Inventive incentives and the myth of IP

I received some interesting comments lately on the general theme of ‘How can small companies and lone inventors possibly survive if they don’t have patents with which to defend their intellectual property?’ What follows is a response to that, as well as an extension of my earlier posts on this subject.

The declared purpose of patents is to promote innovation within a given country. An inventor is supposed to obtain a period of monopoly, in return for publishing his or her invention in detail (so that, later everyone can make use of it).

Governments thus seem to believe that:

  • it’s their role to promote innovation…although I’m not sure I’d accept that
  • a monopoly is necessary because, without that, no one would invent (which is just nonsense).
  • Patents work pretty well for big companies (even if the implementation details form a bureaucratic nightmare). These organisations can afford to play the game and, if they find themselves opposed by an inventor with a patent, then they can choose to ignore it in the knowledge that he or she can’t afford access to meaningful legal support. (There are alternatives to the patent business, such as prizes, but these have many difficulties of their own. Governments can declare that they seek eg a cure for cancer but then have to apportion rewards to a variety of different, competing part-solutions).

    When trying to design a fair system for promoting and rewarding inventiveness, the first thing to get clear is that Research and Development are fundamentally different things. Here comes the Science part…

  • Research happens when you stumble on discoveries (even if you are hoping to find a cure for cancer or a replacement for the petrol engine at the time).
  • Development occurs when you work to deliver a product to match, as closely as possible, a multidimensional specification derived by marketing experts.
  • In that sense, coming up with an idea is very much more like research. Nobody knowingly ‘invests’ in research. What I mean by that is twofold:

  • investors, who always want to see a return, don’t tend to put money into the random walk that is the research process
  • it’s actually not possible to do anything other than spending on research. “Shell out the money, wait and hope” is not an investment strategy. Investment and Spending should not be confused.
  • So when someone has a brilliant idea, I’d argue that whoever is paying them, or whoever trained them, or whatever their declared objective, the idea was never ‘invested’ in -in that no sane investor would apply their funds without seeing a credible plan for how they would create a significant surplus.

    Hire a group of creative, well-educated people and they will come up with 1000s of ideas; maybe 1% of which will ever be any use to anyone. It doesn’t mean that their funder invested in the ideas. He or she simply spent a lot of money. Societies recognise the benefits of research, so they spend money on Universities.

    When an inventor comes up with something novel, lots of people start saying “I invested in that person, so I own the idea (because it wouldn’t have happened without my money/facilities/lectures)”. I see it all the time, when universities start demanding to own a % of their students’ inventions.

    Ultimately, we can’t trace the causality within a creative process, so I’d argue the ideas aren’t where the value is, it’s in the people. In a sense, and inventors really get this, when an ‘aha’ moment occurs, the person to whom it happens can’t really take credit for it. It’s not something they willed into existence.

    Ideas aren’t a form of property. We should stop acting as if they were like cars, or land or jewellery. Intellectual property, including patents, is an expedient construct, rather than as fundamental to innovation (Richard Stallman has commented on this blog in a similar vein).

    So what would it mean for business, if we stop granting patents for example?

    Wouldn’t corporations stop innovating and cause the end of civilisation? Well, large industrial companies almost never come up with novel ideas ideas anyway. Their gameplan is to compete on the basis of efficient marketing, product design, development, manufacture and distribution. Think for a moment about why Open Innovation has become such an attractive option for many corporates. Also-

    Since the second world war 95% of all the radical new inventions have come from businesses employing less than 5 people. The formation of those businesses is critical to our economic success
    David Irwin DTI 2001

    If a company launches products that others can copy, then it seems to me that red-blooded capitalists should accept that they need to compete at the things they do best -not try to threaten and close-down the opposition.

    Instead of controlling ideas, they should do temporary, exclusive deals for the (future) creativity of people who seem able to have good ones (as evidenced by competitions, publications and yes, blogs like this). It’s accepted among venture capitalists that a great idea is largely worthless without a great team of people and that, similarly, a super team can be later reassigned to work on someone else’s genius idea.

    Ideas, it’s often said by those who don’t have them, are ten-a-penny. The people who can actually have a good idea, capable of underpinning a profitable product, are however, relatively few. If companies have to compete to sign contracts with these folk, the Inventives, let’s call them, then the fee rate for their work will soar and companies will increasingly be forced to behave ethically, for fear that the talent will go elsewhere.

    SMEs may have an advantage under this regime by being able to deal with their Inventives in a more personal, responsive way. A few great ideas will also keep an SME going with product development for a longer period than would be the case for a multinational with numerous product lines to support. Even if ACME Corp. can re-engineer and undercut SME products, SMEs will often be better placed to react fast, with highly personalised products and services and thus sustain international customer relationships.

    Not convinced? Just think for a few moments about the effect of the Internet. Now, garage-startups can design, advertise, remotely manufacture and sell high-value, products -without themselves ever needing to build a factory or hire a ‘workforce’. Increasingly, big corporates are only service-based brands at the head of a pyramid of small manufacturers anyway. If you are a smart SME, you clearly won’t take on corporate competition head-to-head, but you’d never have succeeded at that -with or without patents. SMEs have always had to defend their niches without patents.

    What’s in all this for big companies? First, they get to stop pretending they do research or inventing and can cut the associated costs. They also save on all of that potential litigation and all those retained lawyers. Best of all is that they can hire, on fees, the best Inventives they can afford and end up paying much less per successful product than they would ever have done if they had had to negotiate with an external patent-holder.

    How about academe? Well Universities are currently plagued by guilt at their inability to commercialise the ideas they generate. Professors, under the new patentless system, would be free to act as Inventives for companies and not have to worry that they might be ‘giving away ideas worth a fortune’.

    The incentive for Inventives would be improved too -by avoiding all threat of infringement suits and their crippling costs. People who can invent one good thing can repeat the process. It’s part of their DNA and they do it for fun, to become respected, to be useful and to make some money too.

    My solution would therefore be to:

  • stop awarding patents, since they discriminate against the most innovative
  • launch some very high-value competitions so that our best Inventives can be identified and
  • start negotiating deals for the future value they can create.
  • In 20 years, we can have removed forever the brake on progress which patents represent.


    1. Just in case anyone reads the above and brands me naive, I’d like to reassure them that I spend a big fraction of my working week negotiating business based on intellectual property. It’s a brutal activity from which creative or thoughtful types often shy away. Certainly, it inhibits numerous forms of inventiveness and supports legalised bullying. With the administrative and legal breakdown of the patents system, which can’t keep pace with internet speed, it’s becoming much less attractive even to big companies. Sometimes the process reminds me of golddigging for virtual goods- but until some government recognises the problems, and limits this beanfeast for lawyers, I still have to eat!

    2. Another issue I’ve heard expressed concerns how inventors would get paid. Well any number of ways are possible.

      It might involve an upfront fee for say 3 months’ work (at N times the rate for conventional consulting, where N would be negotiated based on an individual’s reputation for great new product ideas).

      Or it might involve some form of advance fee, together with a % of ultimate sales revenue. Obviously, Inventives and companies would have to sign NDAs to maintain secrecy at least until product launch.

      In either case, companies would have to commit to some payment in advance of any deliverable…but the amounts would be -smaller than when eg licensing a patent, controllable by contract and thus there would be effectively zero litigation cost.

      This isn’t new; it’s the same model that technology consultancies have always used, but centred around those individuals who have the best ideas. Perhaps it can be thought of as working with Philippe Starck or Ron Arad but directed towards creating real working products, not show-off concepts.

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