Do Patents Truly Promote Innovation?

Do patents actually promote innovation and economic growth?

We know from the historical record that in 19th century America, at least, most observers had no doubt that that the patent system was absolutely vital to U.S. economic success.

Sir William Thompson, a British inventor and scientist attending the 1876 Centennial Exhibition in Philadelphia, looked at the amazing array of American inventions — including Bell’s telephone, the Westinghouse airbrake, Singer’s sewing machines, and Edison’s improved telegraph — and told Scientific American that “if Europe does not amend its patent laws, America will speedily become the nursery of useful inventions for the world.”

Meanwhile, the Swiss Commissioner in attendance, the shoe manufacturer Edward Bally, offered a similar warning to his Old World countrymen. “American industry has taken a lead which in a few years may cause Europe to feel its consequences in a very marked degree.”

Then there’s Japan’s Assistant Secretary of State Korehiyo Takahashi, who visited the U.S. Patent Office. Upon his return home, he said: “What is it that makes the United States such a great nation? We investigated, and we found it was patents. And we will have patents.”

Even the British jurist and historian Sir Henry Sumner Maine, who had once argued that “the establishment of the masses in power is the blackest omen” for the future of invention, later changed his tune. He conceded that the U.S. patent system was “one of the provisions of the Constitution that have most influenced the destinies of the American people” and that it had made the United States “the first in the world for the number and ingenuity of [its] inventors.”

As economic historians Naomi Lamoreaux of Yale and the late Kenneth Sokoloff of UCLA concluded, “The U.S. patent system had a powerful impact on the patterns of inventive activity. Its provision of broad access to property rights on new inventions, coupled with the requirement of public disclosure, was extremely effective at stimulating the growth of a market for technology and promoting technological change.”

Or in Abraham Lincoln words, it ‘added the fuel of interest to the fire of genius.’

But that was then. What about now?

In recent years, a great many studies of the real-world impact of patenting on innovation and economic growth (many available for free on point to its beneficial effects. Arrow (1962), Griliches (1963), Schmookler (1966), Kitch (1977), Reinganum (1981), Tirole (1988), Klemperer (1990), Romer (1990), Giulbert and Shapiro (1990), Grossman and Helpman (1991), Aghion and Howitt (1992), Scotchmer (1999), and Gallini (2002) all found that patents foster ex ante innovation — meaning, they induce people to invent because of the prospect of reward.

Invention, it has been shown, is driven primarily not by genius or happenstance but rather by markets and the expectation of the profit that can be gained by securing the patent rights to new technologies. Zorina Khan of Bowdoin College and the late Kenneth Sokoloff at UCLA found that among the “great inventors” of the 19th century, “their patterns of patenting were procyclical [and] responded to expected profit opportunities.” And as Khan noted elsewhere, “Ordinary people [are] stimulated by higher perceived returns or demand-side incentives to make long-term commitments to inventive activity.”

By contrast, in countries without patent rights, Barro (1995) found that people have an “excessive incentive to copy” and insufficient incentive to invent for themselves. Moser (2004), meanwhile, reported that “inventors in countries without patent laws focus on a small set of industries … while innovation in countries with patent laws [is] much more diversified.”

The evidence that patents foster innovation is not confined solely to the U.S. or even to developed countries. In 2008, a study by the Organization for Economic Co-operation and Development (OECD) found that “stronger levels of patent protection are positively and significantly associated with inflows of high-tech product [and] expenditures on R&D.”


And in a study that attracted wide attention, Shih-Tse Lo of Concordia University in Montreal reported that the reforms strengthening the Taiwanese patent system in 1986 “stimulated additional inventive activity, especially in industries where patent protection is generally regarded as an effective strategy for extracting returns, and in industries which are more R&D intensive. The reforms also seemed to induce additional foreign direct investment in Taiwan.” But such benefits did not accrue across all sectors of the economy. “For industries that chiefly use other mechanisms to extract returns from their innovations, such as [trade] secrecy, the strengthening of patent rights had little effect on their inventive activity.”

In addition to encouraging ex ante innovation, Acemoglu, Bimpikis, and Ozdaglar (2008) discovered that “patents [also] improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms.”

Given that patents grant exclusionary rights, some will be surprised to learn that the patent system is actually one of the most effective tools for knowledge-sharing and technology transfer ever devised. A 2006 study by French economists Francois Leveque and Yann Meniere found that 88 percent of U.S., European, and Japanese businesses rely upon the information disclosed in patents to keep up with technology advances and direct their own R&D efforts.

This is hardly a new phenomenon. The inventor Elias E. Reis reported that when he read in the Official Gazette in 1886 about a patent issued to Elihu Thomson for a new method of electric welding, “there immediately opened up to my mind a field of new applications to which I saw I could apply my system of producing heat in large quantities.” And Thomas Edison was known to frequent the patent office to study other inventors’ patents and spark ideas of his own.

Indeed, new research published last year found that rather than blocking development, Thomas Edison’s seminal 1880 incandescent lamp patent  (No. 223,898) actually “stimulated downstream development work” that resulted in “new technologies of commercial significance [including] the Tesla coil, hermetically sealed connectors, chemical vapor deposition process, tungsten lamp filaments and phosphorescent lighting that led to today’s fluorescent lamps.”

As Sokoloff and Naomi Lamoreaux at Yale (1997) observe, “The very act of establishing exclusive property rights in invention not only protected patentees but also promoted the diffusion of information about technology. To see why, imagine a world in which there was no patent system to guarantee inventors property rights to their discoveries. In such a world, inventors would have every incentive to be secretive and to guard jealously their discoveries from competitors [because those discoveries] could, of course, be copied with impunity.

“By contrast,” they noted, “in a world where property rights in invention were protected, the situation would be very different. Inventors would now feel free to promote their discoveries as widely as possible so as to maximize returns either from commercializing their ideas themselves or from [licensing] rights to the idea to others. The protections offered by the patent system would thus be an important stimulus to the exchange of technological information in and of themselves. Moreover, it is likely that the cross-fertilization that resulted from these information flows would be a potent stimulus to technological change.”

One need only look at the extraordinary growth of the smartphone industry to see the truth of that analysis. Does anyone believe we would have witnessed the rapid emergence of smartphone devices requiring major contributions from four intensely-competitive industries — mobile phones, electronics, computing, and software — under a trade secret regime?

Impossible. Only a patent system enabling the cross-licensing of know-how across industries could have produced the extraordinarily-successful smartphone industry we see today.



The response of some academics to all this is, “Yes, but you cannot prove causation.

And it’s true, one cannot prove theoretically that the patent system by itself causes higher rates of innovation and economic growth. That’s because the exogenous factors — the dynamism of markets, the efficacy of legal and governmental institutions, the availability of capital, and the role of countless other factors — are far too complex and interdependent to isolate causation to patents alone. It’s like trying to pinpoint ultimate causation in the weather. It can’t be done.

But then no one can even prove that free market capitalism — isolated from all the legal, educational, economic, governmental and cultural institutions that surround it in any country — causes more economic growth than a socialist, government-run economy, either. All we can do is look at actual real-world experience, including the fact that 74 years of socialism in the Soviet Union failed to produce even a single decent refrigerator or consumer product, and conclude that free markets are strongly correlated with greater economic prosperity.

The same is true of the patent system: on balance and over the long term, it is strongly correlated with increased technology innovation, knowledge diffusion, and economic growth.

In addressing problems regarding patent quality and abusive “patent troll” litigation, therefore, we should proceed with caution in considering legislation that may have unintended consequences. Far better to focus on judicial reforms that “do no harm” to a patent system that for two centuries has been central to U.S. economic success.


Warning & Disclaimer: The pages, articles and comments on do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of Read more.

Join the Discussion

14 comments so far.

  • [Avatar for Gene Quinn]
    Gene Quinn
    May 13, 2014 03:23 pm


    Your comment is full of condescending statements and absolutely no evidence. The facts are overwhelmingly against you, yet you retreat the “correlation is not causation” argument. Well, when correlation is 100% of the time and the other side has no factual support just theory, that means the overwhelming factual, objective evidence proves me correct.

    For your information, is a forun where intelligent and thoughtful commentary is not only expected, but required. Your inability to engage on the facts and resort to condescending commentary that offers no substantive content is simply unacceptable. This brand of commentary does nothing but get in the way of substantive discussion.

    Furthermore, what I said was 100% true. If patents stifle innovation then those countries without a patent system would show run away innovation, which is simply not the case. Countries without a patent system have no innovation, and they also have no economy. I know that is an inconvenient truth for which you have no answer, but facts are facts.

    You are banned.


  • [Avatar for Claude]
    May 13, 2014 02:25 pm

    Dear Gene,

    Patents stifle innovation.

    You are hopeless.You will never see the light. After all, you did in fact write: :” If you are correct, and that ridiculous statement were correct, that would have to mean in countries where there is no patent system there would be run-away innovation. Of course, the exact opposite is true. In countries where there is no patent system there is no innovation. That really conclusively proves you are wrong.”

    EXCERPT: “If you are correct…. that would have to mean …….. Of course, the exact opposite is true. In countries where there is no patent system there is no innovation”

    This is incredible. For goodness sake Gene, and, specially for your own sake, never utter this phrase again. It shows and expresses a degree of illeteracy that is damning and shameful. You should profusely, apologize to all IPWatch readers.

    You, as this evidence shows so definitely, have no clue of what constitutes a causal relationship between independant variables:

    As if this was nor enough, you have little or no understanding of the complex nature of the innovation process.

    No Gene, it should not and could not mean this absurd extrapolation: As you put it: “in countries where there is no patent system there would be run-away innovation” As Kline explains explicitely (see above), there is no direct link or proven or demonstrable causal effect linking patent protection and innovation

    So this false assertion that you keep repeating is absolutely shameful. You should profusely apologize to all readers of this blog for deliberately misleading them as you keep repeating opinions dressed as evidence.

    Gene, you need to get outside your bubble and seek help: you need to read and reread carefully and attentively the data reported in those references cited in the post #11 (see above). and take the necessary steps to consult someone who could explain their significance and teach you how to draw some meaningful and reliable conclusions supported by the evidence.

    You wrote: “Anyone who is at all objective can see that patents foster innovation, and only irrational ideologues could conclude otherwise.” – See post #11. The proof showing that this assertion is equally false is there for all to see.

    Gene, you owe this much to the readers of the IPWatch blog.


  • [Avatar for Gene Quinn]
    Gene Quinn
    May 13, 2014 11:39 am


    You are wrong.

    The supposed glut of patents hasn’t stopped innovation in the smart phone market, has it? Nope. And those countries without a patent system, or with a weak patent system, rank at the bottom of the list in terms of economic activity, median income, education and innovation. You see, the overwhelming, objective, factual evidence clearly demonstrates that patents foster innovation, and proves you wrong.

    In order to help you become better informed so that you don’t make such ridiculous statements in the future I recommend you read these three articles:

    Anyone who is at all objective can see that patents foster innovation, and only irrational ideologues could conclude otherwise.


  • [Avatar for Claude]
    May 12, 2014 04:57 pm

    Folks: Patents stifle innovation

    There is an abundance of unassailable evidence, be it empirical or intuitive, all converging to put down this MYTH

    THE MYTH: “…. innovation will be spurred by the prospect of patent protection, leading to the accrual of greater societal benefits than would be possible under non-patent systems.”

    One cannot and must not toss aside or, worst, ignore basic facts taken from credible (e.g., competent and objective) investigations as do promoters of patent systems.

    FACTS: HISTORICALLY, “the initial eruption of small and large innovations leading to the creation of a new industry – from chemicals to cars, from radio and TV to personal computers and investment banking – is seldom, if ever, born out of patent protection and is, instead, the fruits of highly competitive-cooperative environments.”

    “The case against patents can be summarized briefly: there is no empirical evidence that they serve
    to increase innovation and productivity, unless the latter is identified with the number of patents awarded which, as evidence shows, has no correlation with measured productivity.” …”There is strong evidence, instead, that patents have many negative consequences.”

    “The majority of inventions are not patented ……..given the fact that most invention takes place outside the system, it is difficult to make the case for patents as a necessary prerequisite to stimulate innovation.”

    “Fewer than 10 percent of patents are worth the money spent to secure them”

    “In spite of the enormous increase in the number of patents and in the strength of their legal protection, the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure.” (p. 2)

    “The basic problem with the patent system – the downstream-blocking effect of existing monopoly grants on future innovation – is greatly increased because modern products are made up of so many different components.”

    “The existence of a large number of monopolies due to past patent grants reduces the incentives for innovation as current innovators are subject to constant legal action and licensing demands from earlier patent holders.”

    SOLUTION – “Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.”

    Torrance and Tomlinson (2009) –

    Michele Boldrin & David Levine (2012) –

    Nicholas (2013) –

    Abrams et al, (2013) –


  • [Avatar for Gene Quinn]
    Gene Quinn
    May 12, 2014 10:58 am


    Your claim that patents harm innovation is simply unfounded.

    What is missing in your comment is any discussion of the innovation that you are being prevented from pursuing. You conclude that your products are innovative, but something that costs less and is preferred is not by definition innovative. You seem equate a your product with innovation. Innovation, however, is to do something new. What is it that you are being prevented from doing that is objectively superior? If you are infringing a patent then you are not really innovating. Instead, what you are doing is the antithesis of innovation.

    Furthermore, the patent system has been intended from its very earliest days to create the very scenario you complain about. Patent are intended by design to give the patent owner an exclusive right to prevent others from making, using and selling. This forces industry to come up with other ways to move forward that do not infringe. That is why patents promote innovation rather than harm innovation. When an innovative person is blocked they design around. Instead, what we have today is a bunch of companies complaining that they can’t do what they want to do and, therefore, patents harm innovation. Simply not true. What is happening is people are throwing up their hands and giving up rather than innovating as the patent system is designed to encourage.

    As for now, you are right, you are faced with terrible choices. But did you do any kind of evaluation to determine whether you would be infringing any patents? My guess is you did not. I’d also be interested in knowing whether you have patent infringement insurance to cover your defense costs? My guess is you don’t have that either. If it is the case, as it usually is, that you did not engage in any kind of research in advance of launching your product and you do not have patent infringement insurance it would seem that your poor business choices are what has put you in this position rather than any defect in the patent system. The patent system is operating exactly as designed.


  • [Avatar for Ron]
    May 11, 2014 10:24 pm

    Folks –

    Patents certainly can stunt innovation and economic development – and in modern times this is most typically the case. Let me give you a clear example. I am in the network services industry. My company serves the hospitality industry. My company recently received a Cease and Desist letter from a major Japanese wireless carrier. This company claims to own all forms of billing for guest Internet access. This same company sued a number of competitors in the space a few years ago for other patents they claim to own. They committed large dollars and a substantial legal campaign to force royalties through settlements. They raised their own prices on the products they sell to further extract hundreds of millions of dollars from the hospitality industry – by limiting competition.

    More recently, they have used their “winnings” to go back to the patent office to expand the language of their original claims. This time they managed to net our product features, now making us an infringer and their most recent target.

    My company is 3 years old. We have taken nothing from them, or anyone else. We launched our products to avoid them and their infringement zeal. Our products are innovative, less costly, and preferred in the market. As our market penetration has increased, they have been busy reworking their patents (by flooding the US Patent Office with new documents and revision requests) with the aim of shaking us (and any other new competitors) down. So, we are faced with terrible choices. We can fight in court to prove our case – at a cost of $2 million or more, or we can pay them unearned royalties. In either case we are losers in this scenario. The hospitality industry also continues to lose.

    This is not a just system. Their patents stem from vague language from filings in the late 1990’s. In fact, the Japanese company purchased a small US company in the mid 2000’s with the specific aim to sue others and corner this market.

    If you would like to hear the specifics, let me know and I’ll be happy to share.

  • [Avatar for Claude]
    May 8, 2014 01:53 am

    Dear Gene,

    You wrote:” If you are correct, and that ridiculous statement were correct, that would have to mean in countries where there is no patent system there would be run-away innovation. Of course, the exact opposite is true. In countries where there is no patent system there is no innovation. That really conclusively proves you are wrong.”

    Your stated hypothesis (if you are correct….. that would have to mean…..) is flawed, false and irrational. There could not be better evidence that the innovation process is way beyond your current capacity to understand its intricacies.

    Kline has graciously done you and people like you a big favor explaining why it is impossible to prove “that the patent system by itself causes higher rates of innovation and economic growth. That’s because the exogenous factors — the dynamism of markets, the efficacy of legal and governmental institutions, the availability of capital, and the role of countless other factors — are far too complex and interdependent to isolate causation to patents alone.”

    Unless and untill you can master what makes this a given, ex., this basic set of principles and the complex interactions between known and not so well known variables underlying this undisputable assertion, you will continue to make absurd statements as cited above and that, unfortunately, will keep you down and out and this debate.

    There remains so much more to teach you

    Now the question becomes: Can you handle the truth?


    P.S.: Patents stifle innovation

  • [Avatar for Gene Quinn]
    Gene Quinn
    May 7, 2014 04:33 pm


    I agree that disparaging remarks and insults are not appropriate in the debate, which is why I didn’t call you any names or insult you. Pointing out that you are wrong and completely ignoring objective facts is certainly fair game. I do find it amusing, however, that people like you who spout such nonsense are and come off with such an air of superiority find it impossible to be told you are wrong. It is as if proving you wrong somehow is unacceptable and tantamount to calling you names. Well, if that is what you really think then for goodness sakes go elsewhere with your ridiculous position. What you say is false and cannot stand any scrutiny whatsoever.

    And no matter how many times you say it, it will never be true. Patents do not stifle innovation. The proof is in front of you. I provided proof and argumentation that demonstrates you are incorrect. So why cling to a viewpoint that is so provably false?

    Oh, I see, you want to believe the OPINIONS of “experienced career scientists,” rather than objective fact that proves your position wrong. Seriously. Just saying that something is true doesn’t make it true, you do understand that don’t you? You have presented not a single shred of factual support, while I on the other hand have provided volumes of factual support. The article tomorrow morning which I just concluded will provide even further irrefutable factual support.

    So if you want to debate then let’s get to debating. You can try by starting with a factual truth and go from there, as I have done.


  • [Avatar for Claude]
    May 7, 2014 04:22 pm

    Dear Gene

    Disparaging remarks and insults (so-called “facts”) will not cut it in this debate.

    FREE ADVISE: To follow David Kline’s respectful style could help your intransigent stand on this issue gain in consideration in some quarters.

    Patents stifle innovation:

    As Kline demonstrates so well in this piece: slowly but surely, we see patent systems’ proponents backing away from largely inflated claims standing on opinions dressed in evidence. Kline, cited a short list of anecdotal reports to seek instead acceptance for this downgraded claim: CAUSATION VERSUS CORRELATION – acknowledging the total lack of evidence proving that a patent system by itself causes higher rates of innovation and economic growth.

    As knowledgeable analysts of patent systems keep pushing back these unsubstantiated claims and experienced career scientists from the public sector pursue their mission of educating misguided or misinformed proponents, we will get to a place where all converge in support of a new guide of best practices.

    In closing, this quote: “In fact, according to a US survey, secrecy and lead time are more popular than
    patents amongst R&D managers to protect product and process innovations. SOURCE:


  • [Avatar for Gene Quinn]
    Gene Quinn
    May 7, 2014 02:28 pm


    Thanks for the comment. Of course, patents do not stifle innovation whatsoever. In fact, the overwhelming evidence is clear that patents promote innovation.

    You cite a study that finds that participants are more likely to innovate when there is no intellectual property protection. That is simply a lie. If you actually stop and think about what you are saying you would be able to see through the lies yourself. If you are correct, and that ridiculous statement were correct, that would have to mean in countries where there is no patent system there would be run-away innovation. Of course, the exact opposite is true. In countries where there is no patent system there is no innovation. That really conclusively proves you are wrong.

    The problem you are having, no doubt is that you are not looking in the correct places. The studies that conclude that patents harm innovation are not based on fact, but rather are based on the opinions and fears of those who don’t like patents and are against capitalism. All objective evidence conclusively proves that patents foster innovation.

    Of course, if we want to actually interject facts into the debate, I would also point out that those who hate patents erroneously claim that the existence of patents has stifled smart phone technology, which is just about the most ridiculous comment I’ve heard. Smart phones as we know them didn’t exist until 2007. In the ensuing 7 years innovation has exploded and the smart phones we have today look and function nothing like generation 1. But that is an inconvenient truth that again conclusively proves you are wrong. If you were right there would be no way that with all the patents in that space smart phones today could be so much more advanced, yet with each new release they become more and more advanced.

    Now I know all these facts get in the way of your predisposed notions, but facts matter here. So please educate yourself so you don’t make the mistake of uttering such provably false nonsense in the future. You can start here:


  • [Avatar for Claude]
    May 7, 2014 01:56 pm

    OPPOSITE VIEWPOINT: The patent system stifles innovation. So many reports are left out this biassed assay that it fails the credibility test. As with many on the pro patent side of the ledger, we get opinion pieces dressed in data.

    It is worth emphasizing that ” the response from academia to all this, albeit sparsed with dissentive views and short from unanimity, is far more substantive than given credit for: “Yes, but you cannot prove causation.” – The IP system gives traction to many research impediments hindering and impeding the progress of fundamental research, source of the raw material of innovation.

    Sensitive points of impact of patents – Public sector scientific research impediments include: pulled back access to input research material, research tools and experimental methods as well as curtailing open communication among scientists. Hindrance (greed is a strong incentive for researchers to forego public participation) of patents on knowledge inputs and methodology necessary for scientific research – raising the costs of conducting research and grant applications turned into a hide and seek contest are all driven by the false lure of cashing in.

    Must read this informative and eye-opening investigation and while at it, give it your best shot to discredit this study. Please, if you can, use logic and some common sense to complete the serious task of tackling this myth – “that innovation will be spurred by the prospect of patent protection, leading to the accrual of greater societal benefits than would be possible under non-patent systems.”

    PATENTS AND THE REGRESS OF USEFUL ARTS by Dr. Andrew W. Torrance and Dr. Bill Tomlinson – Columbia Science and Technology Law Review, Vol. 10, 2009 pp. 130-168.

    “In fact, participants were more likely to innovate when there was no intellectual property protection at all, or when they could open source their innovations and share them with other people.”

    The researchers measured the efficacy of the patent system based on 1) innovation – the number of unique inventions; 2) productivity – a measure of economic activity; and 3) societal wealth – the ability to generate money.

    “Current patent laws are based on assumptions that patents spur technological progress that were considered settled more than a century ago, and that few have questioned since then,” says Torrance. “If it turns out that our laws are based upon misinformation and bad assumptions, society may be failing to promote beneficial new technologies that could improve potential quality of life.”

    The following review and references infra are a must for any assessment from the pro patent lobby to be credible.

    “Another Study Finds Patents Do Not Encourage Innovation – Every study I have ever seen is either neutral or ambivalent, or ends up condemning part or all of IP systems.”


  • [Avatar for Brian Hahn]
    Brian Hahn
    April 18, 2014 12:01 am

    Great point about cross-licensing of patents instead of trade secrets enabling rapid growth of technology

  • [Avatar for Eric P. Mirabel]
    Eric P. Mirabel
    April 17, 2014 03:28 pm

    Great Article, David. Someone always objects with “correlation is not causation” no matter strong the correlation; but here’s a “100%” correlation: no patent, no raising capital for a new venture.

    As for the “innovation” question, I like your analysis which hits on the key: “innovation” may not be strongly influenced by patents (Rube Goldberg had none on his brilliant inventions) but commercially significant innovation correlates with strength of patent protection.

  • [Avatar for Dinesh kumar Anchal]
    Dinesh kumar Anchal
    April 17, 2014 12:05 am

    In my opinion it restrict the innovation as in pharma research people filled the patents even which are hypothesis or in complete reseach or as well as a series of salts/esters or solvent combinations showing different forms, which has no concern with clinical research.