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Home Publications Blogs Beat the Press Morning Edition Gets It Right on Patents

Morning Edition Gets It Right on Patents

Thursday, 17 July 2014 06:54

David Kestenbaum of the Planet Money team had an interesting piece on whether patents are an impediment or spur to innovation. The immediate issue was the decision by Tesla Motors to put all its patents in the public domain with the hope of helping to create a mass market for electric cars. However the piece went further and asked the question of whether patents actually promote innovation.

The argument in the opposite direction is that they lock up technologies for the period of the patent's duration. They also create enormous legal uncertainties since the boundaries of a patent's applicability are rarely clear. This means that a deep-pocketed patent holder can often scare away potential innovators with the threat of a lawsuit.

The piece includes an interview with David Levine and Michele Boldrin, who have been warning of the economic harms of patents and copyrights for more than a decade. They also maintain the fascinating website AgainstMonopoly.org.

One area where I would disagree with their argument about experimenting with an alternative approach is the suggestion in the interview that the way to get from here to there is through a gradual shortening of patent duration. This may actually provide little benefit since all the legal structures around patents and the need for secrecy would still be in place. As a result there may be little, if any, perceptible benefit from reducing patent duration from 20 to 18 years, for example.

An alternative would be to carve out areas where research would be publicly funded with all findings and patents put in the public domain. For example, the government could set aside $5 billion a year to finance the research and development of new cancer drugs. We would then be able to compare progress in an area where the research is all openly available and the final products are all sold as generics compared to output in areas that rely on the current patent system. This would provide a quicker and simpler test of the relative merits of research supported by government granted patent monopolies as opposed to research supported by direct upfront funding.

(Publicly funded patents could be subject to a "copyleft" principle where anyone can freely use them as long as they themselves don't use the patent to develop a privately held patent. If they do go that route then they would have to negotiate a payment to the government just as they would a private patent holder.)    


Note; Typos corrected.

Comments (10)Add Comment
A Cautionary Patent Tale
written by Robert Salzberg, July 17, 2014 9:03
Iplex is a biologic that is a synthetic form of the naturally occurring IGF1 with it's most common binding protein #3 which was developed by Insmed. Simultaneously, Genentech developed IGF1 alone.

Iplex was approved by the FDA for treatment of primary IGF1 deficiency, dwarfism, and showed promise in the treatment of ALS.

Genentech sued for patent infringement and the settlement included Iplex being withdrawn from the market. Genentech's IGF1 was substantially less effective at treating dwarfism.

Part of the problem is that judges don't have the scientific capacity to reasonably decide patent lawsuits involving complex technology. But the most important factor was that Genentech was over a hundred times larger than Insmed at the time and Insmed couldn't afford a prolonged legal battle.

So a clearly superior drug was withdrawn from the market. Duration of patent protection had no effect.

The Telsa Tipping Point: Slouching Towards Communism
written by Last Mover, July 17, 2014 9:17

Of course this is little more than godless communism in action intended to undermine the very heart and soul of capitalism itself - private property.

America must maintain the uncertainty created by patents that kill innovation. Without uncertainty, what will the austerians have to blame for lack of spending by the private sector to close the output gap and attain full employment?

Build a better mousetrap America, but not without patent protection to guarantee a monopoly market with rent extraction privileges, the same way you would build a house inside a property boundary with approriate property protection.

Don't be fooled by the Telsa Tipping Point America. They want everyone to join in recklessly and reach a critical mass where innovation is maximized from the cradle of creation to the grave of widespread mass adoption.

Elect Rand Paul. He understands economics. He understands freedom. He understands private property. Keep the government in your life so you can get it out of your life. Support an infinite life for all patents. You built that. It's yours. Keep it safe from the commies.
written by skeptonomist, July 17, 2014 10:03
A lot of electronics development is due to the very basic research done at Bell Labs when AT&T had a monopoly on phone service. As a condition of keeping the monopoly, the Lab had to be maintained and any discoveries had to go into the public domain. This doesn't necessarily mean that monopolies are a good thing, but it does show that cutthroat competition is not necessary for innovation. In fact it may be harmful if companies can't afford much really basic research. Things which don't lead to an immediate commercial payoff usually require some sort of government intervention.
Fred Hiatt is at it again
written by ifthethunderdontgetya™³²®©, July 17, 2014 11:12
My comment:

Here we have Fred Hiatt and company concerning trolling about the debt yet again.

As usual, no mention of the Three Trillion Dollars added to it by Team Chickenhawk, of which Fred was a prominent cheerleader.

We have an employment problem. And we have problem with huge corporations avoiding their tax bills.

Fix those, and that debt problem goes away.

Of course, Fred and company (Pete Peterson, etc.) do not really care about the debt. They just want to crush Social Security and Medicare, while continuing with the wars for corporate profits.
I've never gotten this link attachment to work yet...
written by ifthethunderdontgetya™³²®©, July 17, 2014 11:27
Love Those Patents!
written by Bill Hall, July 17, 2014 12:49
Drug patents help society even more than software patents.
limiting pricing w/patents
written by Ross Boylan, July 17, 2014 1:38
Another possibility is that patent protection only be granted in exchange for limits on the prices of goods protected under patent. There is a long tradition of dealing with monopoly with price controls--or even government price setting (e.g., utilities).

What do people think of this approach?
I pay $2 a month for both of my former patented drugs....
written by pete, July 17, 2014 5:12
The problem is doctors prescribing new drugs when old ones work just as well. Consider what will happen when Viagra goes off patent soon. In that instance there are like 3 competing drugs, quite similar. Are they colluding or is there still monopoly profits. But, in the long run, we have an infinity of essentially zero cost drugs for heart and diabetes medicines and other ailments. The company does get a profit for the short run to recoup R&D. The market drives the research. Not sure what to expect from non-market forces doing research.

Plus, I assume by secrecy we are talking about non-patented stuff. The role of the patent is to make public the information, i.e., no secrets, in exchange for the temporary monopoly. Without the patent, there would be more secrecy, and a lot of needless reverse engineering.
Good ideas
written by Dave, July 17, 2014 10:31
I think these are good ideas. I'd like to see this happen.

I would warn about getting too broad about this though. Drug patents are horrendous for the world, and it is hard to make a case against that. There are other kinds of patents that do encourage innovation, but mostly for very small entrepreneurs.

Elon Musk is willing to open up his patents now because he has made it. He will exist regardless of the competition, because he is well capitalized besides being well endowed with intelligence. However, there are many entrepreneurs or inventors that need patents to get their start. So I think we need to be a bit careful about using too broad a brush to paint patents in general.

I like where this is going on drug patents. I think the answer is to fix patent law to better differentiate where patents are appropriate and where they are not appropriate.

At the extreme, certainly Monsanto patenting a genetic sequence is outrageously ridiculous! Drugs run a close second in ridiculousness.
Eventually we'll recover from patent trolls
written by Squeezed Turnip, July 18, 2014 1:31
The bad news, Pete, is you will have to die before the patent runs out on the drug that would keep you alive provided you didn't have to sell the house to afford it.

Very small entrepreneurs are easily squashed like little bugs by people (you know, corporations) with deep pockets, Dave. What would you do to protect small inventors from the very patent system that is held before them as their savior?

In any event, the system is proved to stifle innovation, as Robert Salzberg shows and this paper: http://cdn.arstechnica.net/wp-....16.14.pdf

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.