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20220820 – The Battle over Patents




This book came out from the results of the work of Stanford University’s Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity (Hoover IP2). It is concerned with the distribution of economic surplus generated by innovations via the mechanism of government-granted monopoly on the use of innovations via the legal enforcement of the patents. The book reviews many facets of the patent system, its impact on economic development, and its many faults. But however bad these faults are, they are not the main issue. That’s how the authors define it:” The meaningful question, therefore, is not how patent systems are imperfect, but why historically they have come to dominate all other methods of encouraging inventive activity. The chapters in this book pursue that question at length. Because this is a work of social science, not a mystery novel, permit us to outline a brief version of the answer that we came to as a group. Patents dominate because they create a property right that facilitates a productive division of labor, because they allow firms to transfer technological knowledge to one another, even across countries, and because they allow for incremental improvements to existing technologies. In short, patent systems foster the kind of decentralized, cumulative improvement that extends the frontiers of what is economically possible.”


As it exists now, I think the patent system has already outlived its usefulness and increasingly became the break on innovation rather than its accelerator. The reason is the treatment of innovations as material property to be distributed between mainly corporate entities. The typical consequence is when the transfer of all intellectual property developed by an individual to the corporation is the condition of employment. The complex innovations such as software development create high-value products, either Windows or Facebook, consisting of the multitude of inventions created by thousands of individuals but concentrated via a legal system under the control of a few individuals at the top of the corporation. Moreover, when formalized as a patent, it could be transferred from one entity to another, correspondingly moving economic rewards away from the actual innovators to others better versed in the legal system rather than technology. These issues increasingly demonstrate to potential innovators that they have very little chance of getting economically rewarded for the dedication required to produce something new and valuable.

I think that the new and different system should substitute the current system. In this new system, intellectual property is an inalienable property of an innovator. It should be automatically licensed to anybody based on standard or arbitraged conditions that provide adequate economic returns to the innovator. With the current proliferation of automated data collection functionality and coming AI-based functionality, it should be pretty feasible to trace who came up with a sufficiently new, non-trivial, valuable idea and implemented it to the demonstratable level. As a result, the merit would be allocated between human individuals who created the innovation. The task of redesigning and implementing the system of rewards for value created by innovations would not be easy. Still, it will become necessary unless we want to go back to some neo-feudal system when value produced by peasants is transferred to the lord to use as the lord wishes.         


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