gordoni@chook.ua.oz.au (Gordon Irlam) (07/10/90)
Any discussion of how patents will benefit the computer industry
overlooks one "minor" point. Historically, patents have been a
hinderance to most branches of human endevour.
I reproduce below a table and the conclusions of an enquiry into the
effects of patents in Australia. The report contains a wealth of
information on patents and their effects, that is not reproduced here.
There is no reason to believe that the situation in Australia is in
any way different to that of the rest of the world.
It was found that most engineers have no involvement with the patent
system, and as such do not make use of patents as a source of
technical information. Some engineers do however have an involvement
with the patent system. The following table shows the relative
importance of patents as a source of technical information as ranked
by these engineers.
Main Sources of Technological Information
for Engineers Involved with the Patent System
Source Percent
Technical and trade journals 38.0
Informal contact with
other organizations 13.8
Conferences and seminars 12.8
Informal contact within
your organization 10.0
Visits outside Australia 7.8
Newspapers and magazines 6.2
Government departments 3.5
Courses in edu. institutions 2.7
Computer data bases 2.0
Internal training courses 1.7
Patents specifications 1.0
TV and radio 0.5
First ranked source given a weighting of 3, second
ranked source a weighting of 2, third ranked source
a weighting of 1.
"Economic Effects of the Australian Patent System: A Commissioned
Report to the Industrial Property Advisory Committee"
Industrial Property Advisory Committee
Attorney General's Department, Canberra 1982
Overall Effects, Conclusions, and Policy Implications
-----------------------------------------------------
The patent system involves an interaction between law and economics.
However the key issues, as Lahore has pointed out, are economic and
policy related; not legal. The law provides the mechanism but the
tendency in the past for almost exclusive emphasis on the legal
aspects of the patent system has put "the cart before the horse".
Before the mechanism is invoked, the ways in which the patent system
serves economic policy need to be investigated. Indeed, are the
patent system's economic effects of net benefit to the nation? This
study has investigated the many facets of the issue. Throughout this
Report, an enormous amount and variety of information has been
presented - facts, figures, the findings of others, and arguments
built on this evidence as well as on theory. What conclusions can be
drawn?
Overall, this study suggests that the economic benefits of the patent
system to the innovative process in Australia are not only small, but
extremely subtle. They can be summarised as follows.
The patent incentive is not an important determinant of measured
domestic IR&D activity, but has some importance for the small
inventor.
Patents apparently play a subtle role in connection with
investment expectations and the transfer of technology to
Australia.
Patent information is a relatively unimportant source of R&D /
technological information for domestic industry, small investors,
and professional engineers. However, it is regarded as having
some importance by large overseas-based multinational firms.
Patent statistics have a role in connection with science and
technology policy.
The majority of patents held by domestic firms are said to produce
a return but the absence of a patent system would be unlikely to
affect production significantly.
Social costs or negative economic effects attributed to the patent
system appear more apparent, but as with benefits, cannot be measured
precisely. They are summarised below.
Direct and compliance costs of the patent system are high. In
many respects it is a "make-work" institution that acts as a
deadweight to the innovative process by distracting resources from
more useful activities.
Restrictive practices in patent licensing often occur. Their main
impact is likely to be a dampening of the already small domestic
industrial R&D effort.
Patent monopolies imply higher prices for consumers and industry
as well as distortions in the allocation of resources. In terms
of the kinds of negative effects as well as the characteristics of
the protagonists in the respective debates, there are many
parallels between patents and tariffs.
Both patents and inventions have a very small role to play in the
innovative process. Yet the mystique of that venerable old
institution, the patent system, can distract attention from more
important phases of the innovative process such as development and
marketing.
Use of patent information by domestic industry, professional
engineers, and the government and higher education sectors is
mainly patent system oriented - for patenting and checking on
infringement.
While ultimately a matter of judgement, this study leaves little room
for doubt that the benefit/cost ratio of the patent system in
Australia is negative, or at the very best, in balance. However, this
conclusion does not necessarily imply an economic justification for
abolishing the patent system. The costs and benefits of an
institution need to be distinguished from the costs and benefits of
abolishing that institution. In the perspective of the national
economy, the economic effects - both costs and benefits - of the
patent system in Australia are quite modest. However, the costs of
the unilateral abolition of the patent system to Australia's
international commercial relations could possibly be much larger; the
Swiss experience outlined in the historical section of Chapter 2 is
pertinent.
Since the benefits of the patent system are so tenuous and subtle and
the overall benefit/cost ratio is considered to be negative, there is
no economic justification for extending patent monopolies by
lengthening the term, or by widening the grounds for either
infringement, or patentability (for example, Plant VAriety Rights or
computer programs). However, in the light of our findings, there is
considerable economic justification for policy action to reduce the
negative effects of the patent system by stricter examination, by
reducing the length of term and the scope of patent monopolies, and by
action to deal with undesirable restrictive practices in patent
licensing.
An historical awareness of the political economy of patent reform
suggests that this task is not easy at the domestic policy level.
This is basically because those who perceive they would lose by such
reform are concentrated, powerful and active defenders of their
interests. In contrast, those who would gain by patent reform are
diffuse and hardly aware of their interest in the matter. Again a
pertinent parallel could be drawn with the tariff issue. Furthermore,
since the patent system's costs and benefits cannot be measured
precisely, "the optimum limits of the patent system, whether with
respect to time, space, patentability or restrictions on the use of
the grant must always remain a subject of controversy. There is no
doubt, however, that the costs have been underestimated". For these
reasons, as well as the patent system's intrinsic international
nature, patent reform is best pursued in international forums - such
as the conferences for the revision of the Paris Convention. This
need not preclude unilateral action by Australia whenever such action
is deemed practically appropriate or feasible. There is now ample
economic justification for measures which might be taken to reduce the
costs of the patent system in Australia.
Gordon Irlam
Adelaide, Australia
(gordoni@cs.ua.oz.au)