10 ms·

Patents and Innovation: Evidence from Economic History [pdf]

37 points by asdf333 14y ago

Someone 14y ago
Same journal, also from Vol. 27, No. 1, same subject: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.3 http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.3 TOC at http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1 http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1
- kvb 14y ago
  I'm less anti-patent than most people here, but I think that's a very good article. In particular, the treatment of pharmaceuticals is not the absurd "if we just got rid of patents, innovation would continue at the same rate" argument that some patent opponents advance, but a more nuanced take on what other changes could be made to the larger system to maintain appropriate incentives.
  - yxhuvud 14y ago
    When it comes to pharmaceuticals, one has to remember that the vast majority of the costs involved are with the late stage trials that society mandates. That medicine is properly tested is not a bad thing, but there may be other ways to finance such tests without having to resort to monopolies.
    - rayiner 14y ago
      You can't lump all clinical testing into the approval process. Drug companies have to do a certain amount of clinical testing just to see if the drug does anything. To make a computer comparison: just because you don't get your OS POSIX certified doesn't mean you don't need to run any tests. This graphic suggests that pre-FDA clinical trials still account for about 30% of the cost of developing new drugs: http://blogs-images.forbes.com/aroy/files/2012/04/fda_05t2.jpg http://blogs-images.forbes.com/aroy/files/2012/04/fda_05t2.j.... Even if you assume that all of the costs after that are allocable to the regulatory process (which is a liberal assumption--it's unlikely that drug companies would need to do zero human trials in the absence of regulation), developing a new drug is still a billion dollar endeavor. The reason drugs are such a great example of the applicability of patents is because they're the worst case scenario for the economic issue (free riding) that patents address: high capital costs for a product that is trivially reproduced. That dynamic exists independent of the regulatory process, and exists in other capital-intensive areas too (Tesla has a raft of patents on its technology, and Google has patents on self-driving cars, etc). The reason patents often seem ridiculous in the software context is that by and large they are not a bad scenario for free-riding. The capital requirements for software inventions tend to be very small. Looking at capital requirements also exposes a weakness in the article, which uses historical data. Capital requirements for new inventions was much lower in the past than they are today. The era of "lone inventors" is largely dead outside the software realm. We live in the era of "big science" where it costs $1 billion to get anything done. Patents are a lot more relevant in the face of high capital costs than in the face of low capital costs.
      - kvb 14y ago
        Note that I was commenting on the article from the parent to my comment, not to the one from the OP (which I found much less persuasive, and where the historical focus does seem like a real weakness). Even if a monopoly is the best way to incentivize pharma research, patents aren't the only way to achieve it - even today there is a complex set of mechanisms outside of patents, such as clinical trial data exclusivity for FDA approval.
    - Someone 14y ago
      Also, there are indications pharma spends about twice on marketing what it spends on research: http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%20Marketing%20and%20Research%20Spending%20APHA%2021%20Oct%2001.pdf http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%... (2001), http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0050001 http://www.plosmedicine.org/article/info:doi/10.1371/journal... (2008)
M8R-fhlcjm 14y ago
Patents provide the incentive to invest in R&D by providing a form of guarantee on their investments. Generally speaking, the countries with the strongest patent rights produce many of the innovative companies.
- mtgx 14y ago
  Where's the evidence to that? In fact the evidence shows the contrary. Also, US does not have the strongest patent laws.
  - M8R-fhlcjm 14y ago
    1) Where is the evidence of the opposite? The data is overwhelmingly. 2) U.S. is certainly in the top tier of strongest patent laws.
- conanite 14y ago
  > Generally speaking, the countries with the strongest patent rights produce many of the innovative companies. The article suggests that the available evidence does not support this conclusion. It seems that in historical technology fairs, countries with a weak or no patent system in place performed as well as other countries, both in terms of numbers of inventions they presented, and awards they received. The article also describes some instances where patents clearly inhibited innovation - for example in the US in 1916, aircraft production halted due to patent disputes between Wright and Curtiss.
  - M8R-fhlcjm 14y ago
    That's assuming the article is right, but a look around the world shows the opposite - generally speaking the stronger the patent rights, the stronger the innovation. Weak IP African countries vs strong IP in American, European, Japan, Korea.
    - e40 14y ago
      What came first, though, strong IP or innovation? I could see strong IP laws growing out of existing innovation.
M8R-fhlcjm 14y ago
from the article: "In countries without patent laws, inventors depend entirely on secrecy, lead time, and other alternatives to patents in protecting their intellectual property." This has been shown time and again, remove patents and you remove the incentive to disclose.
- glesica 14y ago
  Who cares? With so many patents issued in the US there is basically no disclosure anyway, at least as far as a small company or individual is concerned. In addition, many modern inventions are so complex that it is almost impossible to identify every patent they might violate. Even large companies get hit by this sort of thing, just look at video codecs.
  - M8R-fhlcjm 14y ago
    That's a cop-out given the abundance of search tools, regexp, CTRL-F, etc...
    - glesica 14y ago
      That's one of the dumbest things I've ever seen posted in this forum. I can't tell if you're genuinely ignorant or just trolling. You're saying that the reason patents covering a given product are so difficult to identify is that nobody knows about regular expressions? That has absolutely nothing to do with anything. The difficulty isn't in finding patents based on keywords or patterns (Google patent search can do that all day long), the difficulty is in identifying patents that might cover a given device or product. If you've created a cell phone you can't just search the patent database for "cell phone". A patent could cover some piece of the device and never even reference cell phones, or a patent could cover a method of doing something that you didn't even realize was novel enough to warrant patent protection. This requires careful study of a given patent, by lawyers but also by engineers. It is an expensive process with potentially tens of thousands of patents to sift through for a reasonably complicated product.
      - 14y ago
zby 14y ago
Just another link in this subject: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016968 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016968 - the problem with patents is the scalability of the system. It can work reasonably when there is an index - like in the chemical patents now - but without efficient search it is a minefield for inventors.

37 points by asdf333 14y ago

Same journal, also from Vol. 27, No. 1, same subject: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.3 http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.1.3 TOC at http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1 http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.1

kvb 14y ago
I'm less anti-patent than most people here, but I think that's a very good article. In particular, the treatment of pharmaceuticals is not the absurd "if we just got rid of patents, innovation would continue at the same rate" argument that some patent opponents advance, but a more nuanced take on what other changes could be made to the larger system to maintain appropriate incentives.
- yxhuvud 14y ago
  When it comes to pharmaceuticals, one has to remember that the vast majority of the costs involved are with the late stage trials that society mandates. That medicine is properly tested is not a bad thing, but there may be other ways to finance such tests without having to resort to monopolies.
  - rayiner 14y ago
    You can't lump all clinical testing into the approval process. Drug companies have to do a certain amount of clinical testing just to see if the drug does anything. To make a computer comparison: just because you don't get your OS POSIX certified doesn't mean you don't need to run any tests. This graphic suggests that pre-FDA clinical trials still account for about 30% of the cost of developing new drugs: http://blogs-images.forbes.com/aroy/files/2012/04/fda_05t2.jpg http://blogs-images.forbes.com/aroy/files/2012/04/fda_05t2.j.... Even if you assume that all of the costs after that are allocable to the regulatory process (which is a liberal assumption--it's unlikely that drug companies would need to do zero human trials in the absence of regulation), developing a new drug is still a billion dollar endeavor. The reason drugs are such a great example of the applicability of patents is because they're the worst case scenario for the economic issue (free riding) that patents address: high capital costs for a product that is trivially reproduced. That dynamic exists independent of the regulatory process, and exists in other capital-intensive areas too (Tesla has a raft of patents on its technology, and Google has patents on self-driving cars, etc). The reason patents often seem ridiculous in the software context is that by and large they are not a bad scenario for free-riding. The capital requirements for software inventions tend to be very small. Looking at capital requirements also exposes a weakness in the article, which uses historical data. Capital requirements for new inventions was much lower in the past than they are today. The era of "lone inventors" is largely dead outside the software realm. We live in the era of "big science" where it costs $1 billion to get anything done. Patents are a lot more relevant in the face of high capital costs than in the face of low capital costs.
    - kvb 14y ago
      Note that I was commenting on the article from the parent to my comment, not to the one from the OP (which I found much less persuasive, and where the historical focus does seem like a real weakness). Even if a monopoly is the best way to incentivize pharma research, patents aren't the only way to achieve it - even today there is a complex set of mechanisms outside of patents, such as clinical trial data exclusivity for FDA approval.
  - Someone 14y ago
    Also, there are indications pharma spends about twice on marketing what it spends on research: http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%20Marketing%20and%20Research%20Spending%20APHA%2021%20Oct%2001.pdf http://dcc2.bumc.bu.edu/hs/sager/pdfs/020402/Pharmaceutical%... (2001), http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0050001 http://www.plosmedicine.org/article/info:doi/10.1371/journal... (2008)

M8R-fhlcjm 14y ago

Patents provide the incentive to invest in R&D by providing a form of guarantee on their investments. Generally speaking, the countries with the strongest patent rights produce many of the innovative companies.

mtgx 14y ago
Where's the evidence to that? In fact the evidence shows the contrary. Also, US does not have the strongest patent laws.
- M8R-fhlcjm 14y ago
  1) Where is the evidence of the opposite? The data is overwhelmingly. 2) U.S. is certainly in the top tier of strongest patent laws.
conanite 14y ago
> Generally speaking, the countries with the strongest patent rights produce many of the innovative companies. The article suggests that the available evidence does not support this conclusion. It seems that in historical technology fairs, countries with a weak or no patent system in place performed as well as other countries, both in terms of numbers of inventions they presented, and awards they received. The article also describes some instances where patents clearly inhibited innovation - for example in the US in 1916, aircraft production halted due to patent disputes between Wright and Curtiss.
- M8R-fhlcjm 14y ago
  That's assuming the article is right, but a look around the world shows the opposite - generally speaking the stronger the patent rights, the stronger the innovation. Weak IP African countries vs strong IP in American, European, Japan, Korea.
  - e40 14y ago
    What came first, though, strong IP or innovation? I could see strong IP laws growing out of existing innovation.

M8R-fhlcjm 14y ago

from the article: "In countries without patent laws, inventors depend entirely on secrecy, lead time, and other alternatives to patents in protecting their intellectual property." This has been shown time and again, remove patents and you remove the incentive to disclose.

glesica 14y ago
Who cares? With so many patents issued in the US there is basically no disclosure anyway, at least as far as a small company or individual is concerned. In addition, many modern inventions are so complex that it is almost impossible to identify every patent they might violate. Even large companies get hit by this sort of thing, just look at video codecs.
- M8R-fhlcjm 14y ago
  That's a cop-out given the abundance of search tools, regexp, CTRL-F, etc...
  - glesica 14y ago
    That's one of the dumbest things I've ever seen posted in this forum. I can't tell if you're genuinely ignorant or just trolling. You're saying that the reason patents covering a given product are so difficult to identify is that nobody knows about regular expressions? That has absolutely nothing to do with anything. The difficulty isn't in finding patents based on keywords or patterns (Google patent search can do that all day long), the difficulty is in identifying patents that might cover a given device or product. If you've created a cell phone you can't just search the patent database for "cell phone". A patent could cover some piece of the device and never even reference cell phones, or a patent could cover a method of doing something that you didn't even realize was novel enough to warrant patent protection. This requires careful study of a given patent, by lawyers but also by engineers. It is an expensive process with potentially tens of thousands of patents to sift through for a reasonably complicated product.
    - 14y ago

zby 14y ago

Just another link in this subject: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016968 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016968 - the problem with patents is the scalability of the system. It can work reasonably when there is an index - like in the chemical patents now - but without efficient search it is a minefield for inventors.