Business Unusual

Patents were created to protect innovation. After 600 years, do they still work?

There were 67 million cars manufactured in 2014, a tiny portion of those were electric. Tesla, while not at full production yet, can produce less than 100 000 a year. The CEO of Tesla Motors, Elon Musk, knows he can't make enough electric cars to offset the climate impact of combustion engines so in June he made all the Tesla patents open for those wanting to make electric vehicles in order to speed up the adoption of electric vehicles.

Patents are supposed to protect innovation, yet Musk believes the patents were blocking innovation, not protecting it.

When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.

Elon Musk

What is a patent?

First issued almost 600 years ago they allowed for the public disclosure of new inventions and innovations that would allow the holders to earn revenue from those choosing to use the new options, protect them from others claiming they had invented the item, or process, and to encourage people to develop and share new ways to do things.

The earliest were for the glass makers of Venice, the original Silicon Valley.

Typically they protect the non-permitted commercial use of the patent for 10 to 20 years. In most countries they are civil breaches so action against those that infringe on a patent need to be pursued at your own expense via the courts.

Given the nature of the lodged patents, and the sometimes detailed law that applies, attempting to pursue or defend a claim requires specialist legal teams that could make it a costly exercise for innovators without the financial means to protect their rights. There is still a good reason to register patents in that at least someone else can't prevent you from applying your invention commercially because they did register it.

Where is the disruption coming from and who is being disrupted?

This may be a contentious point, but the efforts to reform patent law are not welcomed by everyone. Patent registration volumes have increased significantly over the last decades creating a sizable market for patent attorneys. Standardising and simplifying the system could reduce their market and certainly their margins.

Some have called Musk a hypocrite for his decision. (They do reflect the interests of patent attorneys)

There is no call to do away with patents or the legal experts that would see them protected. However, an indication of the growing issues with patents can be seen when comparing the number of Google searches for "Patent registration" with "Patent troll".

The firm Intellectual Ventures are both one of the largest IP firms and, on occasion, has been part of the issue with finding the right balance between protection and competition.

While trolls are an unwelcome addition to the industry, they do not define it. The challenge is finding a better way to return to the original principles of the why patents were created, to make innovation public and to offer the innovators a return for their effort.

Currently it is a costly and complicated process to register a patent and you still would need to submit them to multiple agencies to get global protection.

Licensing can be complicated and expensive too, resulting in alternatives being used to avoid the effort and cost rather than to benefit the end users. While not a patent issue, the point can be illustrated with the multiple remotes and charging connectors you use - would it not be easier if they were standardised?

It is a complex issue with good arguments on both sides.

It is fair to say that technology improvements, and rapid expansion of what can be done with it, has created disruption for a patent system that is not sufficiently able to address it. The process to correct that will see regulators battle both those wanting to maintain the status quo and those looking to overhaul the system.

For a final summation consider John Oliver's segment on patent law reform and the IPWatchdog's response to it.

In South Africa, the South African Institute of Intellectual Property Law represents the patent attorney industry, while globally the World Intellectual Property Organisation co-ordinates how this is managed.

The current Patents Act 1978 (Act No. 57 of 1978, as amended up to Act No. 49 of 1996) is being reviewed with an updated law due for 2015.


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