From the Notebook

To Innovate, or not to Innovate?

blogqz01 | 14 December, 2009 15:29

Whether it is economy, jobs, environment, or health care, technology and innovation often play very important roles. So, it is very shocking that articles that question the legitimacy of patent law itself surfaced.

The Tiger Woods episode is a good example of how money becomes a dominating force in our lives and in the media. And, the health care reform also tells us how closely related are politics with business interests. In stead of businesses exist for the benefits of the consumers and societies, the interests of consumers and societies are often sacrificed for the interests of the businesses.

It is true that patent system has its problems. It often fails to protect innovations and inventors because significant resources are required to embark legal proceedings to protect patent rights. But, without it, inventors would have not reliable ways to protect their rights.

People can throw the word monopoly out trying to scare people about the harm of patents, but cannot offer real significant negative social effects of patents, because there is not such evidences. In fact, there is clear evidence that patents help and maintain the technology development. In the Bilski vs. Kappos, someone had try to expand the controversy from business method patent to put software patent as subject matter in question. However, it is not coincident that as US provides the most protections for software related inventions, and US enjoys the insurmountable lead in this area.

It is true that patent law awards the inventors monopoly rights, but more restrictions on patent rights (or as some suggested to abolish patent law all together) will award those that steal the ideas from the inventors, and often prevent the implementations of inventions. As the choice is really about who to award, do you really want to award those that only have their own interests in their minds, and will do anything to assure that, including harm your interests, or do you want to award those who can only help your interests. In short, the choice is really about market monopoly or the monopoly awarded by patent law to protect the inventors and inventions.

The reason this assertion can be made is because that many important inventions are come from individuals and small businesses, especially in the software industry that is mostly idea driven (that significant amounts of experiments are required in order to conceive the ideas), and individuals or small business that do not have market monopoly can only use the inventions to provide benefit to the consumers and the society, otherwise no one is force to use or accept the products or services using the inventions.

The reason that big companies with thousands of PhDs from top universities sometimes cannot compete with two people in the garage is because that creative process is not a linear process (please read about post “About Creativity” for more details). In essence, the PhDs are not competing with particular two people in particular garage, they are competing with all peoples out there that could come up with various of ideas, and some of them could be very valuable to the society. As a society, the way to foster inventions is to provide incentive to get more and more people interested, because it is the only way to increase innovations.

In addition, PhDs from a few top schools and working in a few companies can be affected with inbreeding problems. As in business and academic the basic structure is still hieratic, some theories and ways of thinking will often gain dominating positions that will impair the abilities of many people in the “inner circle” to think outside of the box.

As creative process basically start with the act of exploring, any restrictions could be harmful. Therefore, in order to increase innovations, independent inventors are very important forces.

The importance of patent law protection is not just for awarding inventors so that to encourage innovations. Even though some ideas may not require large amount of investment to obtain, implementation of these ideas often need significant investments in order to have substantial impacts in the society. Private investors heavily related on patent protections in making decisions about their investment. Without patent protection, most inventions would not be able to find investment, thus will not be able to enter the market.

Would large companies that have the resources to develop new products or services use new inventions as there is not patent rights to prevent them to do so, not likely so. As developing new products or services require investments, there must be incentives for them to do so. Large companies with market monopolies will have no incentives to incur heavy investments without viable competitions. As I just stated, without patent protections, there would not be such competitions.

In fact, many companies with market monopoly positions have intentionally resisted inventions that will provide significant benefits for the public, but will hurt the companies’ bottom line (at least temporarily). Without patent law, there will be less obstacles for them to do so.

It is true that these companies sometimes have used patent law for this very purpose. They will buy some patents and shell them up so that others cannot use them when they have no intention to use them. To solve this problem, we can use anti-trust law, or make certain revisions on the patent law to prevent this problem.

For this reason, I can see the argument of Ebay vs. Mercexchange, that patent holders should not prevent others to use their patents if they are not practicing it. But even the rational of this argument is not without limitations. If the inventors simply are not able to practice their inventions, and there are no real intents to actually prevent others for using their patents altogether, then the real issue is the amount of the compensation, which is the balance of the interests between the patent holders and the infringers (as the consumers would likely to have a choice of not using the products or services that are using the inventions). With protections for inventors, new and useful innovations could be used to improve existing technology, thus the argument of existing patents will hinder on new inventions is groundless.

There are suggestions that software patent should be given shorter lives, but no real reason was provided. It is true that because of the speed of the development in the software field, some patents may lose their value when they are granted. But this will only support a need to expedite the patent prosecution proceeding for these patents, not to shorten the lives of the patents. If fact, large software system that will have significant impact on the society will require many years to be fully developed, and due to market monopoly of some existing companies, it might even take longer for new companies to be able to compete in the equal footing, so there is no justification to shorten the lives of software patents. If the lives of the software patents are shortened, some large companies will most likely secure their monopoly power for a long time. It is perhaps why someone will suggest to shorten the lives of the software patents without any justifications.

The most interesting thing is that many people that trying to restrict or diminish patent rights had been arguing about the importance of these rights in the past. So they will arguing for the rights if it will benefit them and will turn against it if they think will hurt them. To them, truth and law seemed all become tools to serve them, do we have to stand for it?

Some people trying to distinguish intellectual property rights with other property rights by trying to make an impression that intellectual property rights are somehow less nature thus less essential rights. But we have to realize that all rights are essentially statuary as they are under the protection of certain social structure. The American Indians lost their lands because the European Settlers did not recognize the society of American Indians and the society of American Indians was not able to help protect these rights.

It is a choice that the society needs to make to protect what rights. But the standard should be what will benefit the society, not what will benefit certain companies. Big companies can use money to buy media and politicians, but do we have to be part of it, and stand for it?

Because the lobbing of the financial industry, the laws that prevent the financial meltdown were significantly weakened and the financial melt down would certainly occur without the rescue from the taxpayers. Do anyone actually want to try to destroy the legal system that sustain the innovation and technology development, thus to destroy the future of the country?

Most of the advocates for reducing patent protections (this become an orchestraed movement that assaults on all aspects of patent protection) are large corporations especially many software related companies that benefited from patent protections in previous years but now turn to bite the hands that feed them.

These companies intended to rely on their monopoly market power to maintain their dominating positions, and become the enemy of innovations. The rational they provided is to protect business interests. Because the innovators that can be directly harmed are lack of voices, and some of them have not even surface yet (with less patent protections, many of them would not even become innovators), the advocates received little resistances, which helped the rapid changes in patent laws that in many aspects are hostile to inventors (it is interesting that although intellectual property rights include patent, copyright and trademark, the only area that received this attack is patent law, as copyrights and trademark still help these interest groups, and present little danger to them).

But there will be victims and consequences. Many people would not even consider become innovators because of the hostile patent police, but the innovators are not the only concern here. It is the fact that less and less people will try on innovation that is the harmful effects. If there is less innovators, there will be less innovations, the society will surfer.

In the globe economy, the most likely consequence of this trend is the future of the industries will be jeopardized while a few large companies trying to protect their business interests. Lack of patent protections certainly will significantly reduce or eliminate new domestic companies with new technologies to emerge, so that companies that currently in dominating positions could enjoy their dominating positions for years to come.

But the futures of these companies are not necessarily secured. The danger for these companies could come from overseas. Many governments incurred heavy investments to support certain companies in certain sectors. As the lack of innovation in United States is maintained for a certain period of time, it will become easier to introduce new products or services to gain customers (because lack of innovations). As foreign companies backed by governments could have the economic power equivalent or even stronger than big companies in US, they could come real threat to these companies.

The results will be devastating. Not only United States will lose ground in technology development, many jobs will be lost as well. It is true that competition based on innovations that protected by patent law could results in some of the big companies to reduce their businesses and results in job loss, but people that loss their job could often found new jobs in the emerging companies.

Without patent protections, it will be almost certain that real threat to the big companies will come from overseas. Thus, if (actually, it is only the matter of when, as lack of the spirit of innovation will poison the companies, they will be less and less innovations) the big companies failed in competitions, the results will be significant job loss domestically. As globalization intensified, the effects could be very soon.

The claps of auto industry provide illustrations about the likely consequences. It is pretty much the same scenarios that cause the problems in the auto industry. Tax payers have to intervene in order to save the economy. But many jobs have already been lost, and it will take many years and many efforts to reverse the trend (if ever). We got to take this lesson into our hearts, as mistake in policies will cause long lasting effects that could danger the future of this country.

**Please look for my other posts regarding the modern life, politics and economics, science and technology, and legal system, about discussions related to issues in this post.