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PedroDaGr8
11-14-2012, 05:05 PM
This is an interesting piece written by the St. Louis Fed. It's a very interesting article that discusses how patents actually serve to stifle innovation. It basically says what those of us who follow the tech industry have known for years. How the patent system is inherently biased to promote itself. For example, the court that established software is patentable after years of rulings that it was an algorithm(so mathematical in nature) and as such not patentable, rendered a 3-2 ruling on the issue. Of those three judges that ruled for software patents, two were former patent attorneys of the rest were not (so 1 voted for 2 voted against).


There is little doubt that providing a monopoly as a reward for innovation increases the incentive
to innovate. There is equally little doubt that granting a monopoly for any reason has the many ill consequences
we associate with monopoly power – the most important and overlooked of which is the
strong incentive of a government granted monopolist to engage in further political rent-seeking to
preserve and expand his monopoly or, for those who do not yet have it, to try obtaining one. Said
differently: while the positive impact of patents is the straightforward partial equilibrium effect of
increasing to the monopolistic level the profits of the successful innovator, the negative one is the subtler
general equilibrium effect of reducing everybody else’s ability to compete while increasing for everyone
the incentive to wastefully lobby.


On the contrary: a system that at one time
served to limit the power of royalty to reward favored individuals with monopolies has become with the
passage of time a system that serves primarily to encourage failing monopolists to inhibit competition by
blocking innovation.


http://research.stlouisfed.org/wp/2012/2012-035.pdf