The perfect society is an illusion. Tomáš Sedláček

Impatent

The basic flaw of our patent system is that no one is measuring patent quality. Large businesses take advantage of this and thereby destroy small businesses and innovation

A question is posed: “How is technology innovation being impacted by patent trolls, patent brokers, patent wars, and/or regular patent practices?”. Interesting – as are similar questions: “How is technology innovation being impacted by tax policies, monetary policies, investment fads, Silicon Valley oligopolies, etc.” All of these issues impact innovation, and short of a very sophisticated model of technological innovation, and ample amounts of data on technology and innovation, it is pretty much impossible to determine how much of an impact any one issue is having.

All of these questions beg a more serious, a more troubling question, that needs to be addressed first: “Just how much real technological innovation is there left to be discovered and commercialized?” That is, have we / are we / will we be reaching Peak Innovation? If, as some have argued, we have reached Peak Innovation, and it is diminishing returns from here, then the impacts of the above issues (which do little more than move money around different parties with patents) pale in comparison to the problem of relying on innovation to solve massive global problems such as health, the environment, job creation, etc.

Wasting billions on useless patents

As an example of bad policy management, few in government and industry do much in the way of measuring rates of innovation, and in particular, the rates of quality innovation. This is not surprising, since such measurements require technological sophistication that few in government have (or out of government for that matter). But without data on levels and rates of technological innovation, it is impossible to measure the impact of anything on such rates and levels. In particular, what is the quality of “new” innovation (outside of public relations departments).

One correlated proxy for new technology rates quality is new patent quality. This correlation rests on one assumption – that the best, that is, most commercially exploitable, innovations, are patented to help protect potential profits from the innovation. That is, companies look at their new innovations, determine which have the most profit potential, and file for patent protection.

So the primary question, for all of these important secondary policy questions, is: what is the quality of issued patents, and thus to a great extent, the quality of current innovation?

And the sad thing is, for the most part, no one is measuring patent quality. None of the patent offices around the world (honestly) measure the quality of patents that they issue (nor do their controlling agencies). International economic groups such as the OECD, IMF, WIPO, etc., don’t measure patent quality, and what they do measure is of low quality (ignore any argument about patent quality that includes the phrase “patent citation analysis”), such as the number of patents issued to joint inventors living in different countries.

It may be no one is measuring, because the results are troubling. For example, since the year 2000, inventors and corporations have spent over $30 billion acquiring over 2.5 million U.S. patents, reflecting over $800 billion in research and development. Yet no one knows the quality of these 2.5 million patents, and thus the quality of the innovation produced by that $800 billion of R&D spending.

Informal polls of experts in patent quality analysis typically return comments to the extent that in light of non-cited prior art, over 50% of all issued patents are either not novel, or obvious, in light of such prior art, and thus of zero quality, reflecting no innovation. If true, that means since the year 2000, over $15 billion has been spent acquiring useless patents reflecting no innovation, meaning hundreds of billions of R&D dollars were completely wasted. So who cares if patent trolls disrupt flows of monies in the technology world on the order of a few billion dollars here or there, when the technology world is wasting more money on bad technology management?

Focusing on hardware/software/electronics/communication technologies, where most of the patent controversies (e.g., trolls, wars, etc), and these problem appear even worse. For example, from 1984 to 2012, across millions of such Electronics patents, over 66% of such patents have cited no prior art for any of the world’s engineering societies, such as the IEEE or ACM. This is highly suggestive that these 66% of Electronics patents, after such prior art is searched, will be found to be invalid. Indeed, for Electronics patents, again polling the expert analysts, suggests that 80% of such issued patents are invalid in light of the prior art (and more invalid for other reasons).

No iPhone app can replace a toilet

So, how can we measure the impact of any business practice (e.g., patent trolling, patent wars, tax breaks on R&D) on innovation, when we don’t know what the current levels and rates of innovation are, to use as a baseline to measure any impact? We can’t, leaving some to toss around made-up numbers (“Patent Trolls Cost $25 Billion to Industry”).

For over 20 years, the issue of patent quality (and thus innovation quality) has been completely ignored by government and industry. We have too many important global problems, for which technology can be a partial solution, to allow this ignorance – this blindness – to continue.

As Robert Gordon, a proponent of the Peak Innovation theory, put its, do you prefer all technology as of the year 2000, and indoor plumbing – or all technology as of 2013, without indoor plumbing? How much real, life-impacting innovation has there been since 2000 that you would be willing to give up indoor plumbing? There is no iPhone app to replace a toilet.

Read more in this debate: Rickard Falkvinge, James Bessen, Julie Samuels.

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