The third course of the specialization CREATING INNOVATION will teach you what is at the core of all innovations that solve complex problems and how to foster methods to make big breakthroughs possible. It advances your knowledge of your own field by teaching you to look at it in new ways. CREATING INNOVATION is constructed in the following way: Week I. “What is Innovation?” – What lies at the core of all innovations. Week II. “The Evolution of Human Creativity” – How humans developed the ability to innovate and think creatively. Week III. “Innovation in a Complex Global Network” – How innovations emerge from human networks. Week IV. “Planning Innovation” – How organisations seek out and create the right conditions for new breakthroughs. Week V. “Market Innovation” – What makes innovations more likely to emerge in a market setting. Week VI. “Innovation in the Anthropocene” – How innovations are crucial to meet the problems of the 21st century.
Patents and Innovation
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From the course by Macquarie University
Creating Innovation
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From the lesson
Market Innovation
In this module we will examine bottom-up innovation, where the forces of supply and demand can under the right conditions foster innovation and increase the chances of them occurring.
Meet the Instructors
David BakerAssociate Lecturer
Big History Institute
David ChristianProfessor
Big History Institute
Shawn RossAssociate Professor
Big History Institute
The big question for
this segment is how does the patent system facilitate innovation?
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Patents are a form of intellectual property.
Intellectual property refers to creations of the mind such as inventions,
literary and artistic works and designs and symbols.
Patents give the patent holder an exclusive commercial right
to an invention.
Patents effectively grant a monopoly for a device, substance, method, or process.
In accordance with the World Trade Organization's agreement on
Trade- Related Aspects of Intellectual Property Rights or TRIPS,
the monopoly period is harmonized t 20 years in the patent law of many countries.
A patent grants this legally enforceable right
on the basis that the invention is novel.
The expression of the particular requirements for
the granting of a patent and how they are assist can differ between countries.
The rationale for patents is to allow inventors to derive financial benefit from
what they invent and by so doing to create an environment that fosters innovation.
The patent system is designed to stimulate economic and technological development,
encourage competition, and provide incentive to inventors to be the first
to develop an innovation and seek patent protection and exploitation rights.
Abraham Lincoln believed the patent system added the fuel of interest
to the fire of genius.
Whilst a patent grants a monopoly,
it also involves disclosure of the invention to the public and
anyone can then use that knowledge or technique once the patent term expires.
Patent documents are therefore an important public and
comprehensive source of technical, scientific, commercial, and
legal information that researchers can access to stimulate further advances.
Economic historians Naomi Lamoreaux and Kenneth Sokoloff argued that the US
patent system was a powerful facilitator of invention.
And was extremely effective at stimulating the growth of a market for
technology and promoting technological change.
However, the modern patent system was not born fully formed.
Early patent legislation in many countries
often did not enforce an originality requirement.
Required disclosure of details or
probably if at all protect the rights of foreign citizens.
In fact, the patenting of imported inventions was often specifically allowed,
and countries adopted patent legislation of varying strengths at different times.
Switzerland for instance had no patent law at all until 1888, yet in
this period of incomplete or non existent patent law, innovations still occurred.
This is to be expected because as we have seen earlier innovation
is an evolutionary process driven by knowledge, collective learning and
the process of creative destruction within the capitalist system itself.
This question of innovation in the absence of patents is at the heart of a debate
about how effectively the patent system fosters and facilitates innovation.
Does it help supercharge the process or does it have a dampening effect and
would innovation be greater without the patent system?
Well, we can see from the historical record that without the legal protection
provided by the patent system secrecy and confidentiality are key mechanisms relied
upon by innovators to ensure that the benefits of innovation remain with them.
As Chan recounts, in the early days of industrialization, when the migration of
skilled workers was a major mechanisms for the transfer of technology, advanced
countries actively saw to maintain their advantage by restricting the outflow
of technological knowledge embedded in skilled workers or in machines.
For instance,
in 1719 Britain introduced a ban on the migration of skilled workers and
on an attempt to recruit skilled workers for jobs abroad which lasted until 1825.
To try to inhibit reverse engineering of innovations,
Britain banned the export of machines used in the wool and silk industries in 1750,
the export of machines used in cotton and linen industries in 1774, and in 1785
extended this ban to many different types of machinery and sensitive technologies.
Competitors obviously are reticent to accept a permanent disadvantage
as can be seen from the employment by the French government of John Holker,
a former Manchester textile worker as Inspector-General of Foreign Manufactures.
His job, industrial espionage, to bring skilled workers and
technology from Britain to France.
The modern international patent system with a public register of inventions and
enforceable rights appears a much superior solution.
Without such a system, economic theory has long identified the problem
that to the extent a firm cannot keep innovative knowledge secret,
competitive firms will copy that innovation.
This means return on investment will flow
not only to firm investing in knowledge and innovation but
also to firms that did not make that investment but simply copied.
And this produces a disincentive to undertake research and development
in the absence of an intervention in the market such as patents.
Importantly, given how collective learning spurs innovation we can see how
a patent system amplifies and strengthens that process.
For instance consider the case of an innovation A that generates the idea for
an innovation B.
Innovation A and innovation B might be developed by different people or firms.
Without disclosure of innovation A, innovation B would not be developed,
because it builds upon innovation A, it could not exist without innovation A.
How do both innovations get to market?
The patent holder of innovation A can take their product to market,
but the inventor of innovation B can't take innovation B to
market unless they are granted a right to use innovation A also.
Because a patent is a property right, or be it a temporary one, it can be licensed.
Licensing is an important strategy in commercializing technology.
So innovation A is licensed to enable innovations B to be developed.
And the license fees negotiated to provide
a share of the revenue stream from innovation B to both innovators.
The patent system enables this type of cascading technological development, as
well as the economic cooperation required to license intellectual property and
share returns.
A great number of studies have demonstrated that patents do
foster innovation across both developed and developing countries.
An OECD research study concluded that the strength of patent protection is
positively associated with greater flows of inward foreign direct investment and
the transfer of technology intensive goods and
services across all countries, developed, developing and the least developed.
Although the association is strongest in developed countries.
In other studies, it is the impact of patents on developing countries
that attract significant criticism.
This is a healthy and needed debate because intellectual property rights,
such as patents, like all property rights reflect underlying factors such as
economic development, financial capacity, and technological complexity.
Is the patent system currently configured for optimal impact, or
could its role and function in the innovation ecosystem be improved?
Well, just as the global economy is a dynamic and complex system,
we should expect that the patent system will continue to evolve as an economic and
legal policy tool in response to economic, political,
social and technological forces.
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