Posts Tagged: "incentive to create"

The effects of proposed Rule 11 on the patent system will be like putting an additional bullet to a dying man. As far as patent litigation is concerned, the pending rule is intended to deliver what was missed in the AIA: shifting fees from infringers to patent owners.

America innovates most when property rights are stable and government gets out of the way so risk takers can dream the impossible and then go accomplish those dreams… The patent system all three branches of our government has created over the last 12 years has increasingly incentivized the stealing of patent rights rather than engaging in an arm length negotiation with innovators who possess patent rights that are supposed to be statutorily presumed valid. This is antithetical to basic, fundamental principles embedded throughout American law, and basic economic principles. Laws are supposed to be certain, stable and understandable. When that occurs externalities and transaction costs are low, which allows for the bargaining of rights to ensue.

These government agencies target successful, inventive U.S. firms. They politicize their processes and disregard the exclusivity that rightfully belongs to patent owners. They take away private property from the creators and give it to favored domestic companies like Samsung and Huawei, which apparently lack the smarts to win fair and square in market-based competition or by ingenuity. It’s time that America put an end to these threats, foreign and domestic. Either you believe in property rights and free enterprise or you don’t… In essence, Chinese, South Korean and FTC officials demand the benefits produced by free markets and property rights for free from American innovators in mobile technology, who took all the risk and made investments in research and development.

Individual inventors, not just corporations, should be able to benefit from the fruits of the inventive mind. The limited private right of a patent is a necessary reward to fuel innovation, something recognized in the Constitution and by both President Washington and President Lincoln. Corporations in their quest to eliminate all patent challenges by delegitimizing the entire patent system have created this crisis, all to protect their bottom line and thwart competition. In time, just as the birds in Carson’s book, inventors will be silenced and innovation will suffer.

The consequences of a weakened patent system are increased inequality, a higher competitive bar for market entrants, protection of incumbent monopoly profits, decreased competition, disincentive to invest in innovation by both small entities that have higher costs and large companies that can free ride, declining productivity growth, slower employment and wage growth and economic malaise… With less incentive to invent or invest in innovation, it should be no surprise that in a weak patent regime, productivity growth has declined precipitously and economic growth is substantially reduced.

Near the end of 2016, a new multidisciplinary research center was forming in Europe under the title European IP Institutes Network (EIPIN) Innovation Society. The organization seeks to improve innovation in Europe by connecting innovative research projects with political leaders and stakeholders by providing recommendations on the research in the form of doctoral IP research. The establishment of this new research center in Europe underscores major differences in worldwide IP regimes, especially between the disarming of intellectual property rights in the United States in contrast to growing IP protections in Europe and China.

I think the long-term benefits to authors are greater than the downsides or the risks. But, like any time there’s a shakeup of an industry, there are short-term and long-term winners and losers. I’ll even use the term “digital disruption,” although it is way overused these days (and too often used as a poor excuse for infringing copyright). Digital technology is disrupting the industry as a whole. We had the same business models for the better part of at least a century, and while things are starting to change, we’re still largely operating as we did in the past, based on old business models with just a few tweaks. We haven’t fully evolved yet, and as a result we’re mostly seeing a little bit of the downside. Whenever there’s a disruption in business models, someone is negatively affected. Unfortunately, here it is the authors, and creators generally. And that’s because creators in these industries tend to have the least bargaining power and they tend to be a line item in a budget where there is some discretion.

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.

Invention, it has been shown, is driven primarily not by genius or happenstance but rather by markets and the expectation of the profit that can be gained by securing the patent rights to new technologies. Zorina Khan of Bowdoin College and the late Kenneth Sokoloff at UCLA found that among the “great inventors” of the 19th century, “their patterns of patenting were procyclical [and] responded to expected profit opportunities.” And as Khan noted elsewhere, “Ordinary people [are] stimulated by higher perceived returns or demand-side incentives to make long-term commitments to inventive activity.” By contrast, in countries without patent rights, Barro (1995) found that people have an “excessive incentive to copy” and insufficient incentive to invent for themselves. Moser (2004), meanwhile, reported that “inventors in countries without patent laws focus on a small set of industries … while innovation in countries with patent laws [is] much more diversified.”