| > 1) Patents enable "benevolent monopolies." Companies that can afford to splurge on fundamental research because they have a revenue source protected by some sort of barrier to entry or network effect. The value in "benevolent monopolies" isn't the revenue source. Money is fungible. If there is something worth investing in, it will attract VC money. And if a company has revenue from a monopoly, they could just as easily invest it in real estate or the S&P 500 as their own industry. The value of a monopoly is that it excludes free riders from improvements. The best example of this was Ma Bell and Bell Labs. If you can improve the phone network, e.g. with lasers (fiber optics), or information theory (data compression), or transistors (microprocessors), then you can invest in those things and capture the benefits directly without incurring a competitive cost disadvantage, because you have no competitors. But the AT&T monopoly wasn't due to a patent. They never expected their monopoly to expire as patents do. The patent monopoly isn't designed to be long enough to engage in this kind of behavior in general. Which is why we see this much more often in monopolists whose monopolies aren't derived primarily from patents -- AT&T, Microsoft, Google, etc. And the other side of it is that you're excluding the whole rest of the world from making improvements. You have to buy your phone from AT&T. No modems, no iPhones, no third party ISPs or open internet. Just the original monopoly extended into everything it touches, with all the deficits that make monopolies terrible. That this is a net-negative is the reason we have antitrust laws. > 2) Patents enable business models that separate design from production. The simple version of this where you have a core design but not a fab is solved by having the fab you use sign an NDA, or you can sell the secret to the implementer outright. The version where you design part of the core and someone else improves on it or you have multiple customers is really this: > 3) Patents enable technology sharing. Dozens of different companies have technology that is included in DVD, Blu-Ray, 2G/3G/4G, Wi-Fi, etc. The counterargument is that it's difficult to keep a lot of these things secret. And there are reasons to enter into technology sharing agreements independent of patents, like the network effects of interoperability. You want your movies to play on every customer's DVD player and your phone to work on every carrier's network. The patented technology sharing cartels are also currently used to exclude new entrants to the market, or impose unrelated conditions like requiring all DVD player manufacturers to not let customers skip particular ads as a condition of the patent license. The best case to be made for patents is that they prevent free riding. But that's maybe the biggest problem with the existing patent system -- independent reinvention is not free riding but is patent infringement. Which is the root of all patent trolling. |