Insights | Rationalising the Patents System

Most people know and accept the patent system as a mechanism for establishing ownership in fruits of the mind which, in the case of patents, are solutions to technical problems. But why is the patent system used? In this article we take a step back and consider the rationale for the patent system.

A patent essentially involves a quid pro quo: the state grants a set of exclusive rights to an inventor or his or her assignee for a limited period of time in exchange for the detailed public disclosure of an invention. Patents are intended to encourage and facilitate the public disclosure of innovations for the common good. Once the term of a patent expires – generally twenty years from filing the patent application – the invention can be exploited and improved by other inventors. On the other hand, if inventors did not have access to the legal protection afforded by patents, they would have been reluctant (or more reluctant) to disclose the details of inventions and would have preferred to keep their inventions secret, thereby stifling innovation.

The most popular argument in favour of the existence of the patent system is found in the so-called “incentive theory”. According to this theory, the patent system induces both innovation and investment in innovation.

In simple terms, patents provide incentives for economically efficient research and development (R&D). Naturally, once an invention has been made available to the public, the risk arises that it will be copied by a competitor. Patents aim to prevent this from happening. If the patent system did not exist, it would be difficult to convince companies to invest in R&D, as there would be no way (apart from a few common law remedies) in which to prevent competitors from reverse engineering a product once it becomes commercially available.

The incentive theory is best illustrated in the pharmaceutical industry, where the cost of commercialisation of a pharmaceutical product is far more than the initial conception cost, but also applies to many other fields of technology, such as computer processors and certain chemical technologies.

Although not part of the original rationale for the patent system, the patent system has in modern times had the effect of both enabling and incentivising competitors to “invent around” patented inventions. The publicly available details of an invention enables other inventors to adapt technology to an extent that it no longer falls within the scope of a patented invention (in many cases even improving on the original invention), while the exclusive rights afforded by a patent essentially forces competitors to do the “inventing around” in order to survive in the market. In this context a patent could therefore, counter-intuitively, also be regarded as being conducive to innovation.

There are, of course, many who are critical of the patent system. Such critics’ concerns are usually based on socio-economic arguments. It is not the aim of this article to discuss these concerns, but mechanisms already exist to address such concerns by balancing the rationale for the existence of the system and the right to property with the justified necessity to avoid real socio-economic prejudice. It is submitted that, in most cases, any real socio-economic prejudice can be addressed within the framework of the patent system as it stands, which already provides for the relaxation of patent rights in such cases.

Winston Churchill once stated: “Democracy is the worst form of government, except for all the others.” Perhaps his words also hold true for the patent system.

By Hugo Biermann | Patents Department Adams & Adams