Having some sort of patent protection is an important bedrock for a healthy economy. For some sectors, like drug development, it’s crucial for advancement. For other areas, invention and design do deserve to be rewarded with some limited period of exclusive harvest.
But the patent system is out of control. All the major technology-driven companies are embroiled in hundreds of legal bunfights at any one point in time.
The problem, to this untrained eye, is that a lot of the patent applications that should be laughed at and rejected are instead granted, particularly in the US. Two examples should suffice.
Gillette is the dominate maker of razor blades around the world, with a US market share of more than two-thirds. But it was slow developing an online business, opening a gap for Dollar Shave Club to emerge over the past 5 years as a decent little competitor – Dollar Shave is now the largest online seller and has taken something like 8% of the total US shaving market. Gillette isn’t happy.
So off to court we go. In 2004, Gillette filed a patent about applying a secondary overcoat, containing chromium, to protect and strengthen its blades. It was granted. The company recently tested competitors’ products and reckons Dollar Shave is infringing on its patent. After utilising the technology/process for more than a decade under patent protection, Gillette believes it should still have exclusive use of a second coat of chromium-addition (the 22nd most abundant element in the earth’s crust).
I can’t blame the company for trying, and the legal system will probably support its argument. But surely this is indicative of a system more interested in the protection of metaphorical toll bridges than real innovation. Any exclusivity granted for an improvement like that should be short-term in nature.
This is far from the silliest patent I’ve come across. That award probably belongs to the One-Click patent owned by Amazon. The first time you shop on Amazon the company collects your important details—chiefly delivery address and credit card details. On subsequent visits, every product page has a ‘Buy now with 1-Click®’ button. No more inputting tiresome details. Press one button only and there’s nothing more to do until the parcel arrives at your house.
It’s handy. It was a good innovation. While someone else would have come up with the concept eventually, perhaps Amazon deserved some sort of exclusivity for its inventiveness. But here we are 16 years after the patent was awarded, and only two online retailers in the US have 1-Click offerings – Amazon and Apple, with the latter paying the former a hefty licencing fee to do so.
Amazon used to assiduously enforce its patent across the whole US economy. Subsequent to a court case and forced amendment in 2007, non-retailers are free to use a 1-Click process for some things, but anyone trying to sell product online is still bound.
Thus, any American retailer unwilling to pay a substantial licencing fee to Amazon (or any competitor Amazon refuses to offer the opportunity to) must, by law, have at least a two-click process on all online orders. Every day, millions upon millions of redundant secondary clicks occur around the country just to keep the law and Amazon happy. It’s utterly absurd.
In the interests of innovation, patent offices around the world need to get more selective in granting patents, particular in the US (the European Patent Office refused Amazon’s 1-Click application). Concurrently, particularly in Europe, the patent process needs to be simplified and made cheaper.
Every day, we’re bombarded with messages from all stripes of government about how they plan to grow or improve ‘the economy’. Most of it is hokum. But sensible patent reform around the world is a juicy, low-hanging piece of fruit just begging to be plucked.
6 thoughts on “Patent Madness Stifling Growth”
There is an argument that patents and copyright are there merely to stifle competition, and thus innovation. In the modern world most patents and copyright should last no more than ten years. If you cannot make your money in ten years, then maybe you should not be in business.
I agree Peter, and The Economist agrees with us both, with some sensible ideas outlined in this article earlier in the year (subscription required unfortunately):
For those who can’t access it, the main points are:
1. Patents should come with a use-it-or-lose it clause
2. Patents should only be granted to big, fresh ideas – a ‘non-obvious’ requirement. Apple should not have been able to patent a rectangular tablet with rounded corners.
3. Differing patent lengths for differing industries (shorter lengths for technology, long ones for pharmaceuticals). Length to be determined by what is most encouraging to overall innovation and inventiveness in that sector.
Patent law is officially supposed to strike a tradeoff between the free access for all to new ideas (which is why all patents have expiry dates) and incentivising innovation. Unfortunately, as is so often the case, the public sector bureaucrats who created and administer the law are more concerned about ticking boxes than looking at the substance of what they are doing.
Big pharma is probably the worst offender when it comes to gaming patent law (see: http://io9.gizmodo.com/5865283/three-sleazy-moves-pharmaceutical-companies-use-to-extend-drug-patents)
another trick that isn’t mentioned in that article is the use of “butterfly molecules”, where the “new” molecule actually splits into two copies of the old molecule upon contact with (e.g.) stomach acid. Same old drug, patent extension box gets ticked, everyone is happy except for the sucker who needs medicine.
Hi Gareth, send your post to our innovator-in-chief PM.
We need to resist subjecting our innovators to foreign patent madness via FTAs. The “national common good” should prevail in our market: a balance between getting an innovation to market and the economic amenity received by consumers. Interesting connection to intangible assets held off-shore and the repatriation of pre-tax revenues.
The funniest part of the Amazon patent is the company itself has long attested ardent support of libertarianism. As seems usual amongst those of established wealth, their interpretation of libertarianism seems to be founded on the right to strong arm one’s way to an insurmountable monopoly.
And another one: http://www.businesswire.com/news/home/20151230005522/en/XPEL-Technologies-Corp.-Responds-Alleged-Patent-Infringement