There's More Invention Without Patents
The more than one hundred year old patents system is in need of an overhaul and a new method of compensating inventors could result more efficient. This is the conclusion of the study Promoting Intellectual Discovery: Patents versus markets by Debrah Meloso from Bocconi University, first author, with Peter Bossaerts, of Caltech, and Jernej Copic, from the University of California, published today in Science. According to the researchers, a market economy in which inventors can buy and sell shares of the key components of their discoveries actually beats out the 'winner-takes-all' system of patent rights as a motivating force in promoting intellectual curiosity and creativity.
The paper, prompted by the idea that the patents system has limits since it only rewards who comes up with an idea first, describes a series of experiments designed to quantify the different ways patent systems and market forces might influence a person's drive to invent.
The researchers ran a series of experiments in which participants were asked to solve what is known as "the knapsack problem." Participants are given a large number of items to pack into a knapsack that cannot possibly hold all of the items; their job is to try to figure out how to maximize the total value of the items that they can pack.
Participants in the experiment had to solve one set of problems under a regime that worked in much the same way as a traditional patent system. To 'win' required coming up with the right answer first, which seemed to remove the incentive for the large majority of participants to even attempt solving the problem.
The second set of problems was to be solved in a kind of free-trading market regime. Each item that could go into the knapsack was given a different price and participants were encouraged to buy and sell their securities for the various items, stocking up on shares of items they believed were likely to be included in the problem's solution. Once the solution was revealed, the securities of the left-behind items became worthless, while those of the included items rose in value. While nobody won the full prize as in the patent groups, several people were able to benefit financially from coming up with a workable solution to the problem and participants didn't have to fully solve the problem to benefit financially.
This system, researchers noted, led to participants being more motivated in searching for the solution, since more than one person was rewarded at the end, to more people solving the problem correctly (27% compared to 17% in the patent-based experiment) and to a large number of different people trying different ideas each time the game was played.
"People are aware that discovery is difficult and may be more willing to commit to discovery if the gains are not exclusive to the 'winner'," explains Meloso. "This research highlights how fostering a large number of distinct ideas is beneficial for intellectual discovery and that one can do this with appropriately-designed markets."
According to the researchers, in fact, to stimulate inventions and innovation a new system of compensation could be devised no longer based on patents but on people owning securities in the components of their inventions. For example, scientists working to invent a fuel-cell catalyst who were convinced that platinum is the best catalyzer would go out and buy platinum futures, knowing that once the invention got into the public domain their investment would go up in value. The premise for the functioning of this system is the creation of markets for all the items that can potentially become components of a future discovery.
Without a patent on the invention, other people would be motivated to continue working on their projects but there would still be a benefit to being the first: that inventor would be the one able to buy up securities when the prices were at their lowest. Inventors would also have a strong incentive to reveal their discovery a soon as possible, in order for the share price to adjust in their favor, which would also speed up the development of applications based on the new discoveries.
"The success of our markets system relies on markets allowing for the sharing of ideas through people willing to trade," concludes Meloso. "We conjecture that they will trade because of overconfidence. More than 50% of people in fact think that they are better than the median and thus that they are closer to solving the problem. This will lead people to be willing to trade and hence creates the possibility of profiting from discovery in a market."