Tony was the first of a bunch of you to send over the news that President Obama's top advisor, David Plouffe, has put up a blog post providing a preliminary overview of what he "heard" via the Ask the Advisor question, which we wrote about last week, concerning "obstacles to innovation." The only indication that responses like mine were read was a brief mention about how some people complained about how the government, and particularly patent policy, got in the way of innovation:
Many respondents felt that too much government regulation stifled businesses and innovators and that the patent process and intellectual property laws are broken.
Unfortunately, rather than listening to why today's patent system is a real and significant problem, it appears that Plouffe is using this to score political points for his boss:
In his State of the Union Address, the President called for a government-wide review of regulations to find and fix those regulations that place unnecessary burdens on businesses. Indeed, in his Budget, the President put forward a set of common sense reforms to our patent system that will make it easier for innovators to move ideas to market and foster growth.
The problem is that his suggestions for patent reform do not fix the system, and in some cases make it much worse. In fact, I pointed to numerous studies and research in my response that explained this.
Plouffe claims he'll have much more on this topic of encouraging innovation, so we'll wait and hope that perhaps the administration will really listen this time, and not just paper over the real problems of the patent system with reform policies that won't help (and might actually make the system worse).
The White House website kicked off a new feature this week, called Advise the Advisor, in which a senior staff member at the White House will post a YouTube video on a particular subject, asking the public to weigh in on that topic via a form. The very first such topic is one near and dear to our hearts: American Innovation. Here's the video of David Plouffe asking how to encourage innovation and get rid of roadblocks:
The form only allows 2,500 characters, which really isn't that much. I ended up sending in two separate answers due to the space constraint. The first answered one of the questions posed:
What are the obstacles to innovation that you see in
your community?
And here is the answer I provided:
Research on economic growth has shown time and time again the importance of basic innovation towards improving the standard of living of people around the world. Economist Paul Romer's landmark research into innovation highlighted the key factor in economic growth is increasing the spread of ideas.
Traditionally, many people have considered the patent system to be a key driver for innovation, but, over the last few decades, research has repeatedly suggested that this is not the case. In fact, patents more frequently act as a hindrance to innovation rather than as a help to it. Recent research by James Bessen & Michael Meurer (reviewing dozens of patent studies) found that the costs of patents far outweigh the benefits.
This is a problem I see daily as the founder of a startup in Silicon Valley -- often considered one of the most innovative places on earth. Patents are not seen as an incentive to innovation at all. Here, patents are simply feared. The fear is that anyone doing something innovative will be sued out of nowhere by someone with a broad patent. A single patent lawsuit can cost millions of dollars and can waste tons of resources that could have gone towards actual innovation. Firms in Silicon Valley tend to get patents solely for defensive purposes.
The problem is twofold: First, the rationale for the patent system (that it incentivizes innovation) ignores the true incentive for innovation: need and the market for products. Research by Eric von Hippel highlighted that there is almost no evidence that patents increase incentives for actual innovation. In fact, his research has shown that a more collaborative, open innovation model significantly outperforms a system of patent monopolies.
The second problem is that patents assume that innovation is a "flash of genius" concept, rather than an ongoing process. Historic research has shown that "big breakthroughs" in innovation almost always come from many different parties, all advancing at around the same time. A patent to the first person who does "step A" puts a block or a toll on all other parties working on moving to step B. And if someone then gets a patent on "step B," it creates a toll on step C. In economics, this is known as the hold-up problem and it has been shown to be quite significant.
I am running out of space, but will submit a second note with steps to be taken. I am happy to provide specific references to all of the research I mentioned above (plus lots more research).
And the second one responds to the question:
And what steps can be taken to remove them?
Here is my response:
I have already submitted a separate answer discussing how the current patent system is a clear obstacle to innovation in Silicon Valley. This response will discuss key steps that can be taken to help remove that obstacle.
One of the worst parts of the patent system today is how it blocks all innovation from any party other than the very first to get the patent. If multiple parties are working to solve a challenge, and only the first gets a patent, then all or much of the effort by all of those other parties is completely wasted, economically.
A key way to deal with this is to provide an "independent inventor" defense, which also serves as a test for obviousness within the patent system. Our patent system is not supposed to grant patents on inventions that are considered obvious to those skilled in that field. If multiple parties are all coming up with the same concept independently that would present clear evidence of obviousness to those skilled in the field and no patents should be allowed. Instead, we should allow those parties to compete fairly in the marketplace, and to let the best innovators win, providing the most economic surplus.
Currently, you can't even defend yourself against patent infringement if you came up with something entirely independently. It is hard to justify why our patent system punishes innovators, who did not copy an idea, but worked hard and put their own effort and resources into their own ideas. Stopping someone from implementing their own ideas should be seen as being anti-innovation and we should prevent that from happening further within the US.
A second fix is to make sure a patent actually does teach something. If someone skilled in the art cannot use a patent to actually build something, it should be rejected.
Finally, we should make sure that it is easier to have patents reviewed. Existing stats have shown that a large majority of patents that do make the re-exam process get changed in retrospect, suggesting regular mistakes in the original approvals. Making the review process easier to initiate would help to fix these problems. On top of that, the review process should involve the patent examiner speaking to those who are currently engaged in the field rather than just to the patent holder in order to determine the actual obviousness of the patent in question.
These simple fixes would go a long way towards removing many of the obstacles to innovation found in today's patent system.
I doubt my input will get read or, if read, anyone will care, but at least it's worth a shot. Unfortunately, to date, it's appeared that the administration is under the sway of lobbyists, who still pretend that the patent system of today really does increase innovation, and, thus, I can't imagine they'll be open to looking at the actual research on the issue or tackling the real problems of the patent system.
