The Rational Optimist_ How Prosperity Evolves - Matt Ridley [124]
Yet there is little evidence that patents are really what drive inventors to invent. Most innovations are never patented. In the second half of the nineteenth century neither Holland nor Switzerland had a patent system, yet both countries flourished and attracted inventors. And the list of significant twentiethcentury inventions that were never patented is a long one. It includes automatic transmission, Bakelite, ballpoint pens, cellophane, cyclotrons, gyrocompasses, jet engines, magnetic recording, power steering, safety razors and zippers. By contrast, the Wright brothers effectively grounded the nascent aircraft industry in the United States by enthusiastically defending their 1906 patent on powered flying machines. In 1920, there was a logjam in the manufacture of radios caused by the blocking patents held by four firms (RCA, GE, AT&T and Westing house), which prevented each firm making the best possible radios.
In the 1990s the US Patent Office flirted with the idea of allowing the patenting of gene fragments, segments of sequenced genes that could be used to find faulty or normal genes. Had this happened, the human genome sequence would have become an impossible landscape in which to innovate. Even so, modern biotechnology firms frequently encounter what Carl Shapiro has called a ‘patent thicket’ when they try to develop a treatment for a new disease. If each step in a metabolic pathway is subject to a patent, a medical inventor can find himself negotiating away all his rewards before he even tests his idea. And the last patent holder to yield commands the highest potential pay-off.
Something similar happens in mobile telephony, where the big mobile firms have to fight their way through patent thickets to bring any innovation to market. At any one moment these firms are involved in scores of lawsuits as plaintiffs, defendants or interested third parties. The result, says one observer, is that ‘lobbying and litigating may be a more profitable way to win market share than innovating or investing’. Today, the biggest generators of new patents in the US system are ‘patent trolls’ – firms that buy up weak patent applications with no intention of making the products in question, but with every intention of making money by suing those who infringe them. Research in Motion, the Canadian company that manufactures BlackBerries, had to pay $600m to a small patent troll called NTP that did no manufacturing itself but had acquired contested patents with the aim of profiting from their defence.
Michael Heller’s analogy for the patent trolls is to the state of the river Rhine between the decay of Holy Roman imperial power and the emergence of modern states. Hundreds of castles grew up all along the Rhine, one every few miles, each occupied by a little robber baron princeling living off tolls exacted from boats travelling along the river. The collective effect was to stifle trade on the Rhine, and repeated attempts to form a league to lift the burden from the trade to the benefit of all came to naught. In the twentieth century there was a possibility in the early days of flight that every landowner would extract a toll from every aircraft that crossed his ‘searchlight’ of vertical ownership of the air just like the Rhine robber barons. In this case, good sense prevailed and the courts quickly extinguished such property rights in the sky.
Modern patent systems, despite attempts at reform, are all too often a gauntlet of phantom tollbooths, raising fees from passing inventors