From glyn moody @Techdirt:

New UK Banknote Celebrates James Watt, Patent Bully and Monopolist

from the litigation-is-easier-than-innovation dept

As do many nations, England likes to put images of its great and good on banknotes. In a somewhat quixotic attempt to stem the decline of what little manufacturing remains in the country, the governor of the Bank of England has come up with the following idea:

Sir Mervyn King, the governor of the Bank of England, has often voiced his yearning for a “rebalancing” of the economy towards neglected manufacturing, and he will put the nation’s money where his mouth is next month when the Bank produces a new £50 note celebrating two pioneers of the industrial revolution.

The Bank will evoke the memory of the inventor James Watt and his Birmingham business partner, Matthew Boulton on the new note.

Here’s the orthodoxy regarding Watt and Boulton’s contribution to innovation and the industrial revolution, as retold by the Guardian piece about the new banknotes:

[Boulton] later went into partnership with James Watt, who took the Newcomen steam engine, then the latest design, and made a series of crucial improvements, improving its efficiency and making it more commercial.

By 1800, Watt’s version [of the Newcomen steam engine] was outselling its predecessor, and they were shipping it across the world. Boulton and Watt worked together to pioneer the use of the steam engine in the cotton spinning industry; and Boulton also used Watt’s engine to power minting machines, pressing coins at his Soho Mint in Birmingham, to boost the supply provided by the Royal Mint.

What’s missing from this rosy picture of jolly engineers and entrepreneurs working together to apply technology for the benefit of humanity is that Watt was one of the first to exploit the monopoly power of patents to stymie innovation by others:

Once Watt’s patents were secured and production started, a substantial portion of his energy was devoted to fending off rival inventors. In 1782, Watt secured an additional patent, made “necessary in consequence of … having been so unfairly anticipated, by [Matthew] Wasborough in the crank motion”. More dramatically, in the 1790s, when the superior Hornblower engine was put into production, Boulton and Watt went after him with the full force of the legal system.

During the period of Watt’s patents the United Kingdom added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent; while between 1810 and 1835 it is estimated to have increased by a factor of five.

After the expiration of Watt’s patents, not only was there an explosion in the production and efficiency of engines, but steam power came into its own as the driving force of the Industrial Revolution. Over a thirty year period steam engines were modified and improved as crucial innovations such as the steam train, the steamboat and the steam jenny came into wide usage. The key innovation was the high-pressure steam engine — development of which had been blocked by Watt’s strategic use of his patent. Many new improvements to the steam engine, such as those of William Bull, Richard Trevithick, and Arthur Woolf, became available by 1804: although developed earlier these innovations were kept idle until the Boulton and Watt patent expired.

So rather than representing all that is best about invention and industrial innovation, the story of Watt and Boulton turns out to be one of how the nascent patent system was abused to prevent progress in this field. Indeed, it offers one of the best demonstrations that patents often harm everyone – even patent-holders:

Ironically, not only did Watt use the patent system as a legal cudgel with which to smash competition, but his own efforts at developing a superior steam engine were hindered by the very same patent system he used to keep competitors at bay. An important limitation of the original Newcomen engine was its inability to deliver a steady rotary motion. The most convenient solution, involving the combined use of the crank and a flywheel, relied on a method patented by James Pickard, which prevented Watt from using it. Watt also made various attempts at efficiently transforming reciprocating into rotary motion, reaching, apparently, the same solution as Pickard. But the existence of a patent forced him to contrive an alternative less-efficient mechanical device, the “sun and planet” gear. It was only in 1794, after the expiration of Pickard’s patent that Boulton and Watt adopted the economically and technically superior crank.

As such, Watt and Boulton’s appearance on the new £50 banknote is not so much a celebration of engineering excellence, as a timely reminder of the harm that patents and their thickets continue to wreak on true innovators today.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

See also, however, George Selgin & John L. Turner, “Strong Steam, Weak Patents, or, the Myth of Watt’s Innovation-Blocking Monopoly, Exploded,” Journal of Law and Economics, Vol. 54, November 2011. Abstract:

James Watt’s 1769 patent is widely supposed to have stood in the way of the development of high-pressure steam technology until it finally expired in 1800. We dispute this popular claim. We show that, although it is true that high-pressure steam technology developed only after the expiration of Watt’s patent, the delay was due to factors other than that patent itself, including the widely-held opinion that high-pressure engines were excessively risky. Indeed, Watt’s monopoly rights may actually have hastened the development of the high-pressure steam engine, by inspiring Richard Trevithick to revive a supposedly obsolete technology so as to invent around them.

See also idem, “Watt, Again? Boldrin and Levine Still Exaggerate the Adverse Effect of Patents on the Progress of Steam Power,” Review of Law & Economics, 5:3 (2009). Boldrin and Levine respond to earlier criticisms by Selgin and Turner in Against Intellectual Monopoly, in an appendix to chapter 1.