Point: The Economist is Infallible - Patents need to be questioned

In good, old high-school debate style, Neil and I are doing a point-counterpoint.  The dividing line? This Economist article from August 8th. The article kicks off with the fundamental economic question for IP - how does it incentivise innovation? Pointing to a number of shortcomings in patents in agriculture and pharmaceuticals, The Economist concludes that patents don’t.  It’s a strong opening and a good one.  If the political justification for a patent system is based on growth and innovation, then the patent system should be held accountable to its impact on these areas.

This is in contrast to the magazine's historical views; the article article notes the magazine’s support for the abolition of the UK patent system in the 19^th century. The Economist is not immune to flip-flopping (e.g. flip-flops on African economies). TechDirt finds flip-flops on patents in the last five years. In 2015, The Economist is arguing in favour of patent policy reform with higher thresholds for patentability and shorter terms in what they call a "rough-and-ready" system. 

It's a kind of magic

The Economist also questions the romantic ideal of the lone inventor.  As most innovation is cumulative, the limitations of the patent system's ability to adequately reward multiple innovators is a fair criticism. (See my previous post.) The same TechDirt article argues that here The Economist inappropriately adds "feelings" to the argument.  I disagree with TechDirt; the rhetoric surrounding patents has long evoked emotive case studies where lone inventors, patients with neglected diseases, etc. 'suffer.'  

One phrase in The Economist's article that will no doubt raise the hackles of IPKat readers is, “patent lawyers are masters of obfuscation.” It's a hyperbole, but not completely off the mark. The crafting of a patent claim could be construed as a magic trick. Claims have the illusion of being very specific and are anything but.  However, the charge of obfuscation could equally be levied at economist's penchant for bewitching with numbers.

I question the suggestion that, “under-resourced patent officers will always struggle against well heeled patent lawyers.”  It is unclear who “patent officers” are, but it should not be patent examiners.  It is politicians and policy officials who struggle against heavily-funded lobbying (and sometimes between themselves.) As is always the case with lobbying, it is those that stand to lose or gain the most that lobby the hardest.  In recent patent memory, this has been well-funded patent owners and less well-funded users of patents.

The Economist calls for adjusting key policy levers: introducing a use-it-or-lose-it test, increasing the ease of challenging an existing patent, lowering the bar for invalidity, increasing the non-obviousness requirement and shortening patent term.  All very sensible from the econ-centric perspective, she said blithely (far too much to unbundle in a blog post), but exactly how to put in practice is another matter. 

Kats going haywire

While this clear, rough-and-ready system will have some losers, it is likely the most efficient.  The more complex a system, the more it increases transaction costs such as legal costs.  A system tailored to each case is impossible and inefficient, the one-size-fits-all is an economically efficient solution.  That is not to say that the distribution of the costs and benefits does not matter, but there is a balance to be struck between an efficient system and one that can adapt to the unique characteristics of the economy. Indeed, The Economist calls for shorter terms in fast moving tech areas.  A tricky task, possibly on a slippery slope, and a reason we have such debates.

Overall the question has always been how to strike the right balance between the interests of private innovators and society.  And that is what this article is fundamentally about – questioning whether we have that balance right.

N.B. There is a second article in The Economist on patents, of which IPWatchdog was not a fan. This post focuses on the Op-Ed "Time to Fix Patents."

P.S. A Kat-pat to my personal IP-economics clipping service (a.k.a. D.A.D.) for alerting me to the article while I was distracted by beaches. 

P.P.S. At my favourite conference, EPIP in Glasgow this week.  Looking forward to updating IPKat readers on all things hot and economics.