When the compact cassette hit in the 1970s, – and even more so when Napster hit in the late 1990s – the copyright monopoly invaded honest people’s bedrooms. Up until that point, it had been an esoteric concept that had only concerned lawyers in big publishing houses. When single families started getting sued by big publishing houses for the “crime” of sharing knowledge and culture, the public came into direct contact with the exclusive right construct, we know as the copyright monopoly, and started re-evaluating a lot of the things that had been taken for granted up until that point.
That’s where most of us are with another exclusive right construct today – the patent monopoly. Most of us have never been in contact with one, haven’t filed or written one, and haven’t seen somebody being sued over one. Therefore, a lot of myths have been allowed to stand untouched. That is bad, because these myths provide for bad data and bad policy.
The poor and lonely inventor doesn’t exist
The first myth is that patent monopolies equal innovation and that innovation can be measured in patents. This is the worst possible kind of metric. Patent monopolies ban innovation: they legally ban improving a product without permission from the monopoly holder. If you want to argue that patents equal or improve innovation, you have to point at a positive side effect of this innovation ban that overcomes the negative effect of the ban. Regrettably, no matter which industry you look at, no positive side effects can be found.
The second myth is that patent monopolies are taken out by poor and lonely inventors coming up with a stroke of genius. But this is false. Today patents are manufactured in meetings, where engineers discuss what they did last week, and a patent monopoly attorney takes notes and files patent monopolies on the most trivial things. If somebody had invented the chair today, next week you would see dozens of filings for a patent monopoly on placing two chairs side by side or opposite each other. This is the actual level of monopolization going on, just in case the filing corporation can use the patent to sue or countersue somebody later. The poor, lonely inventor does not exist, for all intents and purposes. In any case, he or she could never afford to even apply for a patent monopoly.
The third myth is that nobody would research anything if they couldn’t patent it. A patent monopoly is a severe drain on research and development (R&D), which produces what you can actually sell – products and services. If you don’t invest in R&D, you simply don’t have a product or service to sell. That is the reason research happens – not because you can file for a legal monopoly on it. In 1851, when patent monopolies were about to be introduced in the United States, “The Economist” was scathing. It wrote: “The granting [of] patents ‘inflames cupidity’, excites fraud, stimulates men to run after schemes that may enable them to levy a tax on the public, begets disputes and quarrels betwixt inventors, provokes endless lawsuits…The principle of the law from which such consequences flow cannot be just.” In hindsight, it was right on the money.
In short, it has become more profitable to create patent monopolies rather than actual products and services, and then sue (or threaten to sue) those who actually create something. This may look like value on the books but it has no roots in the real economy; it is a purely artificial construct with no intrinsic value in products or services.
Two kinds of patent monopolies stand out as particularly egregious. The first are the software patent monopolies, which are essentially patent monopolies on mathematics. Such monopolies are no inventions; they are pure logic. Patent monopolies are being granted in this field for “inventions” that a first-grade computer science student could come up with before breakfast, and they are increasingly threatening the pace of innovation with everything net-related.
The system cannot be fixed
The second kind concerns pharma patent monopolies. The industry – using its own numbers – has discovered a way to tax the public by using such patent monopolies. The market deadweight from the patent monopolies is in the ballpark of 50% of the pharma industry’s total revenue. By getting rid of these patents and opening up research and manufacturing, we could double the money spent on actual research, while allowing people in the third world to use their own raw materials, plants, and knowledge to make medicine for their populations.
This is not a system that can be “fixed”. It has always been broken, but it is only now that this reaches public attention. It needs to be dismantled and replaced with nothing at all. It harms innovation, harms our economy, harms growth, harms progress, and it harms human development in the third world. The only ones who benefit from the patent monopoly system are the patent monopoly lawyers. Sadly, they have had the say in the legislation’s wording – being mistakenly taken for impartial experts on the subject.