Should the White House crack down on patent trolls, or on patents?

That patents boost innovation is received wisdom, but it might not be true.

The Obama administration has sung the tune that Silicon Valley wants to hear, and will be cracking down on patent trolling – even announcing the policy in the web-friendly format of animated gif:

Patent trolling is the colloquial name for a bundle of strategies used by companies technically known as "non-practicing entities", which own patents on technologies which they have not brought to market. The patents used are frequently broad claims, granted by patent clerks with a lack of knowledge of the area. Often they stem from the early days of the internet, and cover ideas which can be summed up as "use the internet to do something".

Once the NPE has got hold of the patent, usually through buying up the portfolio of an older company, they then start threatening smaller companies with lawsuits. Key to the plan is that few of these lawsuits actually come to pass – instead, the companies are bullied into paying "license fees" to avoid the suit. That's because the trolls could ill-afford to have too many cases going on at once, but also because once they head to court, they run the risk that their patent will be invalidated (or at least that it will be ruled to be much narrower than they've construed it).

The "non-practicing entity" part of the equation is most important because many industries exist in a tangled web of patent infringement and licensing. Apple probably infringes a bunch of Google's patents on something – just because Google holds so many patents – but the converse is also true. The two companies end up existing in a state of mutually assured destruction, which NPEs can bypass.

But the other reason why NPEs are the focus of the changes is that they're easy to vilify. They don't make useful products, they don't have public profiles, and many of them don't even have any real link to the person who filed the patent in the first. But they are merely a symptom, not a cause, of the problems of the patent system.

Overly-broad patents have been granted to practicing entities as well. Amazon managed to patent the idea of ordering an item with one click, and it took eight years and a whole lot of publicity for the US patent office to force them to amend it. And they aren't just granted in technology. Here's a patent for "the process and apparatus for refreshing bread products, particularly open face items such as sliced rolls, buns, muffins, and the like" by heating them. You may know it as a "toaster". The patent was granted in 1999 and only lapsed when the inventor stopped paying the renewal fees.

And while it's easy to vilify NPEs, they do have a reason for existing. Theoretically, patents encourage two things: invention, and disclosure. Because you can't patent something without fully describing what it is and how you do it, it ensures that creators reveal their inventions to the world, so that when the patent lapses, everyone else can copy it. In theory, NPEs encourage inventors who might not have the wherewithal to bring something to market to still disclose it; and then, with the simple payment of a license fee, others can build on it.

In practice, of course, this doesn't happen. The industries where patent trolling is most common have little need for this sort of disclosure, since they're ones where it's encouraged in other ways; biotech leans heavily on peer-review, and coding on open-source. And the sort of actually-insightful inventions which we want to be disclosed are useless for patent trolling, since by definition they won't be independently invented. Instead, patent trolls need patents which as many people will infringe as possible.

But if we're comparing theory to practice, we need to go further than just asking whether patent trolls are broken in practice. What about the entire system?

Patently problematic

Patents have been around for so long that it's often forgotten that, prima facie, they're a bad thing. A patent is a government-granted monopoly on the exploitation of an invention, limited for a short time period. The immediate effect of that is the same as with all monopolies: the monopolist gets the chance to limit the supply of the product in an effort to increase their profit margins.

So patents start off on the back foot, and must justify their existence somehow. That justification comes back to the theoretical advantages of patents encourage: invention, and disclosure. The idea is that the monopoly, and the increased money which the inventor accrues from it, encourages innovation. Without patents, it is claimed, inventors would not be able to make any money from their creations, and may just not bother.

Even that advantage is actually a post-hoc justification, though. In the early days of patents, before their commission was codified and organised, they were granted as a sort of reward to inventors. The economic concepts of incentives had not yet come about, and the best way to get a patent was to have a mate in parliament who could make the case that a state-granted monopoly was your just desert.

That system was the worst of both worlds. Since a patent wasn't guaranteed to an inventor, it could do little to encourage invention; but if it was granted after the fact, it would do a great deal to stymie growth in that sector in the future. Economists Michele Boldrin and David Levine, in their book Against Intellectual Monopoly (available online in its entirety, naturally), detail what happened to the steam industry in the years during and after James Watt patented his engine:

During the period of Watt’s patents the U.K. added about 750 horsepower of steam engines per year. In the thirty years following Watt’s patents, additional horsepower was added at a rate of more than 4,000 per year. Moreover, the fuel efficiency of steam engines changed little during the period of Watt’s patent; while between 1810 and 1835 it is estimated to have increased by a factor of five.

Patents do harm. The question is whether they do good as well, and enough good to outweigh the harm

As the system has progressed since then, the scope of what is patentable has increased dramatically. Whereas the patent system initially covered physical inventions only, it soon grew to encompass things like business methods, software innovations, and genetics. If patents encourage innovation, then we would expect a burst of invention shortly after they're expanded to a new area. That is not quite what Boldrin and Levine find.

They look at a number of examples, from US agriculture – which grew from a system where only "some mechanical and chemical inventions" could be patented to one where plants and biotech inventions could be – to the software industry. In every case, they find that the extension of patents to the industry had little effect, or even a negative effect, on productivity growth.

It's hard to measure the actual effect of patents. Partially that's because the typical measure for the level of innovation in society is the number of patents granted – which is obviously not suitable for an inward-looking examination of the system. But it's also because their existence is such received wisdom that we have to hunt hard to find examples where they aren't in effect. And many of those examples are new fields, where we'd expect a burst of innovation anyway.

Nonetheless, the balance of evidence isn't as clear cut as popular perception would have it. If the Obama White House really wants to help America's innovators, and free them from the tyranny of being sued for invention, it could consider ending patents entirely.

A young Albert Einstein. The physicist was a patent clerk as a young man. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Chuka Umunna speaks at the launch of Labour's education manifesto during the general election. Photograph: Getty Images.
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After so badly misjudging the leadership contest, how will the Blairites handle Corbyn?

The left-winger's opponents are divided between conciliation and aggression. 

When Labour lost the general election in May, the party’s modernisers sensed an opportunity. Ed Miliband, one of the most left-wing members of the shadow cabinet, had been unambiguously rejected and the Tories had achieved their first majority in 23 years. More than any other section of the party, the Blairites could claim to have foreseen such an outcome. Surely the pendulum would swing their way?

Yet now, as Labour’s leadership contest reaches its denouement, those on the right are asking themselves how they misjudged the landscape so badly. Their chosen candidate, Liz Kendall, is expected to finish a poor fourth and the party is poised to elect Jeremy Corbyn, the most left-wing leader in its 115-year history. For a faction that never ceases to underline the importance of winning elections, it will be a humbling result.

Though the crash has been sudden, the Blairites have long been in decline. Gordon Brown won the leadership unchallenged and senior figures such as John Reid, James Purnell and Alan Milburn chose to depart from the stage rather than fight on. In 2010, David Miliband, the front-runner in the leadership election, lost to his brother after stubbornly refusing to distance himself from the Iraq war and alienating undecided MPs with his imperiousness.

When the younger Miliband lost, the modernisers moved fast – too fast. “They’re behaving like family members taking jewellery off a corpse,” a rival campaign source told me on 9 May. Many Labour supporters agreed. The rush of op-eds and media interviews antagonised a membership that wanted to grieve in peace. The modernising contenders – Chuka Umunna, Liz Kendall, Mary Creagh, Tristram Hunt – gave the impression that the Blairites wanted to drown out all other voices. “It was a huge mistake for so many players from that wing of the party to be put into the field,” a shadow cabinet minister told me. “In 1994, forces from the soft left to the modernising right united around Tony Blair. The lesson is never again can we have multiple candidates.”

While conducting their post-mortem, the Blairites are grappling with the question of how to handle Corbyn. For some, the answer is simple. “There shouldn’t be an accommodation with Corbyn,” John McTernan, Blair’s former director of political operations, told me. “Corbyn is a disaster and he should be allowed to be his own disaster.” But most now adopt a more conciliatory tone. John Woodcock, the chair of Progress, told me: “If he wins, he will be the democratically elected leader and I don’t think there will be any serious attempt to actually depose him or to make it impossible for him to lead.”

Umunna, who earlier rebuked his party for “behaving like a petulant child”, has emphasised that MPs “must accept the result of our contest when it comes and support our new leader in developing an agenda that can return Labour to office”. The shadow business secretary even suggests that he would be prepared to discuss serving in Corbyn’s shadow cabinet if he changed his stances on issues such as nuclear disarmament, Nato, the EU and taxation. Were Umunna, a former leadership contender, to adopt a policy of aggression, he would risk being blamed should Corbyn fail.

Suggestions that the new parliamentary group Labour for the Common Good represents “the resistance” are therefore derided by those close to it. The organisation, which was launched by Umunna and Hunt before Corbyn’s surge, is aimed instead at ensuring the intellectual renewal that modernisers acknowledge has been absent since 2007. It will also try to unite the party’s disparate mainstream factions: the Blairites, the Brownites, the soft left, the old right and Blue Labour. The ascent of Corbyn, who has the declared support of just 15 MPs (6.5 per cent of the party), has persuaded many that they cannot afford the narcissism of small differences. “We need to start working together and not knocking lumps out of each other,” Woodcock says. There will be no defections, no SDP Mk II. “Jeremy’s supporters really underestimate how Labour to the core the modernisers are,” Pat McFadden, the shadow Europe minister, told me.

Although they will not change their party, the Blairites are also not prepared to change their views. “Those of us on this side of Labour are always accused of being willing to sell out for power,” a senior moderniser told me. “Well, we do have political principles and they’re not up for bartering.” He continued: “Jeremy Corbyn is not a moderate . . .
He’s an unreconstructed Bennite who regards the British army as morally equivalent to the IRA. I’m not working with that.”

Most MPs believe that Corbyn will fail but they are divided on when. McFadden has predicted that the left-winger “may even get a poll bounce in the short term, because he’s new and thinking differently”. A member of the shadow cabinet suggested that Labour could eventually fall to as low as 15 per cent in the polls and lose hundreds of councillors.

The challenge for the Blairites is to reboot themselves in time to appear to be an attractive alternative if and when Corbyn falters. Some draw hope from the performance of Tessa Jowell, who they still believe will win the London mayoral selection. “I’ve spoken to people who are voting enthusiastically both for Jeremy and for Tessa,” Wes Streeting, the newly elected MP for Ilford North, said. “They have both run very optimistic, hopeful, positive campaigns.”

But if Corbyn falls, it does not follow that the modernisers will rise. “The question is: how do we stop it happening again if he does go?” a senior frontbencher said. “He’s got no interest or incentive to change the voting method. We could lose nurse and end up with something worse.” If the road back to power is long for Labour, it is longest of all for the Blairites. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 03 September 2015 issue of the New Statesman, Pope of the masses