Saturday, May 13, 2006

patents tend to harm inventors more than help them?

The text --patents tend to harm inventors more than help them-- appears in techdirt. Working through the maze of links, I'm still not sure "where" (or "if") the original peer-reviewed article is published. IPBiz assumes no responsibility for the gibberish in the statements below.

from techdirt:

However, there's another, related, point where the conversation often breaks down: the idea that innovation is an ongoing process, rather than a single event. Supporters of the current patent system seem to assume that innovation is a single event -- and that event needs to be protected with the patent. The reality, however, is that innovation is an ongoing process. That's why we've said in the past that the idea of a sustainable competitive advantage is a myth. Companies compete by a series of fleeting competitive advantages. That's what innovation is. Even if your competitors can copy you, you keep on innovating and keep the lead in your market. The claims from strong patent system supporters always comes back to the idea that, without patent protection, others would just "steal" their idea. But, that's only true if the original innovator stops innovating and tries to rest on its laurels. That's not good for anyone -- but it's exactly what patents allow. In fact, there's increasing evidence of this exact problem with the patent system. David Levine points us to a new peer reviewed paper on "sequential innovation", which looks into this very issue and finds that, since innovation is such an ongoing process, patents tend to harm inventors more than help them. The report shows that if (as patent system supporters believe) innovation is a static event, then the patent system does make sense. However, since it's an ongoing process, patents tend to hurt more than help. In fact, they find that inventors tend to profit more without patent protection, but by focusing on the increased competition and the ongoing innovation. While they may not have been able to profit as much from the single event of invention, the increased innovation as an ongoing process means they end up profiting more in the long run by supplying increasingly better products to a growing market. Meanwhile, in cases where patent protection was increased, the research shows that investment in innovation actually decreased. This makes sense to us, but it's good to see it supported with research (which, if history is any guide, patent system supporters will ignore). However, it does help highlight how much of the disagreement may simply be due to a lack of understanding concerning the difference between the event of invention and the ongoing process of innovation.

The link under --peer reviewed paper-- points to againstmonopoly.


Bessen and Maskin have a lovely paper about sequential innovation. I have reviewed this over at Najecon. There are two key ideas in this paper about why patenting may lead to less rather than more innovation. First, innovators will generally have more information about the value of their invention than existing patent holders whose licenses they will need to build their own project. This prevents efficient licensing by existing patent holders. Second, competition is not likely to dissipate all profitability from a new invention - this is a point that Michele and I have emphasized. Michele and I have also pointed out how the need to license many different patents further inhibits innovation.

The text at Najecon states:

Based on standard theory there should be little or no innovation without patents. Surprisingly, there is little if any empirical evidence that there is more innovation when patenting is possible than when it is not. This paper provides a theory of why this may be the case. It starts with the common observation that patents may inhibit innovation by raising the cost of downstream innovations that build on existing ideas. This is captured in an elegant model of sequential innovation that directs our attention to the features of the market and technology that make patent systems more or less desirable. Of particular importance is the interplay between two forces. On the one hand, private information about the value of a patent prevents existing patent holders from engaging in efficient licensing. On the other hand, if little profit is dissipated through competition then patents provide little additional incentive for innovation.

This gives the "original link" for the Bessen paper as:


Mike at Techdirt took issue with the "gibberish" comment.

Of his remark, --Supporters of the current patent system seem to assume that innovation is a single event,-- I myself don't belief innovation is a single event (or that the patent system is about innovation.) "To promote the progress," Congress has chosen to reward "invention," by trading a right to exclude for a limited period in return for the disclosure of information that complies with the patent laws. Although the disclosure must be useful, there is no requirement that it be innovative (ie, actually change the way we live). Some of the other text in the techdirt comment might be measured against what happened to the Wright Brothers.

I was also interested in the techdirt comment about a NEW PEER REVIEWED paper. Of that, I wrote Mike:

For starters, I am curious to know what YOU mean by "peer reviewed paper" in: David Levine points us to a new peer reviewed paper on "sequential innovation."

When someone tells me there is a peer reviewed paper, I assume a manuscript was submitted, peers reviewed it, peers recommended it for publication, and it was published (or is shortly to be published). Looking at citations to this work, I find things like:

-->Kimberly A. Moore in 20 Berkeley Tech. L.J. 1521 (fall 2005) refers to a working paper:

n77. See James Bessen & Eric Maskin, Sequential Innovation, Patents, and Imitation (MIT Dep't of Econ. Working Paper No. 00-01, 1999)

-->John R. Thomas, 87 J. Pat. & Trademark Off. Soc'y 781 (Oct. 2005):

Other [*797] studies show that innovative enterprises have filed an increasing number of patent applications since the early 1980's, they have not increased R&D spending over the same time frame. n93

n93. J. Bessen & E. Maskin, Sequential Innovation. Patents, and Imitation, MIT Economics Working Paper No. 00-01 (1999)(available at

-->Oren Bar-Gill* and Gideon Parchomovsky, 84 Tex. L. Rev. 395 (Dec. 2005)

N46. James Bessen & Eric Maskin, Sequential Innovation, Patents, and Imitation (M.I.T. Dept. of Economics, Working Paper No. 00-01, 2000), available at;

indicating that it is a working paper that has been around for years, but not published. Anybody can put stuff on his own website (researchoninnovation, which, by the way, still has the 97% patent grant rate posted) or on ssrn, but that does not make it peer reviewed.

As a different matter, you might note that none of the above authors citing the working paper cite it for the proposition that -->since innovation is such an ongoing process, patents tend to harm inventors more than help them.<--

There are plenty of other issues, but I am curious on what you think "peer review" is, of relevance not only to this but to the "peer to patent" business.

Mike replied:

The source, NAJecon, states that it's peer reviews of econ
publications, and David Levine notes that he was one of the peer reviewers... hence
my claim of peer reviewed.

However, even if it is a working paper, that still doesn't answer the
original question of what's gibberish about the claims. There's a big
difference between "working paper" and "gibberish." I'm not really
that concerned about the status of the paper, frankly, but the ideas within

First, I guess the idea of "new" is kind of gone, since the working paper goes back to 1999, about seven years ago. Second, we have (at least to me) a whole new concept of peer review, one which is disconnected from publishing. One "peer reviews" a manuscript "in the air." Third, of the statement --if history is any guide, patent system supporters will ignore--, one finds that the Bessen/Maskin working paper has hardly been ignored in the patent literature. Fourth, the assertions presented in techdirt are themselves conclusory.


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