Are Patents Good or Bad?
Are patents good or bad? Patents are bad for those who cannot afford the patented products (e.g. 10% of essential drugs are patented). However, it is fairly good in ensuring innovation, granting licenses fees for innovators, and giving smaller businesses a means to compete on technology.
Patently-O, Dennis Crouch, the co-director of the Center for Intellectual Property & Entrepreneurship at the University of Missouri School of Law, points out that about 50% of patents expire prematurely because their owners decline to pay the required maintenance fees.
There is merit in the claim that patents are bad in many ways for consumers, particularly when intellectual protectionism or monopolism harms the public interest and impedes competition which drives innovation. However, intellectual property rights in the form of patents play a part in recognizing the efforts of authors, inventors, and producers, allowing them to survive in the industry. As such, patents are good for these particular groups of people.
At a glance, here are 4 ways that patents are good for people with serious business.
- Patents protect investments in research and development
One of the key reasons businesses apply for patents is to prevent competitors from copying their innovations. Businesses that have a patent granted for an invention prevents and deter third parties from exploiting it and freely reaping the benefits of the time and money invested in research and development.
- Patents secure exclusivity and market position
Blocking competitors from exploiting your invention can allow your business to establish a dominant market position and brand reputation.
It is not always necessary to wait until a third party starts marketing an infringing product before enforcing your patent right – in some cases, the courts can grant an interim injunction to pre-emptively stop a potential infringer from entering the market, to begin with. Merely having a patent can also act as a deterrent even without legal action, as the possibility of litigation might be enough to put off more cautious competitors.
Obtaining a portfolio of patents in other countries can also pave the way for entry into international markets, giving your product a head start over local rivals.
- Patents grant licensing
Patent owners may wish to grant permission for a third party to use their invention in return for royalties. Licensing can be great for start-ups who don’t have the money or facilities to manufacture or market a product themselves, while still retaining commercial benefit from the invention. Licensing can also be useful in international markets to take advantage of the knowledge of local distributors.
In some cases, it may be possible to negotiate cross-licenses for patents owned by competitors. This is particularly important in cases where patents held by two different companies have an overlapping scope, and so neither company has the freedom to operate without a license from the other.
- Patents defend against attacks from larger rivals
Start-up ventures may occasionally be founded on a new development of existing technology, rather than a brand new technology. This can leave growing companies vulnerable to litigation by larger, corporate owners of patents covering the underlying technology.
If a large proprietor seeks an injunction to prevent the use of their patented technology, this will also block the use of any new developments of the technology, which could be fatal for a start-up company relying on being able to exploit their new developments. By patenting their developments, smaller businesses have some means to defend themselves in such a situation, by counter-suing and negotiating a settlement.
The Bad Side of Patents
Despite the seemingly attractive benefits that patents may bring, intellectual property rights are expensive to upkeep and leave consumers bearing the brunt of the costs. The world may be worse off for the ordinary man when consumer goods, patented by businesses in the interest of protecting their rights, become less affordable.
- The high expenses of holding intellectual property rights are particularly evident in patent fights. In the smartphone industry alone, a Standford University analysis revealed that as much as USD20 billion was spent on patent litigation and patent purchases from 2010 to 2011. Based on public filings, the spending by Apple and Google on patent lawsuits and big-dollar purchases exceeded their expenditure on the research and development of new products in 2011. The financial burden of such patent fights is inevitably passed on to consumers of their products.
- Google’s chief legal advisor in 2011, David Drummond, commented that rival companies, Apple, Microsoft, and Oracle, were fighting Google through anti-competitive litigation strategies by imposing a ‘tax’ for patents that would make Android devices more expensive for consumers.
- In the automobile industry, the Property Casualty Insurers Association of America estimated that the patenting practice, if applied to every car part, would cost insurers an extra USD1.5 billion a year, which consumers will indubitably pick up the tab for in terms of higher insurance premiums.
In a fictional context, the removal of intellectual property rights will mean the legitimization of the current black market for piracy and plagiarism. Rather than paying for legal merchandise at authorized retailers, one can simply visit any of the newly legal ‘pirate’ vendors and purchase the same merchandise at a fraction of the price. In the short run, many people will benefit without patents.
Given the high expenses eventually shouldered by consumers as a result of the system of intellectual property protection, patents are seemingly bad in the eyes of the majority of consumers.
The risks of capitalizing on the ‘Good’ patents may bring
Critics of patents and copyrights maintain that the poor will be better off without the system of intellectual property rights which hampers their access to necessities, particularly in the healthcare sector.
Under the World Health Organisation List of Essential Medicines which is revised every 2 years, there is a growing trend of essential drugs being patented, growing from 5.4% in 2013 to 10.3% as of May 2020. (geneva-network.com)
- Many anti-globalization groups fighting for the plight of the poor have protested against the Trans-Pacific Partnership Agreement (TPP) signed in 2016 as intellectual property provisions undermine the autonomy of national governments, eviscerate protections for local industries, and attack health regulations. The TPP also sets a broad standard patent term of twenty years, with opportunities for extensions.
- In recognition of the tremendous benefits that eradicating intellectual property rights would have on the poor communities, public health groups in Asia and Latin America have launched campaigns to break the monopoly of Abbott Laboratories, a major manufacturer of anti-retrovirals Kaletra and Aluvia, and to promote access to generic versions of these critical medicines. In Brazil and India, health organizations have waged legal challenges to the company’s patent claims to break its monopoly.
- In South Africa, officials were considering an overhaul of domestic intellectual property regulations to stop patent ‘overgreening’, to keep the cost of healthcare and drugs affordable to the poor.
The prevalence of such campaigns and movements in developing countries highlights the plight of the poor who are denied healthcare essentials, and who might be better off without the system of intellectual property rights.
While businesses or individuals may have applied for patents to credit and protect the work they have poured their hearts into, the unintendedly insensitive and unethical outcomes it may bring to less privileged communities may cause patents to backfire on themselves.
Under what circumstances can patents be ‘fairly good’?
Patents can be claimed to be ‘fairly good’ when the outcome of patenting generates positive externalities on top of protecting their rights.
For example, after Apple’s 2012 landmark lawsuit against Samsung which determined that Samsung was to pay Apple more than USD1 billion in damages for infringing on a series of Apple’s patents on mobile devices, companies have begun considering how much they want their product to look and feel like their competitors’ products in terms of shape, size, the way they feel, the way they look, how icons are similar, or how the icons are dissimilar. This development has allowed consumers to enjoy some welcome diversity in phone and tablet design.
Hence, patents can be ‘fairly good’ when it functions as a necessary impetus for innovation, which can consequently lead to mutually beneficial outcomes for businesses and consumers alike.
Patents are an integral part of business plans and an aspect of development that is unlikely to be neglected. While patents may offer a wealth of benefits, it may be worthwhile for businesses to foresee potential unintended consequences of patenting, debate ethical standpoints, and weigh the net outcome of their decision to patent before doing so.
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Darryl was born and raised in Singapore, the Little Red Dot situated at the heart of Asia. Growing up, he realised his interest in research, consumer psychology and entrepreneurship, which have motivated him to participate in multiple national-level entrepreneurial projects for which he clinched recognisable accolades. As a young and aspiring business consultant, he is now interning at a local business development and marketing consultancy firm to nurture his passion, and pursue his mission of helping businesses while contributing towards positive social changes. Through his knowledge and experience, he hopes to create more appealing articles that can impact businesses.