Posts Tagged: "incentive to innovate"

The declines in productivity growth in recent years are undisputed. There is some controversy over the causes of these declines, particularly, the sources of the declines in technology investment. However, the arguments of the present article elucidating a decline in the patent system suggest a clear and potent explanation for the declines in technology investment and in productivity growth…. The tech cartel has been relentless in denying opportunities for patent holders to enforce patents. The three main ways for attacking patents include instituting IPRs in the PTO, constraining enforcement in federal court and limiting damages. Each of these must be retuned.

Believing that innovation does not come from risk taking inventors, entrepreneurs, start ups, or even from the likes of Silicon Valley, is naïve in the extreme. Unfortunately, this “you didn’t build that” belief system seems to permeate President Obama’s thinking with respect to innovation, and has trickled down within the Administration. This view is also shared by many in Congress too. Sadly, this fatalistic view removes the virtues of work and ignores the sacrifices it takes to succeed. Worst, such a world-view belittles risk taking, which is an absolute prerequisite to business success, particularly with respect to innovation.

The dilemma for developing countries is primarily a function of two things: lack of access to existing medicines and absence of innovation on the treatments and cures that are needed. Admittedly each of these can be linked to intellectual property rights, but poverty is at the heart of both issues. Fundamentally, drugs are not available because there is no market for them and the necessary market incentives are absent. To facilitate innovation, especially on ‘diseases of poverty’ the UN and member states need to commit to cultivating market incentives and removing obstacles.

Consumers benefit most when patents are strongest and act to block actors. When competitors are blocked that means they cannot simply copy and flood the market with knock-offs or products that at their core are essentially identical. Competitors that are blocked by strong patents have a choice. Either they ignore the patent rights and infringe, which is sometimes the choice made particularly when a small company or individual owns the patent and it is believed they can be bullied. Alternatively, competitors must figure out how to design around the patents in place and find new, creative ways to do what they want to do. When patents are designed around that is when paradigm shifting innovation can and does happen. Unfortunately, thanks to the Supreme Court and Congress we have a patent system that today incentivizes copycats and bullying of innovators.

CUBAN: I have invested in more than 150 companies and never has having or not having a patent impacted the final decision. Small businesses can and do become great without patents. The problem for little guys with patents is that no patent lives in a vacuum. Particularly with software and technology. There is always a work around and you can always find a patent that enables the big guy to sue the little guy. So with just few exceptions the current system doesn’t protect anyone.

It is quite surprising to see that with all of the work being done to strengthen the patent systems across Europe with the creation of the Unified Patent Court, we see The Economist recently publishing a number of authorless articles calling for dramatic curtail of patent rights – on the edge of abolishment… We are currently witnessing some patent owners enforcing their patent rights exclusively using the European courts, some of these are companies based in the United States. Now with the Unified Patent Court on the horizon, it is expected that we will see more enforcement actions in London, and Europe more broadly. This again is a clear sign that Europe sees value in a strong patent system and recognizes the importance of a patent owners ability to enforce those rights.

Critics argue that intellectual property is bad for innovation in part because it allows for “monopolies” that prevent the public from using certain creations without permission for a period of time. As a preliminary matter, the use of the misleading scare-term “monopolies” to describe property rights in inventive and creative labor is clearly an attempt to skew the debate from the outset. After all, you wouldn’t call property rights in hard-copy creations, like the crops a farmer harvested, “monopolies” in those creations. Furthermore, if public access is the concern, a system that fails to provide inventors and creators the economic freedom to create things to market to the public in the first place will be far more harmful than a system that secures justly-earned property rights in inventors’ and artists’ productive labors.

Like a lemming running off a cliff, Fortune author Jeff John Roberts ignores easily verifiable historical truths in what can really only be described as a hit piece on the patent system and patents in general. The lack of intellectual integrity, or even intellectual curiosity, is astonishing… It is absolutely necessary to quash any suggestion that here is a “short supply” of medical miracles today. Medical research is still turning up incredible findings. A quick scan of health news shows plenty of academic innovation leading to tomorrow’s medical miracles. That the author could make such an utterly absurd statement has to call into question the broader motivations. Of course, authors do unfortunately sometimes exaggerate, misrepresent and even lie. What is truly astonishing is how the Editors of Fortune allowed such a falsehood to be published. Do they do no fact checking at all at Fortune?

The patent system our government has created over the last decade incentivizes stealing patent rights rather than engaging in an arm length negotiation. This is antithetical to basic, fundamental principles embedded throughout American law. The laws in the United States are supposed to be certain, stable and understandable. By minimizing externalities and keeping transaction costs low bargaining of rights will ensue, which will lead to an efficient outcome. Obstacles to bargaining and/or poorly defined property rights lead to an inefficient marketplace. To fix the patent system we must return to certainty and strong patent rights, which will push actors into arm-length negotiations rather than into costly patent litigation.

In what can only be characterized as a bizarre, rambling, and intellectually dishonest article, ‘The Economist’ has inexplicably taken the position that patents are not necessary for innovation. The complexity of innovation today and the required investment necessary to innovate, as well as the highly speculative nature of innovation, seems lost on the author. It is surprising, and disappointing, that a publication like The Economist would turn a blind-eye to the underlying financial realities of innovation. Truthfully, The Economist owes its readers a sincere apology for this entire article. Some could, and probably should, call into question the motivations for building an anti-patent argument upon such a rotten foundation.

Most Congressional offices now understand how loser-pay, bonding and joinder stops the flow of capital to innovation startups, how customer stays make defending patent rights impossibly difficult, why eliminating PRG estoppel perpetuates litigation shifting almost all of the costs onto inventors, and how IPR’s and CBM’s unjustly strip property rights and devalue all patents. Rank and file offices seem to be listening. However, key offices are deliberately deaf.

Confiscating other people’s property is hardly the way to stimulate prosperity or creativity. If it were, Venezuela would be one of the richest, most innovative countries in the world instead of a place where you can’t buy toilet paper. It’s not a coincidence that the handful of countries developing new drugs and the wonders of biotechnology are also those with strong patent systems. Patents and licenses are the life blood of many start-up companies that drive our economy. Rather than being a “tax on innovation,” a strong patent system is even more important today than when the Founding Fathers gave the protection of intellectual property a prominent place in our Constitution, preceding the Bill of Rights.

I recently received an inquiry from an IPWatchDog reader, posing several questions about the links between intellectual property protections, innovation and job creation. (Thank you, Marcus!) The interrelated nature of IP, innovation and jobs is essential to economic prosperity and important enough to explore again. Marcus:   I’m curious about two positions that are taken in your writing. First, you state…

Sadly, what seemed so evident to Abraham Lincoln is now all but lost on many elected officials. For over 200 years the U.S. patent system stoked the fire of creative genius by enticing creative persons to innovate by giving them incentive to do so in the form of a patent. Increasingly over the last 10 years the U.S. patent system has chipped away at that incentive. How far rights can be eroded without completely compromising the entire system is a question we shouldn’t have to ponder, but these are not ordinary times.

IBM is proud to be the top recipient of US patents for the 22nd consecutive year. It should come as no surprise that we believe in a strong patent system. Patents protect and promote the business of all innovators. In addition, patents enhance our economy – indeed, many attribute US economic leadership to the robust US patent system. While the patent system is certainly not perfect, many of the attacks being leveled against it are unjustified and unreasonable. As a whole, the patent system promotes innovation, period. Some self-proclaimed experts argue otherwise. They are simply mistaken.