Why Do Patents Cause More Harm Than Good?
Nearly all of the economic evidence shows that patents tend to do more harm than good. Researchers James Bessen and Michael J. Meurer have gone into a little more detail as to how much damage is done, but I wanted to focus on why the downsides to patents are so often worse than the upsides.
At one level, it goes back to basic fundamental economics. Any given monopoly is going to be bad. There are economic rents associated with a monopoly. It limits the supply available and increases the cost, acting as a deadweight loss to society. That’s absolutely true with patents as well (as much of the research has shown). However, there are a few more reasons why patents tend to be a net negative. First, let’s focus on why the reasons in favor of patents aren’t particularly strong.
The first is that it should act as an incentive to create the product. Yet, as the research has shown, that’s almost never true in practice. More innovation tends to happen with weaker patent laws, and when stronger patent laws are put in place, the pace of innovation decreases. The reason is that real innovation almost never happens because of patents.
Very few people invent stuff “to get a patent,” but because there’s a need in the market and they can help solve it. That’s true with, or without, patents. Furthermore, it’s that need in the market that is the real incentive for innovation. If you can serve a market, there’s a way to make money from that market, and that acts as plenty of incentive.
The fears that an “easily copied” product will damage the original inventor are also wildly overblown. Study after study after study has shown that there is a distinct first mover advantage, and even things that are easily “copied” doesn’t mean that the copycats get success in the market. People put a premium on buying from the original creator.
Furthermore, they often believe (correctly in many cases) that the original creator has a better understanding of the market, and is likely to continue to innovate faster and with better solutions.
Finally, in the worst case scenario, where a copycat is able to do a better job, that’s also not a bad thing, because the societal benefit is still a better product. It’s called competition, and is generally considered a good thing in a market economy.
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Photo by USPTO.
Matt- CapForge.com on March 24th, 2008 11:25 am
This is definitely an excellent article. So many inventors think the first thing they need to do is get a patent, and they don’t talk to anyone about their idea because they are afraid of it being copied or stolen. They get a patent, but it turns out there is no market for what they created. If inventors would take the time to do some market research first, a lot of wasted time, energy and money could be avoided, and they could move on to ideas that have more potential.
Dane on March 24th, 2008 2:14 pm
Matt, I agree completely. Too often world be entrepreneurs get caught up in doing the things that feel like running a business without actually having one.
Protecting your invention with a patent is well and good if you have something worth protecting. You won’t find that out until you get out there and attempt to sell your product.
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