Remember Jonathan Swift's "A Modest Proposal"? Well, two very serious guys -- economists at the Federal Reserve Bank in St. Louis -- have a modest proposal of their own: Abolish the U.S. patent system. But unlike Swift, who sarcastically advocated the consumption of Irish babies, these men are not joking.
"Our preferred policy solution is to abolish patents entirely," Michele Boldrin and David K. Levine wrote in a recently published paper. That statement, of course, flies in the face of the conventional wisdom that patents foster innovation and improve productivity. Both truisms, they say, are wrong. In fact, patents have a "negative effect on innovation," they say.
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Obviously, this is awfully radical, but it's worth noting that 18 months after the largest patent reform legislation in decades -- the America Invents Act -- was signed by President Barack Obama, patent litigation has continued to increase. There are some technical reasons for that, but the bottom line is clear: The act hasn't made an appreciable difference.
Meanwhile, patent trolls continue their work, accumulating more and more patents they'll never use for anything constructive and suing anyone who does. Companies like Apple and Samsung waste tens of millions of dollars on ultimately fruitless litigation: Does anyone really think that a rounded corner is an idea that should be covered by a patent? And giants like Google and Microsoft waste billions acquiring a defensive portfolio of patents. With the possible exception of the pharmaceutical industry, no sector of the economy is more embroiled in the patent mess than information technology.
What a waste.
First-mover advantage, not patents, is decisive
What creates success in the market: Getting there first with a great product or a patent? It's the former, argue Boldrin and Levine. Apple, for example, launched the first iPhone in June 2007, and no serious competitor emerged until the HTC Dream came to market in October 2008. By 2010, 25 million iPhones had been sold, compared to 7 million Android smartphones.
It wasn't Apple's patent portfolio that led to its success; it was innovation and the advantage of being first to market. It's not at all clear, Boldrin and Levine argue, that Apple's patent portfolio slowed the competition very much.
Richard Posner, the federal judge who presided over the patent fight between Apple and Motorola Mobility, makes a similar argument. "When you are dealing with products that have very short lives, you often don't need patents because by the time competitors wise up, you've moved on," Posner said in an interview with the New York Times. Indeed, in such industries, patents -- which are primarily intended to encourage innovation -- have the exact opposite effect and discourage innovation, he added.