Unprotected innovation

A recent study (1) shows that sharing patents may improve the rate of innovation and the overall economics of the original inventor. This makes sense as systems with no sharing of intellectual property are unlikely to perform better than those with selective sharing. On the other hand, systems with no protection will be much worse off as without some protected property rights, investments are unlikely to happen. So, both from the innovator's perspective as well as from a societal perspective, an inverted U curve appears to exist – with both ends resulting in suboptimal economics. Granted, this relationship is different with the innovator's preferences for protection, which is generally higher than that of the society.

Perhaps, there are better ways to think about it. Innovation and patents are not generic – some are specific and some have platform characteristics. The later variety has a higher potential to add value to both the holder of the IP position and the society in general, by sharing. If this is so, the whole patent system may need to be revamped – differentiating between IP with specific and platform characteristics. More importantly, governments may have a role to play in opening up sharing in cases where the utility of the inventor and the society can be enhanced.

Advanced societal designs will incorporate a system of multi-tiered IP rights that optimizes value by allowing optimal sharing of know-how and ideas.

(1) Sharing patents with competitors may encourage innovation, UB study suggests. Published: Friday, March 16, 2012 - 15:33 in Mathematics & Economics. Source: University at Buffalo