Patents system is broken and beyond repair

INNOVATION TALK:THERE ARE many ways to measure innovation, and there are no shortage of rankings and indices that attempt to do exactly that. Innovation is seen as key to economic growth – we are all adherents of Joseph Schumpeter now – and if you want to encourage it, you must be able to measure it.

But how do we measure something as intangible as innovation? Any approach has its flaws – one of the most respected, the Global Innovation Index, published by Insead and the UN’s World Intellectual Property Organisation, relies on a vast array of inputs and outputs that throws up some idiosyncrasies, to say the least.

But the most pervasive approach, one that seems superficially logical, is in some ways the most problematic – counting patents and using that as a proxy for innovation. There’s some correlation between the number of patents issued and innovation, but you don’t need to be an intellectual property lawyer to see the problems. Patents can’t be counted like beads on an abacus, used as a convenient, but misleading, metric of innovation.

There are many reasons for this, but the most obvious of all is that the patent system is incontrovertibly screwed up. Last week, The New York Times published an investigation into the patent mess in the technology industry by Charles Duhigg and Steve Lohr, and it was impossible to read it without concluding that the patent system is grossly distorting our technological development.

“In the smartphone industry alone, according to a Stanford University analysis, as much as $20 billion was spent on patent litigation and patent purchases in the last two years – an amount equal to eight Mars rover missions,” they wrote. “Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.”

Admittedly, as British journalist Ian Betteridge made clear, the 2011 figures are skewed by Apple’s investment in the Nortel patent portfolio, to the tune of $2.6 billion, and Google’s gargantuan acquisition of Motorola for an absurdly inflated $12.5 billion.

But the astonishing size of those outlays are indicative of where the patent system has taken us. It is impossible to develop products or innovate without entering into an escalating patent arms race, one that resembles Cold War-era mutually assured destruction more than protecting intellectual property. It need hardly be pointed out that such a scenario acts as a Himalayan-sized barrier to entry for new companies.