The Patent Racket: How Monopoly Rights Insulate Corporate Deadwood

[A slight departure from my usual topics, but given that one of my clients was a multinational firm of Patent Lawyers…]

Or: How Patents Negate Business Improvement Incentives

For decades, policymakers and capitalists have peddled a revisionist fairytale about the patent system. We’re assured that these government-granted monopolies are a necessity, incentivising the innovation that fuels economic progress. But is this intellectual property fiction obscuring an uglier truth?

Dig deeper, and it becomes clear that rather than driving competition and creative destruction, patents are too often a grotesque corporate lifeline perpetuating stagnation and inefficiency. By erecting fortresses around mediocre inventions, they empower underperforming firms to evade the brisk winds of true market forces.

The Monopoly Malaise

At their core, patents gift companies a temporary but ironclad monopoly over their claimed inventions. During this protective window, other firms are legally barred from independently developing or commercialising that technology without harsh penalties. Rent seeking abounds.

This monopolistic power acts as a force-field, enabling inefficient, unproductive corporations to shrug off the pressures and disruptive threats that typically weed out business deadwood. With competitors theoretically kept at bay by infringement risks, the impetus for continuous operational improvement or cost optimisation is dismayingly diminished.

Low Patent Quality Compounding the Problem

Indeed, many jurisdictions grant objectively low patent quality thresholds. Coupled with the broad patent eligibility for software and business methods, it becomes evident how easily patents can solidify corporate malaise and market stagnation under the guise of “promoting innovation.”

Obstructing Disruptive Innovation

The negative effects of this dysfunctional system spread far beyond individual companies, harming national economies and society as a whole. By propping up and protecting incumbents that underperform, patents directly impede the process of creative destruction described by economist Joseph Schumpeter. This “creative destruction,” where new innovative companies can challenge and replace stagnant incumbents, is crucial for sustained economic prosperity and growth. However, the monopoly power granted by patents obstructs that renewal process.

Disruptive startups and nimbler challengers with truly innovative and efficient technologies face imposing patent armouries held by establishment titans. Even when their novel solutions markedly improve upon what came before, outdated titans can brandish their government-approved monopolies to litigate or hamstring these competitive threats.

The Patent Arms Race Distortion

In many industries, incumbents nowadays compete not through fireworks of innovation but via gamesmanship of their patent portfolios. Funds that could be productively reinvested into R&D and operations are instead diverted into securing banal patents or defending against infringement claims from rival rent-seekers.

Escaping the Captive State Cycle

This myopic reliance on patents actively impedes dynamism and resilience across economic ecosystems. It perpetuates an entrenched corporatocracy of lumbering, low-productivity enterprises shielded from disruptive competitive renewal.

Apologists may well cite patents as an imperfect necessity somewhere on the policy tradeoff curve. But the self-serving delusion that this suspect monopolist nonsense improves business productivity or customer outcomes would be almost comical if the consequences weren’t so pernicious.

Perhaps it’s time to interrogate whether today’s patent system is beyond saving from its own contradictions. Productive companies might choose the freedom to thrive or wither based on their operational merits in a free market rather than fight subsidised stagnation behind legalised fortresses. Only then can vibrant innovation and economic paradigm shifts truly flourish.

The Heavy Tolls of Patent Protectionism

To recap, some of the key ways patents restrict open competition and shield inefficient businesses:

• Funds diverted away from productive operations toward paying licensing fees to rent-seekers
• Reduced freedom to operate and delays from patent thickets
• Resources squandered on defensive patenting and “design-arounds”
• Geographic constraints on market access from having to pay licensing fees across jurisdictions
• Difficulties attracting talent due to patent liabilities and litigation risks from rent-seekers

While patents may incentivise some innovation, their monopolistic downsides appear to be increasingly overpowering any societal benefits in many industries. As we strive for a more dynamic, competitive, and productive economy, its it past time to soberly reassess outdated patent doctrine driving the opposite?