Week 14: Its all about Incentives

This week I met with 'Polsinelli Shalton Welte Suelthaus' an Attorney in Kansas City to discuss Intellectual Property. As the business plan for myself and partner Luke, comes together, there is a lot of things we need to discuss and make decisions on. One of the decisions is whether it is worthwhile patenting our idea.

Pro's

• A patent can potentially make it easier to get funding: more credibility
  
• A patent gives you the right to sue those that infringe on your idea
• A patent allows you to license the technology out

Con's

• There a lot of fees associated with patents
• Having the right to sue an infringer is often pointless if you have no money to go through with a court battle: a large company can trample all over a small one just because they have more money
  

The US System
There are also some of patent issues which have arisen in the US in the last 20 years highlighted by the book by Adam B. Jaffe and Josh Lerner "Innovation and its Discontents". The book clearly explains the issues:

• The likelihood of receiving a patent has risen
• The likelihood of winning a law case against an infringer has risen

Why is this a problem? For the patent holder its not! however for the rest of the economy it is. Individuals and companies have patented the most ridiculous things over the last few years. For example a 5 year old girl in the US owns a patent called: 'A Method for Swinging a Swing' . Amazon owns a patent for '1-click ordering'. (Even better 'Method of Exercising a Cat'). How did the system get to this?

Simple: its all about incentives! 2 Changes in the 1980's Patent Law changed the incentives completely

• The Patent Office was no longer Funded by the US government and instead had to fund itself from issuing patents!
• In 1984 The Board of Patent Appeals and Interferences consolidated into 1 board.
  

Now the Patent Office - in order to stay profitable - needs to file more patents. And the appeal board, once a precedent had been set stuck with the precedent rigidly: it had been made in their own building.

Incentives
Its my view that laws, which ultimately characterize incentives control the global economy. If a person has the power to incentivise a market place, they control it. The effect of incentives greatly outweigh any other: culture, intelligence, capital. These things will come to the market if the market has the right incentives. (Look at Dubai - heres links to pictures comparing 1990 - 2003).

What can the UK do to increase entrepreneurship? Change the incentives: change the law.