When anti-troll is anti-innovation

The Paul Allen/Interval Research patent lawsuit has occasioned much handwringing in the tech industry. Some of it recoils at the timing, nature and expansive claims of Interval. However, other is just reflexive antipathy to the idea of patents, particularly from the free software crowd.

Now one of the thought leaders (hate that term) of the open source crowd has weighed in with an expansive attack on all things patent. My friend Matt Asay of Canonical writes in The Register:

Businesses aren't built on ideas. They're built on execution. Google didn't win because it was the first to the search market. It won because it did search better than anyone else, and devised an ingenious way to monetize it.

This, more than anything else, is what makes the US patent system, overrun by patent trolls, so broken: it rewards ideas, not execution against them.

Anyone can think up a brilliant idea. The difficulty is in doing something with it.

Matt is clearly wrong here: I don’t know whether it’s his own bias (or vulnerability) as COO of an open source company, or just a overwrought reaction to the latest example of someone filling a silly suit (which may or may not make any progress in the courts).

While I understand the sentiment, ideas matter too. Things like the laser and the transistor and recombinant DNA got invented by real people who certainly deserved monetary rewards for their contribution to mankind — whether or not they create a company to bring those ideas to market.

My own test is “did this person cause this invention to benefit mankind sooner.” A patent troll goes to a market that’s already developed and says “pay me some money.” A legitimate nonpracticing entity says “I’ve invented something, I’ll help you commercialize it and we’ll share in the profits.”

As law school prof Frank Pasquale notes on the Madisonian, discounting the role of the specific inventor because “it would have happened anyway” is a slippery slope: Microsoft, Google, Facebook and Canonical would have happened too, but they got up one morning and decided to pursue the opportunity with the right strategy before someone else did.

If we don’t incentivize invention, we'll get less of it. This is particularly true today when “innovation benefactors” (to use Henry Chesbrough’s term) are becoming scarce due to budget cuts in basic research and higher education.

The patent system certainly needs incremental reform to fix its excesses, as Adam Jaffe and Josh Lerner showed in their book Innovation and its Discontents. These reforms involve preventing junk patents from being issued, and making it easier to challenge the bad ones who slip through

People in the patent office certainly know about these problems, and are taking steps to address them. One of the most knowledgeable on patent excesses is Stuart Graham, a PhD economist with a JD who was appointed chief economist of the USPTO in March. A study Graham co-authored earlier this year concluded in part:

• Technological innovation is linked to three-quarters of the nation’s post-WWII growth rate. …
• Highly innovative firms rely heavily on timely patents to attract venture capital—76 percent of startup managers report that venture capital investors consider patents when making funding decisions.
• Delay in the granting of rights has substantial costs.…
• The enhanced post-grant review—the process by which a patent’s validity may be challenged through an administrative appeal in front of the USPTO—offers a cost effective and speedier alternative to litigation. The cost of such proceedings is expected to be 50-100 times less expensive than litigation and could deliver $8 to $15 in consumer benefit for every $1 invested.

Patent reform — whether through USPTO administrative action, legislation or court rulings — will improve the odds that a given patent is applied appropriately. However, no system created or run by human being is ever perfect, or ever will be.

Moreover, an effective innovation policy means more than just a patent policy: not all innovations are patentable, and patents are not always the best way to incentivize innovation.

Suzanne Scotchmer has talked about the historic role of prizes as a way to encourage innovations in her seminal book Innovation and Incentives. The idea of using prizes is catching on, with things like the X Prize and academic research on crowdsourcing. In some cases, the prize-winner even keeps the commercialization rights as an incentive to see it to market.

So while I certainly agree with Asay (and Chesbrough and many others) that we must reward those who bring goods and services to market, technological innovation is more than just execution: it’s also about technology. We need more than the MBAs and the salespeople and the bean counters and even the engineers who productize the technology; we also need the inventors who made it all possible.