Innovation Lie

Patents are equated with innovation all the time. Worse than that, an increase in the number of patents held by or granted to an organization, country or region is seen as an increase in innovation.

Such a false equation would not work in most other areas. If a government said that the economy was booming because they just decided to mint more money, people would immediately know that this is wrong and that inflation is ultimately negative. If a government said that it was expanding the road network, people would want to know about the incremental length of the additionally constructed roads, and would not content themselves with a dramatic increase in the number of prohibitive signs. After all, a higher number of prohibitive signs on more or less the same road network is bad news, not good news. Also, more prohibitive signs don't say anything about better road conditions. With patents, it's just like that.

Quantitative thinking ("the more, the merrier") is a completely misguided approach to innovation policy. Less is more when it comes to patents. Like a government can easily mint a huge amount of money, it doesn't require much to cause patent inflation. The easiest way to get more patents is to lower the standards for a patent. That's exactly what has been happening almost everywhere in the world in recent years. It has in fact happened to such a large extent that, if the equation of patents and innovation were correct, we should have booming economies everywhere. As we know, we unfortunately don't.

One of the most terrible mistakes is to compare companies, countries or regions by patent counts. If a company registers for fewer patents in one year than in the previous year, or for fewer than the closest competitor, then its senior management, shareholders and analysts are immediately worried. If a country or a region doesn't have an increase in the number of patents granted (or applied for) in any given year, then the government has to justify itself for that. It is exactly that mindset in which patent offices, and the examiners who work for them, are pressured to put out as many patents as possible. Under that pressure, they lower the standards and they gradually extend the scope of patentability to fields where patents don't belong, especially software.

The decision to grant any patent should be approached with greatest caution and deliberation. Like a good doctor carefully weighs all the reasons for and against a surgical invasion, patent offices should understand that every patents takes competitiveness out of a market and takes opportunities away from many others, especially from smaller companies. Every patent is, figuratively speaking, an amputation.

It is irresponsible to grant excessive numbers of patents and to even talk about "growth" in the context of patents. If a government wants to prove that its economic policies work, then the task at hand is to grow the Gross Domestic Product and to cut down on unemployment. Growth in the number of patents is meaningless because any monkey can achieve that if the standards are low enough.

The patent regime actually discourages innovation in some areas. If you (as a person or as a company) spend a lot of time and money developing a product, then you should have the certainty of being allowed to market it when it is finished. With the patent system, you never know whether someone has already registered a certain concept, or will register it while you are working on your product. If it comes to worst, you will end up having spent all of that time and money without being allowed to market your product, only because someone else went to the patent office first. That makes it less attractive to invest in innovation.

Interestingly, the same who describe patents as an indicator of innovation and competitiveness aren't worried about cross-licensing deals. The German government lauds its national economy as "the European innovation champion" for its many patent applications. However, no one expressed any concerns when Siemens (which holds more patents than anyone else in Europe) announced a cross-licensing with Microsoft, under which Microsoft has access to all of Siemens' patents and vice versa. If patents really were as crucial to innovation and competitiveness as some want to make us believe, then those would have had to stand up and bemoan the transfer of the biggest treasure trove of Germany's inventiveness to a large U.S. corporation.

Click here to read about the lie that software was not sufficiently protected without patents