The Case Against Patents
Michele Boldrin and David K. LevineFirst draft: January 29, 2012This draft: June 29, 2012
The case against patents can be summarized briefly: there is no empirical evidence that they serveto increase innovation and productivity, unless the latter is identified with the number of patents awarded– which, as evidence shows, has no correlation with measured productivity. This is at the root of the“patent puzzle”: in spite of the enormeous increase in the number of patents and in the strength of theirlegal protection we have neither seen a dramatic acceleration in the rate of technological progress nor amajor increase in the levels of R&D expenditure – in addition to the discussion in this paper, see Lerner and literature therein. As we shall see, there is strong evidence, instead, that patents have manynegative consequences. Both of these observations, the evidence in support of which has grown steadilyover time, are consistent with theories of innovation that emphasize competition and first-moveradvantage as the main drivers of innovation and directly contradict “Schumpeterian” theories postulatingthat government granted monopolies are crucial in order to provide incentives for innovation. Thediffering predictive and explanatory powers of the two alternative classes of models persist whenattention is shifted to the historical evidence on the life-cycle of industries. The initial eruption of smalland large innovations leading to the creation of a new industry – from chemicals to cars, from radio andTV to personal computers and investment banking – is seldom, if ever, born out of patent protection andis, instead, the fruits of highly competitive-cooperative environments. It is only after the initial stages of explosive innovation and rampant growth end that mature industries turn toward the legal protection of patents, usually because their internal grow potential diminishes and the industry structure becomeconcentrated.A closer look at the historical and international evidence suggests that while weak patent systemsmay mildly increase innovation with limited side-effects, strong patent systems retard innovation withmany negative side-effects. Both theoretically and empirically, the political economy of governmentoperated patent systems indicates that weak legislation will generally evolve into a strong protection andthat the political demand for stronger patent protection comes from old and stagnant industries and firms,not from new and innovative ones. Hence the best solution is to abolish patents entirely through strongconstitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking,to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.