Patents are bad for Innovation

IN 1970 the United States recognised the potential of crop science by broadening the scope of patents in agriculture. Patents are supposed to reward inventiveness, so that should have galvanised progress. Yet, despite providing extra protection, that change and a further broadening of the regime in the 1980s led neither to more private research into wheat nor to an increase in yields. Overall, the productivity of American agriculture continued its gentle upward climb, much as it had before.

In other industries, too, stronger patent systems seem not to lead to more innovation (see article). That alone would be disappointing, but the evidence suggests something far worse.

Patents are supposed to spread knowledge, by obliging holders to lay out their innovation for all to see; they often fail, because patent-lawyers are masters of obfuscation. Instead, the system has created a parasitic ecology of trolls and defensive patent-holders, who aim to block innovation, or at least to stand in its way unless they can grab a share of the spoils. An early study found that newcomers to the semiconductor business had to buy licences from incumbents for as much as $200m. Patents should spur bursts of innovation; instead, they are used to lock in incumbents’ advantages.

The patent system is expensive. A decade-old study reckons that in 2005, without the temporary monopoly patents bestow, America might have saved three-quarters of its $210 billion bill for prescription drugs. The expense would be worth it if patents brought innovation and prosperity. They don’t.

Innovation fuels the abundance of modern life. From Google’s algorithms to a new treatment for cystic fibrosis, it underpins the knowledge in the “knowledge economy”. The cost of the innovation that never takes place because of the flawed patent system is incalculable. Patent protection is spreading, through deals such as the planned Trans-Pacific Partnership, which promises to cover one-third of world trade. The aim should be to fix the system, not make it more pervasive.

The English patent

One radical answer would be to abolish patents altogether—indeed, in 19th-century Britain, that was this newspaper’s preference. But abolition flies in the face of the intuition that if you create a drug or invent a machine, you have a claim on your work just as you would if you had built a house. Should someone move into your living room uninvited, you would feel justifiably aggrieved. So do those who have their ideas stolen.

Yet no property rights are absolute. When the benefits are large enough, governments routinely override them—by seizing money through taxation, demolishing houses to make way for roads and controlling what you can do with your land. Striking the balance between the claim of the individual and the interests of society is hard. But with ideas, the argument that the government should force the owners of intellectual property to share is especially strong.