How patents slow down the pace of technological innovation

The recent guilty verdict against the Korean electronics giant Samsung for infringement of patents held by archrival Apple has re-ignited a longstanding debate on the role of patents in promoting technological innovation.

The traditional view is that patents encourage creative and innovative work by giving inventors exclusive (i.e., monopoly) rights to their inventions for specified periods of time.

An implicit assumption in this view is that the patent system is an important factor in promoting technological development.

A contrary perspective holds that the incentives provided by patent rights have been grossly exaggerated, and that the social costs associated with them have been largely ignored.

More significantly, this emergent view contends that patents hinder rather than hasten the pace of technological innovation.

Are patents essential?

Let us examine closely the role and usefulness of patents in the context of the current legal tussle between Apple and Samsung.

There is no question whatsoever that Apple—with market cap of $624 billion and counting—dominates both the smartphone and tablet markets.

There is also little doubt that the features that Samsung allegedly copied, notably the “bounce back” and zoom features, are Apple’s original inventions.

And of course, Apple holds the patents to these innovations.

And yes, Samsung is most likely guilty of patent infringement.

The question I pose is this: Have patents been an important factor in Apple’s or, for that matter, IBM’s, or P&G’s, or Pfizer’s market leadership in their respective industries?

The obvious knee-jerk answer of many of us is “Yes,” but an increasing number of doubters like myself are more prone to answer “No.”

Here’s why.

The reason that Apple has been leading the way in consumer electronics and communications technology is NOT that it holds patents to all the glitzy products launched by its venerated and erstwhile CEO, the legendary Steve Jobs.

It is number one in its field mainly because of its unique organizational culture in which everybody—from the CEO down to the lowest technical, marketing and administrative personnel—is single-mindedly focused on getting the job done right and on time.

Of course, Apple implemented other strategies as well to outwit is competitors, such as company secrecy, of which Apple is notorious, and lead time, getting to market ahead of everybody else.

Moreover, for Apple and many other companies, innovative product features and production process are uniquely custom-tailored and specific to the firm’s product line and operations and are of little value to anybody else.

There is little need, therefore, in having these patented.

Contrary to a commonly held belief, the patent system has been a major factor in slowing down the pace of technological innovation and industrial development.

Take for example the Watt-Boulton steam engine, acknowledged to be the invention that propelled the Industrial Revolution.

Truth of the matter is that this invention has actually prevented the Industrial Revolution from progressing at an even faster rate.

James Watt, who had many friends in Parliament, managed to have the patent (or more correctly, patents) to his invention extended many times, and for over 75 years was the only readily available source of power to run factories in both the old and the new worlds.

It has become what is now known as the dominant design despite the existence of several more efficient, less cumbersome, less costly, and certainly far technically superior designs, which were all held at bay and unable to compete with the heavily patented and legally protected Watt-Boulton steam engine.

Other relatively inferior products that have become dominant designs due to the patent system are the internal combustion engine, which most industrial engineers consider to be less efficient and less versatile than the effectively sidelined external combustion engine, and the Windows Operating System, which many consider to be inferior in many respects to Linux.

Other products that prevailed over their technically superior counterparts but for other reasons are the VHS recording system and the QWERTY keyboard.

To my mind, the only purpose that patents serve Apple and thousands of other patent holders is to effectively prevent their competitors from actively participating in the common quest for better and more useful products and services.

The biggest losers are their customers who are left with fewer products and services to choose from.

Hindering collaboration

By limiting access to individual ideas, patents effectively inhibit the communal effort that is needed in order to achieve their full potential value. In the fast-paced, knowledge-driven and highly interconnected world, novel ideas and inventions tend to have very short shelf lives.

Capturing economic value from these inventions within a reasonably short period of time requires the collective effort of a large network of players who must have free access to one another’s ideas and information.   Patenting effectively precludes such a collaborative effort.

Software developers have long realized that coming up with highly sophisticated applications software to drive today’s economy and society requires the extensive collaboration among like-minded communities of practice and interest.

Perhaps we should follow their lead in advocating that all inventions, just like software, should not be patentable.

We have entered the new world of open innovation. In this information-driven world, patents have become an anachronism.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a former professor of management in UP Mindanao. Feedback at [email protected]. For previous articles, visit map.org.ph.)