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.