Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Markets outperform patents in promoting intellectual discovery

09.03.2009
Winner-take-all patent system in need of an overhaul, researchers say

When it comes to intellectual curiosity and creativity, a market economy in which inventors can buy and sell shares of the key components of their discoveries actually beats out the winner-takes-all world of patent rights as a motivating force, according to a California Institute of Technology (Caltech)-led team of researchers.

In a paper published in this week's issue of the journal Science, an international team of researchers led by Peter Bossaerts, the William D. Hacker Professor of Economics and Management and professor of finance at Caltech, and Swiss Finance Institute Professor at the Ecole Polytechnique Federale Lausane in Switzerland, describes a series of experiments designed to quantify the different ways patent systems and market forces might influence a person's drive to invent, to solve intellectual problems.

Over the last hundred-plus years, the patent system has been the gold standard by which we've protected and tried to incentivize intellectual discovery. But Bossaerts and his team--which includes Debrah Meloso from Bocconi University in Milan, Italy, and Jernej Copic from the University of California, Los Angeles--now say there's a new game in town. Or, rather, an old game--the same free-market forces that drive so much of our economy.

The problem with patents, Bossaerts explains, is that they "give the prize to the winner only. Whoever comes in second or third walks away empty." This means that, for the patent system to work well, "a large number of people need to think they're the absolute best." The economic theory that motivated patent regulation even assumes that all people have an equal chance of being the best, he adds.

In reality, Bossaerts says, that's not how people think. Very few of us think we're the person most likely to come up with a unique solution to a problem before anyone else--and so very few of us are likely to even try to solve a difficult problem. We just assume that someone else will beat us to the patent punch.

On the other hand, Bossaerts notes, studies have shown that more than 50 percent of people think they're better than the median--a statistical impossibility, but one that can be exploited in the marketplace to generate trade.

The researchers were able to provide concrete evidence for these ideas by running a series of experiments in which participants were asked to solve what is known as "the knapsack problem." In the knapsack problem, participants are given a large number of items to pack into a knapsack that cannot possibly hold all of the items; their job is to try to figure out how to maximize the number of "valuable" items they can fit into the knapsack.

"These aren't always the most expensive items," says Bossaerts. "For instance, if you're packing the knapsack to go on a trip, one of the items you would consider most valuable would probably be a toothbrush."

Participants in Bossaerts's knapsack experiment had to solve one set of problems under a regime that worked in much the same way as a traditional patent system, with a $66 reward for whoever figured out the solution first.

The second set of problems was to be solved in a kind of free-trading market regime. Each item that could go into the knapsack was given a different price, and each participant was given five securities per item at the beginning of the experiment. They were then encouraged to buy and sell their securities for the various items, stocking up on shares of items they believed were likely to be included in the problem's solution, and getting rid of shares of items they thought would be left out of the knapsack.

Once the solution was revealed, the securities of the left-behind items became worthless, while the participants who had bought up shares of the included items were allowed to keep their earnings of $1 a share. While nobody won the full $66 as in the patent groups, several people in the market groups were able to benefit financially from coming up with a workable solution to the problem.

That solution didn't even have to be the optimal one, Bossaerts notes. "They didn't have to fully solve the problem to benefit financially," he explains. "They could solve only part of the problem--figure out a few items they believed would be in the solution, or those they thought wouldn't be there--and focus buying and selling those."

This resulted in a large number of different people trying different ideas each time the game was played. Allowing people to benefit even if they only tackle a part of a problem might well lead to more collaboration, and to the faster development of a final solution to the whole problem, Bossaerts adds. "This is important, because the nature of knapsack problems is such that one can only be sure that the optimal solution has been found after one has tried everything," he says.

To 'win' in the patent group, on the other hand, required coming up with the right answer first, which seemed to remove the incentive for the large majority of participants to even attempt solving the problem. "In one example, there was a woman who won a couple of times in a row," Bossaerts recalls. "She had over $120, and everyone else had nothing. They just gave up trying, saying, 'Why bother? She'll just figure it out before us anyway.'"

How would these sorts of market forces work in the "real world"? Bossaerts uses the concept of scientists working to invent a fuel-cell catalyst.

"If a scientist is really convinced that platinum, for instance, is the best catalyst for his fuel cell, the best way to go, he would go out and buy a bunch of platinum futures, knowing that once his invention got into the public domain, the items that go into that invention--in this case, platinum--will go up in price."

Without a patent on the invention, other people would also be free to create platinum-based fuel cells. But there would still be a benefit to being the first: That inventor would be the one able to buy up platinum futures when the prices were at their lowest. "In the market system, if you're first, you still have the advantage," Bossaerts explains. "But you also give the second and third person a chance to profit from their work as well."

Bossaerts's next step is to try to collect data to explain why the market system works. "Our conjecture is that it's due to this idea of overconfidence, that most people think they are better than most other people. But this study wasn't able to test that idea specifically, so we're hoping to do that in future studies."

Bossaerts is well aware that his ideas--even with solid data to back them up--are controversial. People are very protective of their patents, and of the system that guards them, he says. But in reality, says Bossaerts, his team's findings should be seen as reassuring, rather than threatening.

"The take-home message from this study is that one should not be too nervous about protecting intellectual property," he explains. "There are other ways you can benefit from your efforts as well, as long as you have a functioning free market economy in place. Even if you get rid of most patent laws, people will still innovate."

Lori Oliwenstein | EurekAlert!
Further information:
http://www.caltech.edu
http://pr.caltech.edu/media

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: LaserTAB: More efficient and precise contacts thanks to human-robot collaboration

At the productronica trade fair in Munich this November, the Fraunhofer Institute for Laser Technology ILT will be presenting Laser-Based Tape-Automated Bonding, LaserTAB for short. The experts from Aachen will be demonstrating how new battery cells and power electronics can be micro-welded more efficiently and precisely than ever before thanks to new optics and robot support.

Fraunhofer ILT from Aachen relies on a clever combination of robotics and a laser scanner with new optics as well as process monitoring, which it has developed...

Im Focus: The pyrenoid is a carbon-fixing liquid droplet

Plants and algae use the enzyme Rubisco to fix carbon dioxide, removing it from the atmosphere and converting it into biomass. Algae have figured out a way to increase the efficiency of carbon fixation. They gather most of their Rubisco into a ball-shaped microcompartment called the pyrenoid, which they flood with a high local concentration of carbon dioxide. A team of scientists at Princeton University, the Carnegie Institution for Science, Stanford University and the Max Plank Institute of Biochemistry have unravelled the mysteries of how the pyrenoid is assembled. These insights can help to engineer crops that remove more carbon dioxide from the atmosphere while producing more food.

A warming planet

Im Focus: Highly precise wiring in the Cerebral Cortex

Our brains house extremely complex neuronal circuits, whose detailed structures are still largely unknown. This is especially true for the so-called cerebral cortex of mammals, where among other things vision, thoughts or spatial orientation are being computed. Here the rules by which nerve cells are connected to each other are only partly understood. A team of scientists around Moritz Helmstaedter at the Frankfiurt Max Planck Institute for Brain Research and Helene Schmidt (Humboldt University in Berlin) have now discovered a surprisingly precise nerve cell connectivity pattern in the part of the cerebral cortex that is responsible for orienting the individual animal or human in space.

The researchers report online in Nature (Schmidt et al., 2017. Axonal synapse sorting in medial entorhinal cortex, DOI: 10.1038/nature24005) that synapses in...

Im Focus: Tiny lasers from a gallery of whispers

New technique promises tunable laser devices

Whispering gallery mode (WGM) resonators are used to make tiny micro-lasers, sensors, switches, routers and other devices. These tiny structures rely on a...

Im Focus: Ultrafast snapshots of relaxing electrons in solids

Using ultrafast flashes of laser and x-ray radiation, scientists at the Max Planck Institute of Quantum Optics (Garching, Germany) took snapshots of the briefest electron motion inside a solid material to date. The electron motion lasted only 750 billionths of the billionth of a second before it fainted, setting a new record of human capability to capture ultrafast processes inside solids!

When x-rays shine onto solid materials or large molecules, an electron is pushed away from its original place near the nucleus of the atom, leaving a hole...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

“Lasers in Composites Symposium” in Aachen – from Science to Application

19.09.2017 | Event News

I-ESA 2018 – Call for Papers

12.09.2017 | Event News

EMBO at Basel Life, a new conference on current and emerging life science research

06.09.2017 | Event News

 
Latest News

Fraunhofer ISE Pushes World Record for Multicrystalline Silicon Solar Cells to 22.3 Percent

25.09.2017 | Power and Electrical Engineering

Usher syndrome: Gene therapy restores hearing and balance

25.09.2017 | Health and Medicine

An international team of physicists a coherent amplification effect in laser excited dielectrics

25.09.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>