How Patents Stifle Innovation


Although it may not seem it, filing a patent is a dangerous game best suited to professionals. A patent filed first can be beaten by one already in existence, and a patent approved is no guarantee of a win in court. Objectively superior patents can be beaten by prolonged legal tactics that drain the funds of smaller players.

It’s a cut-throat, ruthless business. Among all this, the lone inventor tinkering in the shed or laboratory for years before filing a patent faces significant obstacles — and a change to the system is about to make things much harder.

The US is on the verge of introducing reforms that standardise its system with the rest of world. The current system, "first to invent", relies on examining notebooks, records and prototypes to establish the true date of invention. That system will be replaced by "first to file" — who puts in their paperwork to the office first. 

The argument for changing the standard is that "first to invent" increases the cost of administering the patent system; not only of patent examiners having to look through the inventor’s records and notebooks, but of court cases including this evidence in addition to the patent itself.

But the real issue of cost is the lost earnings of world-wide technology patent infringement, seen in the billion-dollar ruling for Apple against Samsung. Here defensive patent walls are flung together in titanic legal battles that neither party can afford to lose — but in Apple’s win the public will lose regardless.

Loss of competition in the market means higher costs for consumers, but as innovators strain to avoid infringement, areas where technology should be simple and standardised become fragmented.

For example, the internet "browser wars" of the 1990s have made web design more expensive for professional services and inaccessible to the novice. Unique environments must be created for Chrome, Internet Explorer, Firefox and Safari. "Browser-proofing" websites takes a majority of the time for web design, which reduces the flexibility and stability of template software, like WordPress. The difficulty that app designers will have in adapting their software to differing platforms repeats this expensive counter-innovation problem with the patent system.

While "first to invent" imposes costs, the underlying problem is the high value of patents themselves. Open Innovation is a relatively new academic field that responds by making the case for large corporations to create spaces for innovation inside enclosed patent walls — this means collaborating formally with suppliers and customers. But smaller businesses (and lone inventors) will be unable to afford patents and lawyers, or to influence suppliers and customers.

Such inequality of participation justifies changes to the current patent system. Originally, patents gave inventors time to recoup capital investment by providing a monopoly period, but the world has changed greatly since the 17th century when an anti-fouling patent gave England a critical advantage against French warships.

Patents were also a permanent record that preserved knowledge in case of inventor’s death. Before university and corporate research and development were commonplace, lone inventors were valuable sources of technology. As a result of this philosophy, patents today can be viewed online for free, and patent "walls" are necessary to fully protect ideas.

Regardless, China and similar nations illegally and systematically copy patented inventions. At the same time, they use their economic power to buy patents that suppress innovation elsewhere; a practise on a smaller scale known as "patent trolling". Modern telecommunications, in addition to aiding abuse of patent law, have also made invention disclosure through a centralised office or regulator obsolete.

The solution is not in changing disclosure rules or using "first to invent," but reducing the value of patents — and the incentive for their abuse. When few inventions were sold internationally a 20 year monopoly could be justified. But today it’s unjustifiably lucrative. Rapid prototyping, computerised design and highly integrated production systems reduce time and cost to market. Patents today undermine innovation by warranting huge legal and administrative costs to protect the monopoly rights they grant; reducing the monopoly term to five years or so would be a vast improvement.

At the moment, governments receive a fee in the realm of thousands of dollars per year for each patent. Research grants to university academics are also tied to the patent system. The upkeep of patents is then funded by universities — and therefore the taxpayer. In a huge waste of potential, many patents are "warehoused" by academics and never actually commercialised. Yet the illusion of quantifiable innovation represented by measurable patent numbers continues to attract financial investment from the taxpayer.

Innovation has become the arena of large corporations who benefit from the status quo.

Open Innovation will strengthen these corporations at the price of smaller players and eventually innovation itself. With their patents impeding competition, corporations can shrink their operations to maximise profits. As the global financial crisis has shown, large businesses survive when the economy is moribund. In a very real sense, patent law is a kind of feudalism — wealth gets concentrated, innovation gets prevented and everyone suffers.

New Matilda

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