“Does the U.S. Patent System Stifle Innovation” Notes

24 11 2013

Last night, I moderated an Oxford-style debate at Zero1, which describes itself as “where art meets technology to shape the future.” The debate motion was “Does the U.S. Patent System Stifle Innovation,” and the two “pro” speakers were UCLA professor Christopher Kelty and NPR journalist Laura Sydell; while the two “con” speakers were entrepreneur Jaz Banga and artist/researcher Scott Snibbe.

As most of you probably know, I have strong views on the debate question, but as moderator I didn’t want to skew the debate. So here’s how I framed the discussion:

Tonight’s debate question: “Does the U.S. Patent System stifle innovation?” I know many of you think about the motivations and decisions of individual innovators, but for a moment, I’d like to consider the question from a different perspective: how we structure our economic marketplace.

Ordinarily, we prefer free and competitive markets. Free markets have some systematically dysfunctional aspects, but overall, competition works to solve many social problems. Consistent with our favoritism of free markets, we generally distrust monopolies—a sentiment that can be traced back to our republic’s founding. Recall that the Boston Tea Party was a protest against the East India Company’s monopoly on tea.

We do make exceptions for monopolies. Utilities are one example, where competition could lead to duplicative investments. Patents are another.

As an incentive to spur innovation, some innovators can obtain exclusive control over the marketplace for the innovations they make. (I’m going to use the term “monopoly,” even though patents aren’t an affirmative right to enter the market; they just allow the patentholder to keep others out of the market). In other words, patents are the government rewarding some innovators by giving them a monopoly over their innovation—a deliberate exception to our free market baseline.

Providing a monopoly as a reward for innovation may seem unusual, but it has a surprising free-market underpinning. The patent monopoly encourages innovators to make socially valuable investments in innovations by preserving revenue streams post-invention—however much or little those may be. An innovator who make an innovation that lots of folks value highly, the monopoly can produce a huge payoff; if consumers don’t value the innovation, the monopoly is worthless. Thus, the marketplace sends signals back to innovators about where to make their investments, rather than making innovation investments through non-market-driven considerations, like government fiat.

This takes us to the dilemma underlying tonight’s debate question. Are we better off in a world where we reward innovation investments by creating monopolists? Do we get more innovation, or do we get more of the evils associated with monopolists?


The content in this post was found at http://blog.ericgoldman.org/archives/2013/11/does-the-u-s-patent-system-stifle-innovation-notes.htm and was not authored by the moderators of freeforafee.com. Clicking the title link will take you to the source of the post.



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