Do Patents Stimulate or Stifle Innovation?

Finjan TeamBlog

Finjan Do Patents Stimulate or Stifle Innovation?

Economic research indicates that innovation is central to economic growth. But what role do patents play in motivating or suppressing innovation itself? It is an ongoing debate, and there are plenty of passionate opinions amongst legal scholars, economists, entrepreneurs and industry titans to make your head spin. Given Finjan’s global leadership in the cybersecurity technology sector and our strong portfolio of related patents, we get asked this question often.

Patents are hardly a new construct. Very few people outside the legal profession realize the first patents date back centuries. In fact, there is some historical evidence that as far back as 500 BCE, patent rights were both granted and recognized in ancient Greece. However, it was the Venetian Patent Statute of 1474, established in the Republic of Venice, that was the earliest recorded codified patent system in the world. Though this statue is nearly 550 years old, it still holds true today. Acknowledging that patents have existed for hundreds of years, through societal, cultural and economic booms and busts, underscores that patents are a mainstay of legal systems everywhere. But the mere fact we accept patents as a fundamental legal right does not address the question of whether patents encourage or discourage innovation.

Empirical studies evaluating the relationship between patents and innovation are as much subjective as they are quantitative. Many of these studies do, in fact, support the argument that patents fuel innovation. Consider the following:

  • A 2012 by report by Dr. Ron D. Katznelson and Dr. John Howells looked at the impact of Edison’s incandescent lamp patent (S. Patent No. 223,898). They concluded that not only did the patent not stifle innovation but actually ‘stimulated downstream development’ that resulted in “new technologies of commercial significance [including] tungsten lamp filaments and phosphorescent lighting. Those innovations, in turn, led to today’s fluorescent lamps.”
  • A comprehensive, widely recognized and respected study done by the Brookings Institution in 2013 concluded that, “Inventions, embodied in patents, are a major driver of long-term regional economic performance, especially if the patents are of higher quality.”
  • In a widely read 2015 Forbes article, Marshall Phelps lays out the case, “Over the last 50 years, economists have found that patents continue to foster ex ante innovation — meaning, they induce people to invent because of the prospect of profiting from those inventions.” He goes on to cite over a dozen economic studies to support his premise.

But not all studies are so emphatic. For example:

  • Stanford University Professor Stephen Haber studied the topic and concluded that while “no single piece of evidence” should “be viewed as dispositive,” it’s certainly quite “telling that the weight of evidence from two very different bodies of scholarship, employing very different approaches to evidence—one based on mastering the facts of history, the other based on statistical modeling—yield the same answer: there is a causal relationship between strong patents and innovation.”

There is another side to this debate. In an effort to level the playing field between industry behemoths and entrepreneurs, as well as to rein in expensive litigation costs, there are those who advocate weakening or even abolishing patent laws. From Finjan’s point of view, efforts to weaken patent laws, particularly in the cybersecurity space, may be well-intentioned but are misguided.

Weak protections of cybersecurity innovations or narrowing the scope of patent eligibility for such innovations would be contrary to the intent of founding authors of Title 35, which was to inspire innovations and strengthen the US economy.  Any effort to reform the foundations of patent law is an extremely significant topic for the cybersecurity technology sector. To change the eligibility standard, to make it harder for otherwise meritorious inventions to be protected by US patents, will no doubt disenfranchise inventors and disincentivize R&D investments. An unintended consequence would be to weaken the US economy. More importantly, particularly in the cybersecurity space, slowing the cadence of robust inventions is tantamount to opening the floodgates to unfettered malicious digital attacks and thievery.  On the other hand, strengthening the enforceability of patents can spur innovation because it will force infringers to design around clear patents with new innovations. This is important because to protect useful cybersecurity inventions and innovations through patents is to promote more innovations and R&D investments, which is to ensure a more armorized cybersecurity industry against ever-growing cyber-attacks.

As we saw with Edison’s patent in 1880 for the “Electric Lamp”, innovation ensued while simultaneously protecting the rights of the inventor. It’s no different now in the cybersecurity or broader high technology market. If one invents and has patented a mousetrap, the market is free to build a better, non-infringing mousetrap.