4. Empirics prove patents are uncorrelated with innovation.

In an ideal world, the legal system's impact on creativity should be no greater than necessary to accomplish the law's goals. Yet some of the cited literature suggests that certain weaknesses in the patent system are being exploited to the detriment of future innovation. With some notable exceptions, many high-technology companies that developed key technologies had very few patents during their earliest years.100

The experience of some companies demonstrates that patents are not vital in a company's early years to achieve success. During its first decade, Cisco Systems grew into a billion dollar company and had filed for only one patent.101 Significantly, according to one insider, “This growth was obviously not fuelled by patents, it was fuelled by competition and by open, nonproprietary interfaces.”102 During its second decade, Cisco began to gradually increase its filings.103 By 2006, Cisco held over 2,500 issued US patents and had applied for over 4,000 more.104 Cisco engaged in this activity to establish a defensive patent portfolio.105

Similar to Cisco, Microsoft had very few patents during its first decade and a half.106 In 1991, the company reached a turning point. In that year, its founder Bill Gates recognized that the power of patents, noting that if patents had been sought on the fundamental building blocks of software when those concepts were first invented, “the industry would be at a standstill today.”107 Nonetheless, Gates stated his concern that patents gave others the “right to take as much of our profits as they want,” and then directed that the solution was “patenting as much as we can.”108 Today, Microsoft’s Patent Tracker shows that the company owns over 46,000 issued patents worldwide.109

Facebook, which launched in 2004, had very few patents as of October 2008.110 The company owned just 56 patents in early 2012.111 By the end of March of that year, the company acquired roughly 750 more from IBM.112 Over the next month, Facebook purchased an additional 785 patents and applications from Microsoft that included rights to patents that had originally derived from AOL.113 Facebook made acquisitions from other sources as well, including the patent portfolio of Friendster that "date back to the early days of social networking, are incredibly broad."114

Cisco, Microsoft, and Facebook present examples of companies the significantly increased patent holdings years after commercial success. These are not isolated occurrences.115 In these instances, path breaking innovation was accomplished without any significant protection from patents. Indeed, as Gates acknowledged, in the early days of these industries patents had the potential to impede the entire field's path to diverse and complimentary solutions. Further, each company's acquisition of patents--through either original research or purchase-- appears to have been motivated to acquire a defensive portfolio. If these companies, each of which experienced major creative and commercial success, are any guides then patents may not be functioning well to incentivize technological creativity. Rather, in these cases patents appear to have taken on a secondary role as a protective asset.