Katonomics: Anything Under the Tuscan Sun

Your Katonomist is delighted to return her paws to IPKat.  Economics, evidence, biker gangs and terrible puns await.

Judge as you may, but while this Kat was sunning herself in Italy, she was reading Howkins 2000 book, "The Creative Economy."  The mention of the American Supreme Court's 1980 comments on patentability presented far too good of an opportunity for a punny title and to reflect on changes to economic understanding of patents over the last years.  Howkins mentions Lessig's predictions that the American penchant for business model patents would sound the death knell for the cyberworld,

"This [business model patents] is a disaster, a major change that occurred without anybody thinking through the consequences. In my view, it is the single greatest threat to innovation in cyberspace, and I'm extremely sceptical that anyone is going to get it in time."

But has the threat realised?  Has dodgy expanding patent policy has created negative externalities sufficient to thwart the development of the digital world?  Certainly the last 15 years has seen expensive court cases, major tech companies engaged in costly, seemingly endless, spats, but could it just be a zero sum game?  A game in which the major winners are lawyers, lobbyists, IP professionals and the odd economist?

I'm sure BlackBerry would say IP has created costs, not innovation, although perhaps not.  Court cases etc add to the cost of doing business.  The need to thwart lawsuits through defensive patenting, licensing and other strategies increases transaction costs.  The knock-on effect may be a decrease in the contestability of markets (the degree of free entry and exit of firms in a market). This loss of competition comes as the economies of scale (bigger enjoys relatively lower costs) required to participate in these markets create barriers to entry (obstacles to joining markets) for smaller players.  These smaller players, the start-up, unicorns of digital innovation, may be key sources of economic growth.

We can't definitively answer these questions.  As previous posts have indicated, measuring and identifying innovation is more of an art than a science.  Ascribing all successful innovation to the IP system would be as folly as assuming IP thwarts all innovation.  Because of, or despite, expanding patent policy, digital innovation has flourished in the last 15 years.  On the other hand, some criticised America patents expire soon and we could see a shift growth and innovation. Perhaps a change in policy, or economic understanding of patents, is just one click away...  

P.S. At the risk of disappointing readers hoping for salacious details from inside the UK government, I'm afraid to say that my posts will not be the Secret Diary of Yes, Minister.  It would be far too difficult to cross Billie Piper with Sir Humphrey.

P.P.S. Keen to read some economic analysis of your favourite IP topic?  Please suggest topics. Haven't got a favourite economic topic yet?  You will.