(Flawed) Study Concludes Patent Licensing Doesn’t Contribute to Innovation

usaAs discussed in Gene Quinn’s excellent IP Watchdog blog, a recent study by professors at the Hastings school of Law and Stanford Law School concluded that patent licensing doesn’t actually lead to new innovation.

However, as Quinn discusses, the study is seriously flawed.

The working paper by professors Robin Feldman and Mark Lemley is entitled Does Patent Licensing Mean Innovation?

According to the abstract, A commonly offered justification for patent trolls or non-practicing entities (NPEs) is that they serve as a middleman facilitating innovation, bringing new technology from inventors to those who can implement it. We survey those involved in patent licensing to see how often patent licenses actually led to innovation or technology transfer. We find that very few patent licenses from assertion actually lead to new innovation; most are simply about paying for the freedom to keep doing what the licensee was already doing. Surprisingly, this is true not only of NPE licenses but even of licenses from product-producing companies and universities. Our results cast significant doubt on one common justification for patent rights.

Subjective “Analysis”

The biggest problem with the paper is that it is based on subjective – i.e., anecdotal – rather than objective evidence.

Obviously, anyone who has recently had to pay for a patent license – perhaps after an expensive battle over past infringement – is not going to be enthusiastic about patent licensing.

Similarly, anyone who has recently received a traffic ticket is often unenthusiastic about traffic laws, but that doesn’t mean the traffic laws are a bad idea or that they “discourage” driving.

The report does not account for this kind of ‘subjective’ analysis nor does it address the underlying question of whether the population study may be biased against the whole idea of patent licensing in the first place.

Also, even asking the question of whether licensing “leads to” innovation seems odd, if no definition of “innovation” is addressed. What is “innovation”? How is it measured? Does innovation mean bringing new ideas to market or does it mean making improvements to existing products and processes? Let’s remember that an entity that was required to purchase a license due to infringement was likely not ‘innovating’ in the first place, rather it may have been copying someone else's work.

One can argue event that one of the main points of licensing is to shareexisting technology and save licensees the trouble and expense of developing some new technology on their own. Rather than focusing on innovation and “reinventing the wheel” perhaps the real takeaway from patent licensing is that it makes the whole process more efficient for all parties involved.

Entering into a patent license in no way discourages or prevents a licensee from innovating. In fact, a license could be seen to empower a licensee to further develop the licensed technology.

Innovative Start-Ups

Also, as both Quinn and the Wall Street Journal point out, some giant companies stoop to infringing others’ patents because they themselves have lost the ability to innovate effectively.

Licensing can be an effective method for transferring patent rights from agile, innovative startups, universities, and research labs to large and established (but less innovative) companies. Innovations generated by startups are a prime reason that larger companies buy startups and their intellectual property.

Also, by apparently looking at licensing only from the perspective of the licensees, the professors failed to take into account that licensing revenues both reward innovation on the part of the licensors and provide them with the capital to continue to innovate.

Unfortunately, given the pedigrees of the authors, the study will likely be taken seriously by those in a position to influence patent policy. Nevertheless, policymakers should be suspicious of academic conclusions that are based on questionable hypotheses and research methods.

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