referring to them as “intellectual property” to appeal to the pro-property sentiments of legislators and the populace. But in truth patent and copyright are state-granted monopoly privileges, not natural property rights, though they are widely called “intellectual property” now. The term “industrial property” is more commonly used in Europe. [click to continue…]