patent trolls and innovation
Other than financial measures (like ROA) I can’t think of another firm-level variable that is more commonly used in organizational studies than patent activity. Patents are used to track everything from innovation to technological niches to social networks among scientists. Patents are an all-purpose measure because we think they are tightly linked to creativity and knowledge production, the engine that drives both science and capitalist enterprise. But what if this is increasingly not true? What if patent use is becoming decoupled from creativity?
This is one of the questions posed made by last week’s This American Life, my favorite NPR show and one of the most consistently interesting programs of journalism out there. The show talked about patent trolls – companies or individuals who acquire patents for the primary purpose of suing other actors who might use technology that potentially infringes on that patent. The show focused on the firm, Intellectual Ventures, and its founder Nathan Myhrvoid. Through a couple of interesting vignettes and sly investigations, they showed how the company uses lawsuits, brought by a number of shell companies, to get large settlements out of technology companies, some of which are struggling enterpreneurial groups. The show demonstrates how, rather than protect and promote innovation, increasingly patents are being used to stifle innovation by wiping out or financially weakening companies that are actually trying to bring innovation to the marketplace. Meanwhile, patent trolls sit on those patents and do nothing to advance the innovations.
This must have some implications for our current understanding of patents as indicators of creativity and innovation. One of the startling revelations in the program was just how much redundancy there is in the patent system. The number of patents issued that cover the same basic function is often in the thousands, especially in the software industry. Patents may be more indicative of turf wars than they are of real innovation.
Even if you’re not a technology scholar, I highly recommend that you listen to the podcast of the show.