18 January 2011

The Truth About Patents

This timely article lists some of the patents that Apple has applied for, and how many:

Apple was granted 563 patents in 2010, some of which will show up in future products and might well change the consumer technology landscape just like the iPod, iPhone, App Store and now the iPad have.
Apple patent expert Jack Purcher of Patently Apple has been monitoring the company’s patents since 2006. We asked him why he thought Apple is such an innovative company.

Though I often mock Apple for being overpriced and pretentious, this post is intended to be a little different.  I’m not singling Apple out for mockery; I simply reference this article because it is a perfect case study of what’s wrong with IP law.  Also note that virtually every company with an R&D arm does this, especially all the tech giants, with the possible exception of Google and Oracle.

As this article makes clear, Apple owns a lot of patents.  The mundane ones will make it to products with little fanfare.  Some of the exciting ones will make it to market with the characteristic Apple product unveiling, complete with superfluous adjectives.  Most will likely sit on the shelf, gathering dust.

Why?  Because the current patent law encourages companies think up inventions and innovations for the sole purpose of hindering their competition.  A large company may not find it worth the time it would take to plan and build minor features that a small number of customers would find to be worth paying for.  However, a freshly unemployed person with nothing better to do and minimal overhead costs may find it to be worth his time to focus on serving this particular niche.  The corporation doesn’t want to miss out on the profits, but also doesn’t want to shell out the money to bring this particular idea to market.

See the problem?  The entrepreneurial-minded individual, if he doesn’t know that there is a patent on that which he is inventing, will be nailed with a lawsuit from the corporation, telling him to either cease and desist or buy a license.  And remember, all the big companies do this.  Under this system, the corporation bears the bulk of the reward without having to do anything but make a drawing and write a vaguely-worded description.  These days, they don’t have to even build a prototype.

The entrepreneur then has three options available:  give up, pay for licensing, or come up with a new way of accomplishing the same thing.  Keep in mind that the only way consumers benefit is if the person doing the work foregoes a large chunk of his profit, making them reliant on the inventor’s altruism.  Thus, we have a market failure, due to government sanctioned monopolies.  The only ones who benefit from this arrangement are the politicians who accept “campaign donations” and large corporations who are too lazy to bring *their* product to market.  (Yes, there are occasions when the mega-corporation has to buy a license from the lazy “inventor,” but this scenario is considerably rarer.)

The solution to this market failure, then, is to abolish patent law.  There will not, contrary to the objections of some, be decline in creativity or new products. There will not be a decline in the standard of living, of production, or any other positive metric.  Instead, those who are in the best position to capitalize on an idea will do so, regardless of whether they came up with the idea originally.  And everyone will be better off as a result.

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