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.

Photo: Getty Images
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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.