Actually, patents discourage innovation


Capitalism is an economic system where the owner of capital is entitled to all profits derived from its use. We don’t often think of ideas as capital, but ideas become capital in the form of patents.

Capitalists argue that patents are absolutely necessary. Without the ability to profit off of new ideas, there is no incentive to create new ideas.

There are many reasons why this is wrong. The last time we covered this topic, we learned the sad fates of the men who created Superman. The Superman franchise has generated billions of dollars of profit, but Superman’s creators died penniless, unable to afford their own funerals. Both the Apache web server and WordPress are open source, yet they are field standards. Most corporate web servers use Apache, and over a quarter of the Internet is powered by WordPress. And–even though his boss ordered him not to–Tracy Hall snuck in on weekends to the lab where he worked at General Electric, in order to invent the synthetic diamond. This invention has brought GE billions of dollars in profits. Tracy Hall didn’t get rich off this invention; he got a $10 savings bond as a bonus, but GE didn’t even have to give him that.

Two of our readings for today focused on examples where patents have been used to stifle, rather than promote innovation.

The first example is American aviation. We all know the names of Wilbur and Orville Wright, who invented the airplane. But Glenn Curtiss was an aviation genius, who dramatically improved the design of the airplane. The Wright airplane could not do much more than takeoff and land, and was very unsafe; Curtiss invented flaps, which allowed a pilot to control the altitude of the plane and to turn. He also figured out landing gear to make takeoff and landing easier and safer. Both of these innovations are still used in aviation today.

At this point, the innovation stopped. Curtiss was using parts of the Wright plane’s design–he was taking a very good idea and making it even better. But the Wright brothers sued him; they owned the patent for the airplane and Curtiss was violating it. American aviation was stuck in place because Curtiss couldn’t use the Wright’s inventions and thus couldn’t make an entire plane; the Wrights were busy litigating against Curtiss and others to prevent them from using their patents; and nobody else could use the Wrights’ or Curtiss’ patents to build a plane.

In World War I, every major combatant used airplanes in the war effort. But there were no American planes capable of even the rudimentary roles planes played in that war; American pilots flew British and French planes. Because of this fiasco, the American government forced airplane manufacturers to cross-license their patents with each other, and the American aerospace industry could finally take off.

The other example involves sewing machines, which were a technological marvel in the 1850s. But no one company had created the many inventions that a single sewing machine needed to operate. Elias Howe held one of these patents, for the lockstitch. Howe didn’t even make sewing machines; his business model was to find wealthy investors to pay for lawsuits to sue companies violating his patent, then force them to pay him to license the patent. People who held the other sewing machine patents realized that patent trolling was more profitable than manufacturing sewing machines, and joined in. Quickly, nobody could manufacture sewing machines. Eventually, everyone involved had to admit that the so-called “sewing machine wars” had been a mistake and they created a patent pool, which allowed all the sewing machine warriors to share patents and resume making sewing machines.

We still struggle with these issues today. Companies still sue each other over patents, the government still forces companies to cross-license patents, companies still create patent pools, and there are still patent trolls. In sum, patents can stifle innovation at least as much as they promote it.

Patent pools are used in throughout the economy: including digital video, telecommunications, and wifi. They have been used for some of the most important inventions on the modern world, including incandescent lightbulbs, electrical grids, telephones, cars, airplanes, radios, airplanes, lasers, medical devices, and even disposable daipers. All of these things could not exist if companies followed the simplistic model of patents, where a patent is used by its owner to pursue maximum profits. Thankfully, companies rely on patent pools instead.

But remember, patent pools are a way to work around patents. Since most major innovations requires patent pools, that means that companies are constantly working around patents in order to innovate. In other words, patents discourage innovation are not a great way to handle intellectual property. Maybe something like a patent pool should replace patents.


  • If you have a great idea, should you be able to profit from it?
  • Is there a middle ground between patents and all ideas being public domain? Is there a way to reward people for their ideas but ensure people can’t harm the public by withholding ideas?
  • Is there a better way to encourage innovation other than patents? Is it possible to encourage innovation while ensuring everyone has open access to new ideas?
  • With technology so advanced, is it even possible to have a new idea? Are all new ideas–no matter how groundbreaking–building off the work of others?
  • Inventors are not motivated by money; they are motivated by a love to tinker and create and give the world something new. Do you agree with this statement?

speaker notes:

  • Some ideas include generous public funding for R&D, such as through universities. We ensure R&D personnel have what they need to succeed, with pay/benefits to lead a happy life–so they don’t need to patent their ideas to put food on the table or buy new equipment. In exchange, their ideas become public domain.