Fostering Innovation and Development
Edited by Christopher Arup and William van Caenegem
Chapter 2: Why Patents Need Reform, and Some Suggestions for It
William Kingston There is an emerging consensus amongst users and students of the patent system that it is not performing as it ought to, and that this performance is getting worse. A recent comprehensive analysis of a large number of US empirical investigations concluded that: The performance of the United States patent system deteriorated markedly during the 1990s as the private costs of patent litigation soared. By the late 1990s, the risk of patent litigation for public firms outside of the chemical and pharmaceutical industries exceeded the profits derived from patents. This implies that patents likely provided a net disincentive for innovation for the firms who fund the lion’s share of industrial R&D, that is, patents tax R&D. (Bessen and Meurer 2008, p. 144) And since most other countries, as will be seen below, have replicated the US system, it is a reasonable assumption that this pattern is also the global one. The simple reason why this has happened is that it is nobody’s business to see that patents work properly. Consequently, they have been shaped by the interests of those who could benefit from them, rather than from any vision of the public good. The subtitle of the book from which the above quotation is taken is ‘How Judges, Bureaucrats and Lawyers Put Innovators at Risk’. I. INVESTMENT IN INNOVATION Economic innovation depends upon investment, partly under uncertainty and partly under risk, which is uncertainty quantified. Investment under uncertainty can never be rational at all, and investment...
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