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Patent-Simulation Study Suggests Current Patent Systems Stifle, Not Promote, Innovation

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By Ben Butkus

Pure patent systems and systems that combine patenting and open-source protection for inventions may significantly deter, rather than spur, technological innovation, productivity, and societal benefits, according to a recently published study.

The research, published in last month's volume of the Columbia Science and Technology Law Review, suggests that a commons system, in which no patent protection is available, may result in increased innovation, productivity, and benefit to society.

The study adds to a growing body of academic research suggesting that the current IP system in the US — which combines patenting and open-source innovation — stifles technological innovation rather than encourages it.

The research paper was authored by Andrew Torrance, an associate professor of law at the University of Kansas School of Law and research associate at KU's Biodiversity Institute; and Bill Tomlinson, an associate professor of informatics at the University of California, Irvine.

As part of their study, Torrance and Tomlinson developed a multi-user online simulation of the patent system called PatentSim to test the hypothesis that availability of patent protection encourages higher levels of technological innovation than would occur in the absence of such protection.

The simulation featured an abstracted and cumulative model of the invention process; a database of potential innovations; an interactive interface that allowed users to invent, patent, or open-source the innovations; and a network over which users could interact with one another to license, assign, buy, infringe, and enforce patents.

The researchers recruited as simulation participants first-year law students from the KU School of Law, none of whom had previously studied intellectual property law. Eight 30-minute games involving five subjects each were run for each of three systems: pure patents, patents and open source, and pure commons.

Under a pure patent system, participants created an average of about 84 unique inventions and 316 total inventions, and ended each trial with about $7,700 in licensing fees, product sales, IP-enforcement fees, or some combination thereof. A combined patent/open-source system yielded similar results: approximately 77 unique inventions, 323 total inventions, and $10,200.

However, under a pure commons system, participants created an average of 103 unique inventions and 659 total inventions, and ended the game with an average of $41,200.

In their paper, Torrance and Tomlinson argue that unique inventions, total inventions, and money earned are proxies for innovation, productivity, and social utility.

"Data generated thus far using PatentSim suggest that a system combining patent and open-source protection for inventions (that is, similar to modern patent systems) generates significantly lower rates of innovation, productivity, and societal utility than does a commons system," the authors wrote.

"These data also indicate that there is no statistical difference in innovation, productivity, or societal utility between a pure patent system and a system combining patent and open-source protection," they added.

The results, they wrote, are "inconsistent with the orthodox justification for patent systems. However, they do accord well with evidence from the increasingly important field of user and open innovation."

The study, which can be downloaded here, is the most recent in a spate of academic research studies suggesting that the current patent system in the US stifles rather than encourages innovation.

For instance, in a paper published in March in Science, Peter Bossaerts of the California Institute of Technology and Ecole Polytechnique Federale provided evidence that a system based on co-operative markets might be superior to patenting for promoting innovation. Bossaerts used a classical applied-mathematics model known as the knapsack problem to draw his conclusions (see BTW, 3/11/2009).

And in September of last year, Richard Gold of the Centre for Intellectual Property Policy at McGill University, along with colleagues from think-tank the International Expert Group on Biotechnology, Innovation, and IP, published a report suggesting that the world’s intellectual property system is "broken," stifles innovation, and prevents life-saving technologies from reaching patients in developed and developing countries (see BTW, 9/10/2008).

In their paper, Torrance and Tomlinson also cite several prior studies by other researchers that used either theoretical economic frameworks, mathematical models of technological innovation, or direct measurement techniques.

They said that many of these studies "have appeared to undermine the basic assumption that a patent system does indeed promote technological innovation;" but have offered little in the way of empirical evidence. They also suggested that a simulation "game" approach has several advantages over previously used research techniques, including the fact that it involves the participation of actual human subjects.

Torrance and Tomlinson also concede that their approach has several shortcomings, in particular the fact that it cannot capture the full complexity of a real-world patent system.

"Notably, PatentSim has yet to attempt to incorporate principles of international patent law or many of the regulatory, legal, or negotiating complexities involved in the patent prosecution, licensing, selling, buying, and litigation processes," they wrote. "For example, litigation is currently represented by a relatively quick and decisive process involving little more than choosing whether or not to enforce one's patent rights … then allocating a proxy for legal effort, and awaiting the roll of the algorithmic dice."

They also admit that total money earned is not a perfect proxy for social utility or well-being; and that the simulation begins and ends at defined points in time, whereas in the real world "there is often no beginning or end to the business process."

Nevertheless, the researchers wrote that their simulation game "does attempt to capture the fundamental and meaningful elements common to most patent systems." Areas of potential future study will include deploying PatentSim as a long-term online game that players can dynamically enter and leave; and conducting additional simulations with subjects of different backgrounds, such as MBA students from top business schools.

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