Good and Bad of Patents

The Good

Patents are a form of intellectual property. Intuitively, one would like to be rewarded for an invention where one has put sincere efforts to produce a solution to an existing problem and from which mankind would reap benefits. Apart from felicitating the person with awards for a breakthrough research, it seems fair to be compensated monetarily in proportion of how great the invention is. And how to decide the monetary value of the invention? That’s where patents come in.

Under the patent system, the inventors are given protection by the state so that they can bear the fruit of their innovation for a specific period. They are given exclusive rights to collect commercial benefits from their patent by either producing the product or selling licenses and collecting royalties. The rights granted to a patentee act as a measure to prevent anyone else from producing and distributing the invention without permission. After the patent expires, the intellectual property goes into the public domain so that everyone can benefit from it at a lower cost once the patentee has been compensated.

Patents seem to incentivize innovation in a big way. After all, you are the sole producer, or licensing authority, of a product you invented and can earn huge profits over a period of time, which is usually 14 to 20 years. Also, anyone can apply for a patent – whether it’s a big corporate or an individual. Needless to say, you get recognition too. Monetary benefits don’t cease to flow once the patent expires. You attract plenty venture capital to boost your business. Even if you are not into business, you get unparalleled credibility for your skills in engineering or designing.

US saw a huge number of patents in the early 1900s. People were patenting things like crazy – matchsticks, balloons, ice cream and electronic instruments like the bulb and sonogram. By 1911, approximately 1 million patents had been granted in the US alone! Here’s a picture of patent of a toilet paper roll (XD). And yes, they even patented burger! Just look at all the patents on the web, you’ll be amazed.

The Bad

Signing up for a patent can be very expensive. The fees charged by the United States Patent Office run into thousands of dollars, while the cost of hiring patent attorneys to help with your application can be even more. Furthermore, once you have a patent, you will have to defend it, which can mean additional legal costs if you think someone is infringing.

Though patents are supposed to be applied to truly unique inventions, frequently they end up overlapping. When this happens, innovators can end up suing each other for infringing on each other's patents. In fact, some companies have been set up for no purpose other than to purchase patents and use them to sue other companies for, in many cases, innocently and unintentionally infringing them. This can end up not only increasing the cost of innovation but also dissuading innovators from taking the risk of being sued for an invention. Thus, something that we might not have been able to foresee from the definition of patenting, it discourages innovation in a way too!

Moreover, patents pertaining to obvious knowledge often hamper production and innovation by disallowing the use of the patented technology, or imposing additional costs on producers of goods using the patent. This drives costs of goods and services up for no real reason.

Patents have a taste of monopoly too. The inventor is the sole producer here and all the profits, or royalties from issuing licenses, from the product end up in her pocket, although the price of the product is decided by a regulatory board. Nevertheless, some of the consumer surplus is lost to royalties and other costs due to possible inefficient production by the patentee. The product is sold at less competitive price and the market moves away from perfect competition.

Patent system is successful in creating atmosphere for innovation only when some economic prerequisites in a country are fulfilled. These include high level of educational attainment, economic development, good public health indicators and availability of capital in the country.

The Opinion

History has witnessed the number of inventions after the implementation of patent laws since the industrial revolution and the numbers have never plummeted. What we couldn’t achieve in centuries, we did in decades. Without patents, inventors were apprehensive about releasing their inventions as there was little monetary incentive to do so and thus we could see many scientists in the past who never disclosed their inventions, always maintaining a secret diary, which got recovered only after their death. But some people like to differ, Elon Musk for instance. The serial entrepreneur has released all the patents of his company "Tesla" to the open source community for free as he believes it will speed up the pace of innovation.

Nonetheless, the inconveniences pertaining to patents to the stakeholders, mainly to consumers and competitor firms (or unrelated producers), are genuine. However, it’s all justified in the end. Innovation is very helpful to bring down costs of entire industries. For example, earlier we used to have bulky mechanical calculators which had no memory, were slow in computation and used to be very costly. They were affordable only by offices and were rarely found at homes. After the advent of transistors, calculators became dirt cheap. Everyone owned a calculator now and carried one in pocket. This not only reduced costs of the calculator industry, but also of other sectors that relied heavily on calculators in operations. Transistors changed the face of mankind. Now, people were in a race to make everything small using transistors and, thus, even more patents!

Imagine a world without patenting system. What would be the incentive to innovate? Yes, there are other ways of acknowledging an idea, but how far does it go? Is an award enough to acknowledge the person who made the diesel engine? Will you be okay inventing the engine and see automobile companies filling their bank balances with jaw-dropping profits? The award eating dust in your showcase is not going to help in earning you a stable income. You’d want a monetary benefit in weight of greatness of your idea. Patent is the answer.

Patenting has its downsides too, but those in no way over-weigh its upsides. With anti-patent initiatives rising every now and then, passively though, we don’t see patent system going anywhere. However, few modifications in the legal structure are inevitable and are always welcomed.

- Yashdeep Singh Dahiya