July 2009

The right to enforce patents is one of the powers specifically spelled out in the U.S. Constitution, which states that Congress shall have the power

To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;

A new study published in The Columbia Science and Technology Law Review suggests that, in fact, patents deter innovation. The authors (one of whom, coincidentally, was my old roommate in grad school) created a patent simulation game that allows players to “invent” new products by arranging a sequence of widgets. These products can be sold to consumers, and the value of a sequence in the marketplace is related to its subsequence, so it makes sense for players to try to build off of particularly valuable sub-sequences.

Once a player has invented a previously undiscovered sequence, he may choose to open source the discovery or to pay a fee and patent it. Open sourcing a sequence simply prevents anyone from patenting any sequence based on it, while patenting a sequence allows the patent holder to license the sequence to other players and to sue anyone who infringes on the patent. If a patent holder decides to enforce his patent against an infringer, both players decide how many lawyers they wish to hire (again for a fee), and the case is decided by (virtual) die roll. Patent holders may also sell a patent outright to another player.

The researchers ran subjects in either a pure-patent version of the game that did not allow open source, a mixed version that allowed both patent and open source options, and a pure-commons version where patents were not allowed at all. Players were recruited from the incoming law school class, and were told that the player with the most money at the end of a trial would be given a prize. Their results show that players in the pure commons version produced more innovation (number of inventions), more productivity (number of inventions made) and higher social utility (amount of money each player ended with) than either of the other two variations. (The amount of innovations was not statistically significant, the other two metrics were very significant). Interestingly enough, they found no significant difference between the pure patent system and the mixed system for any of the three metrics.

It’s easy to nit-pick these kinds of simulation-based experiments, both in terms of how parameters are set and more generally whether the simulation captures enough of the real-world dynamics to be useful. One nit I have is that (near as I can tell) the market value of a product is the same regardless of how many competitors are selling the same product, which would eliminate one of the primary purposes of gaining patent protection. I also wonder whether the stated goal of making more money than your fellow players discouraged strategies that help everyone equally (a rising tide raising all ships), and in particular whether it might have discouraged use of the “open source” option in the mixed variation.

That said, it’s an interesting study, and in their discussion the authors cite many empirical and theoretical studies in the past few decades that have also brought into question whether patents actually promote innovation in the real world. The authors also suggest the possibility of more studies using their PatentSim game, and possibly even creating an online massive multiplayer version, which would presumably allow players to develop their strategy and experience with the game over longer periods of time.

(Via RiteReadWeb)