By Russ Roberts.
Extracts:
But there are exceptions, as you point out. So, you would not get rid of
patents on pharmaceuticals. Why? So, pharmaceuticals are really the classic
case of where the innovation-to-imitation costs are extraordinarily high. It
costs about a billion dollars to create a new pharmaceutical. The first pill
costs a billion dollars; the second pill costs 50 cents. So, that's a classic
case where imitation costs really are low. That's the best case for patents, in
a field like that. But my question is: Why does every innovation deserve or
require the same 20-year patent? Why do we have a system which gives a one
billion dollar pharmaceutical--where there's $1 billion in research and
development costs--we give that a 20-year patent and one-click shopping gets
the same 20-year patent? That makes no sense whatsoever. So, what I suggest is
a more flexible system. I'd like to have a 20-year patent, maybe a 15-year
patent, maybe a 3-year patent. Something like that. And then we could say: You
want to apply for a 3-year patent? We are going to get this through the system
quickly; we won't look at it so much. Hurdle to make the case for it smaller.
Exactly. You want a 20-year patent, though: You'd better show us that you
really are deserving and put some costs in there. Now, a side-note on the
pharmaceuticals--I'm surprised you didn't mention this. Maybe you are just
trying to be strategic. It's true it costs a billion dollars to develop a new
drug; but there's a reason it costs a billion dollars. A lot of that cost is to
no avail. It's replicating tests that sometimes already happened in Europe. A
lot of it is the regulatory structure around the drug industry. People who are
worried about drug pricing--one of the ways to solve the drug pricing problem
is to remove the patent or shorten the patent. I'd like to shorten, reduce the
research and development costs and the approval costs. Are you with me there?
Absolutely. So, we have drug lag and even more importantly, we have drug loss. There
are lots of drugs today which probably could be invented, but people know going
in the costs are just too high. So, sure, I would like to see those costs come
down. As a theoretical point, however, I still think that the pharmaceutical
industry is the best case for a patent in that the innovation/imitation costs
are very high. But
there are other things we can do to bring those costs down.
[...]
You are
looking for evidence of how innovation has been reduced in highly innovative
fields. But these highly innovative fields--the Internet and smart phones and
so forth--they've been innovative not because of these patents but despite
them. And I think the situation is becoming worse in these fields. So, what we
are seeing right not is firms like Google and Microsoft buying up these patent
arsenals. And they are not doing it because they need access to those
technologies. They are doing it because another firm can't sue them and prevent
them from innovating. Well, what's bad about that? What's bad about that--I
call this the Mutually Assured Destruction--and mutually assured destruction I
think was not the greatest way to maintain peace. Probably not the greatest way
to maintain innovation either. And I think what the real problem of this idea
of innovation through strength--we will be able to innovation because we have
this patent arsenal behind us--is that small firms don't have that. So, we are
seeing a kind of Intellectual Property (IP) feudalism. We are seeing these very
big companies get ahold of these arsenals so nobody can attack them. But that
means the small firms can't attack them either. Small firms are being crushed.
And what do we know about really disruptive creative disruption? That often
comes from the small firms. So, I am worried that we are going to see--yes, you
can get innovation if it's from big Google, but what about the little google,
the google of 20 years ago, the next google? Which doesn't exist because it
can't have the legal department, at its small size, that its competitors have.
So, the innovation we are not seeing, that's the invisible innovation. We are
not seeing it; we can't look for where it is.
[...]
Any other
ideas? Would you stop some things from being patented at all? The remarkable
thing is that the extension of patents to software and semi-conductors and business
methods and the broadening of the interpretation of these patents has been
almost all judge-driven. This is actually not legislation so much. It's judges.
Judges have decided to interpret these patents in these broad ways. And they
don't have to do that. The law hasn't actually changed that much. I talk a
little in the book about Thomas Edison and the light bulb, and there actually
was a previous patent. Sawyer and Mann had patented to make the incandescent
filament. Any fibrous or textile material. And Edison came along, and he tried
5000 different materials before he hit on the one--it happened to be bamboo,
and not just any bamboo but bamboo that he had dispatched a man to Japan to
find the right bamboo. So he had gone through all of these different types of
materials and yet Sawyer and Mann sued him and said: We have a patent on any
fibrous material. And the court looked at that and they said, this is crazy.
You can't give such a broad patent. Sawyer and Mann didn't actually investigate
all 5000 of these. And if we were to give such a broad patent, this would
actually discourage innovation. So, they said no to the Sawyer-Mann patent and
let Edison go ahead. We could do more of that today. The trouble today is we
have not done what the judges did in the Sawyer and Mann case. We've said: You
can get a patent on any fibrous material, analogously in many other fields.
We've given these broad patents. And that actually discourages people from
doing the real work of implementing, of creating a product. Now you can just
patent an idea. It's like a science fiction author can patent ideas; long
before they are every even possible to be implemented you can patent the idea.
Even before it's technologically possible. And that has actually discouraged
innovation.
[...]
A point I want to make about education, by the way,
is: There's probably no other area where we can have as much as an opportunity
to increase innovation and growth than in education. Think about it this way:
Almost all U.S. workers will go through the U.S. education system. Not all, but almost all. So, think
about if we improved our education system tomorrow. Well, at first we are only
going to get a small gain because only the new workers will come in under the
new system. But as we get more and more workers coming in under the improved
system, that means that we have 100 million people educated a little bit
better. We are talking about trillions of dollars of potential gains there. So
there's no other place, bottleneck, where we can have as much influence on the
U.S. economy or society as the U.S. education system, because it's where all of
our workers are going to be channeled at some point, through that system. So a
small change there means a big change over the next 40 years. That sounds good;
I'm not sure that's true. A lot of what we learn in life, we don't learn in a
classroom, and so I'm not sure how--I think there are many ways in which they
will become more productive and skilled, and we figure those ways out. And we
sometimes do that in spite of our education. And sometimes our education is
what allows us to do it. I think it's fascinating--you think about your
education and mine--we logged a lot of hours in the economics classroom as
undergrads and graduate students. And we learned a lot there. We learned a huge
amount. But I'm amazed at how much I've learned since then. You could argue
that's what helped me learn how to learn. Certainly there was a basic framework
there. But we're in a really narrow technical field. Somebody who goes through
the standard K-12 educational system and then goes on to study, it doesn't
matter what it is, in college--I just have a feeling a lot of what they learn
comes afterwards anyway. Maybe we ought to be shortening the whole process and
getting people out into the world at an earlier age. If they were mature
enough. Maybe. I think there's some truth to that for college for sure. For
K-12, I think it's going to be more important. I would say you are
right--people like you and I who have alternative sources of education, our
parents, family, friends, peer group. All of these things are working in our
advantage. But for a lot of kids in high school, they don't have those other
factors working in their advantage. So the one we can really move, the one
lever we have, we need to do everything we can to shift that lever. I totally
agree.
[...]
[H]igh-skilled immigration I think is such an obvious,
such a completely clear thing to do, that it's shocking that we haven't done it
already. It's literally easier to win the lottery than it is for a person of
advanced and high skills to get a visa into the United States; and what I mean
by that is we give out more visas in the lottery program--random
allocation--than we do to these people of extraordinary ability. Now that's
insane. How can you have a system like that, where you just randomly give out
visas and there's more of them than you give to people of extraordinary
ability? That's crazy. We need to cut back on regulation and we need to think
about it as not simply thinking about regulation as each regulation comes up. We
need to think about pebbles in the stream. We need to think about what happens
when you accrete, what happens when these things build up. I would like to see
us change our mindset from the warfare-welfare state towards innovation.
