Adverse Effects of Patents on Innovation in Business

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Adverse Effects of Patents on Innovation in Business

Introduction

The field of business comprises various methods and processes implemented to realize competitiveness. Many governments use the patent system as a tool for incentive development and increasing research as they promote innovation check-ups. Companies seek and apply such techniques using exceptional means and operations to stimulate maximum profitability. Therefore, the protective laws providing legal entities or personal ventures with unique privileges for inventing, selling, or utilizing particular concepts while excluding rivals have negatively affected innovation (Duan, 2019).

The invalidation of patent laws has greatly influenced cumulative creation resulting in adverse impacts. Lauren et al. have argued that instead of providing significant incentives for innovation in businesses, patents have resulted in specific problems within the operational sectors (Cohen et al., 2019). Various companies have experienced entire blockage of follow-on innovation due to extreme incidences where patent licensing fails during the bargaining process. Bodies like the National Research Council and the Federal Trade Commission across the States have pointed out particular impediments within several public debates concerning patent policies. Consequently, the adverse effects of innovation patents have caused licensing issuers in holders, litigation in patent trolls, invalidation, and lack of protection across various global businesses, increasing the cost of transactions and limiting actions of freedom that would promote the performance of research and development.

Besides, the Supreme Court formulated ideal decisions in the past few years concerning the dangers of patents. Implementation of the United European Patent Court and European Patent led to discussions about its negative implications affecting European policy. Such cases portray the level at which patent rights have impended follow-on innovations across several firms. The pervasive effects of such blocking resulted in substantial implications for companies in distinct technological sectors (Sampat, 2018). Many corporations and private entities have fragmented ownership privileges and increased proliferation in the production, operational, and marketing systems.

Various empirical studies found in Europe and the US indicate that the patent system has inhibited innovation in different sectors of business enterprises. Lauren et al. have argued that patent trolls provide laws and regulations that do not suit respective firms and later sue companies operating in their workspace (Cohen et al., 2019). Shell corporations are the prominent companies that purchase vague patents or file for the entire client hoping for approval of the lawsuits.

Subsequently, innovative startups have recorded wide-ranging losses and inconveniences resulting from the valueless patents. Innovation within such enterprises has been unsuccessful over time. Many small outlets attempting to devise strategic innovations to enhance competitiveness later develop unsuccessfully. Such business ventures receive patents that do not blend appropriately with their operations, vision, objectives, or marketing patterns.

Literature Review

Bhavens publication presents survey results on empirical evidence about the relations between innovation and patents. The report examines business and economics and synthesizes and reviews concepts concerning first-generation creation. A summary of the significant findings comprises follow-on innovation and disclosure role as evidence of patent influence in business (Sampat, 2018). Cohen et al. have published an article illustrating how various patent trolls target firms hindering their innovations. Evidence from the journal discusses NPEs found in the intellectual property space (Cohen et al., 2019).

The journal further points out opportunistic behavior in the commodities, focusing on the fraudulent extraction of funds from target enterprises. Ashoka (2019) discusses the property protection concept outlining its significance in protecting information technology services (Mody, 2019). The book reveals the commitment and strength of Trade actions in the United States as it spreads across developing nations. From the book, this concept explains how the States use technology generation for invention.

Charles (2009) discusses the latest arguments concerning national security themes incorporated in the patent policy. The article shows that competition determines the relationship between patents and national security (Duan, 2019). Jie and Xuan (2020) argue that the development of an economy depends on the level of technological inventions. The article presents critical information concerning innovation and institutions and shows the necessity of incentives and market growth without patent laws (He & Tian, 2020).

Evidence from the scholarly material portrays how various scientists advocate for the irrelevance of patents. In the article about social change and technological forecasting, Joao et al. (2020) explain how climatic conditions, preventive measures, evolution in technical mechanisms, and the influence of the patents on the environment affect financial progress and sustainable production (Ferreira et al., 2020). Statistics retrieved from the hardcopy concerning technology transfer and intellectual property provide relevant information about the patent system and its effect on sales (Love et al., 2020). The article also compares sales in the patents between centers of higher learning and research institutes across regions in the US.

Discussion

Effect of Patent Licensing and Holders

Even though lawmakers of the United States Constitution pointed out that patents provided multiple benefits to businesses in the past centuries as technology evolved, companies still recorded difficulties deploying innovative strategies. With exponential improvements in technology in contemporary society, patents have become a massive inhibitor of innovation, thus preventing growth in the States. Indeed, competitors in the business sector require out-innovation, a technique that would ensure the US stays ahead. The process results in consistent reinvention and an increased speed for marketing the products and services (Sampat, 2018).

Instead of promoting such practices, patents have reversed the benefits into limitations within various companies in the States. Consistent use of patents has resulted in the creation of disincentives to innovation practices and the slowing down of innovators after permitting extortionists and technology laggards to report them. Hence, the regime involving exponential technological mechanisms, processes, and strategies does not require the involvement of patents. Patent licensing from such entities was associated with a valueless effort to promote innovations in the business sector.

In a study to find out what patent licensing implies in the process of innovation, researchers from Stanford Law School and the University of California discovered many doubts about the potential value of patents. Robin and Mark evaluated some companies authentic experiences to discover how patent licensing spurs innovation (Love et al., 2020). The research is based on the exact worth of licensing in technology products and their respective effects across transactions within industries, including energy, communications, medical equipment, biotechnology, semiconductors, electronics and computers, and pharmaceuticals. Also, the analysis focused on the transfer of technology whenever holders of patents asserted them against the firms progress. As a result, the findings indicated that very few or no innovations occurred due to the practices.

Moreover, patent holders approach some business ventures ordering them to acquire respective licenses. Even though most of the companies agree to obtain the permits, they have recorded poor indicators of innovation and failure to manufacture advanced products. According to Joao et al., such companies rarely achieve joint or personal ventures and technology transfers within the production, marketing, and functioning sectors (Ferreira et al., 2020).

The business corporates are responsible for developing the technology without the patent holders support. Particular firms purchase patents and later obtain charges from licensing other entities. Such companies are referred to as non-practicing entities.

Instead of promoting innovation across various corporations, the companies operate like the current mafia by extorting unnecessary fees. The NPEs do not perform innovative transfers but instead transfer finances to upcoming inventors with the right ideas, thus providing services for the wellness of society.

Patent Litigation in Patent Trolls

Indubitably, litigation of patents has significantly inhibited innovation since findings from empirical studies have illustrated how the issue reduces capital. Patents cut down expenses that could have boosted research and development strategies. Several patents have reportedly sued distinct innovators who independently develop their technology (Ferreira et al., 2020). Patent infringement is a significant factor company uses to get hold of bigger businesses that use extensive research and development strategies. Many non-practicing entities are involved in rapidly transforming technologies, such as telecommunications and computers, that do not stimulate innovations. For example, developing a new startup would involve assembling particular components that are not manufactured internally (Cohen et al., 2019).

The venture would be forced to outsource parts such as boards, memory, and chips through patents. The involvement of such companies would greatly hinder the adoption of new technologies from the partnering plants. A smartphone production startup would not conveniently develop innovative strategies to enhance profitability. Patents in several software producers have resulted in incompatibility and relatively higher costs for device makers.

Outstandingly, patent trolls operate with a single business framework that hurts innovation within their clients. Even though the companies do not offer any valuable services, they communicate with important organizations producing advanced technology and new, meaningful, practical products. Thus, patents reduce their performance and limit innovation instead of adding value to the growing businesses. Entrepreneurs who attempt to develop new ideas and technologies are punished and discouraged. Most of the patents in Texas do not provide overseas protection inconveniencing international inventions (Mody, 2019).

The regional patent offices and other country-based departments only protect privileges belonging to a single area. A patent within the United States of America offers details on technological operations within a company while at the same time displaying the technique to different parties without facing reprimand charges (Love et al., 2020). Such a situation prevents the development of new strategies, ideas, and concepts that may not be protected in other nations.

Various patent trolls, companies, and universities conducted patent licensing activities to create innovations. So, universities and other manufacturing enterprises established lawsuits and licensing requests as patents that led to no technology transfer or production of upgraded commodities. Besides companies comprising life-related sciences, electronic and computer industries experience similar situations. Resultantly, licensing to respond to demands from parents does not significantly promote innovations in several companies. Despite several parties, institutions, and government agencies initiating the licensing process, many firms have encountered challenges in executing innovations in different sectors.

Effect of Lack of Patent Protection and Invalidation

From such information, it is clear that patents have contributed mainly to the moderate blockage of cumulative innovation. According to Bhaven, subsequent citations averagely rise to the focal patent with a corresponding fifty percent margin after the loss of patent protection (Sampat, 2018). Evidence from the decision made by the Supreme Court indicates that the publicity effect has raised several concerns about the laws. In addition, the impact of patent invalidation on respective innovations is associated with a heterogenous characteristic (He & Tian, 2020). Wide-ranging areas of technology have displayed substantial variations. The heterogeneous impacts originate from various fields of technology, comprising of strongest invalidation due to the protective regulations.

In short, the main characteristics of the technology sectors are complex forms of technology that are made up of new commodities that depend on multiple patentable components and high segmentation of patent ownership within diverse companies. Numerous economic theories emphasize bargaining failure while permitting the procedures results to blockage and consistent predictions. In a study to establish some of the systems causing a loss in the licenses, downstream innovators and particular patentees indicate the level of strength resulting in the blocking effect. Several large firms own patents whose invalidation causes a more significant impact associated with an increased quantity of small innovators and corresponding citations of the focal patent.

Conclusion

In conclusion, patents have negatively affected the implementation of ideas, strategies, and technology concepts in various global and personal companies, thus hindering convenient business transactions. Various case studies in Europe and the United States of America show that patent trolls have developed various lawsuits that prevent multiple patent firms located in Texas from mainly pursuing cash from innovative and giant leading firms across the globe. Consequently, patent trolls file lawsuits against startups and dynamic industries and extract vast amounts of money at the expense of promoting innovation.

Unprecedented historical data indicates that patents use fraudulent techniques to cause economic burdens across worldwide business industries. Since high expertise is required to file the patents, utility patents charge massive amounts that discourage many companies. Maintaining the enforceability of the patents also requires high costs. In the article above, patent licensing from business entities was associated with a valueless effort to promote innovations.

Research firms have conducted examinations dispelling the need for broadening an emphasis to put efforts promoting patent reforms in place. In other words, global entrepreneurship and businesses work in various ways that do not require the involvement of patents. The companys measures to acquire patents greatly discourage innovation, thus reducing effectiveness.

References

Cohen, L., Gurun, U. G., & Kominers, S. D. (2019). Patent trolls: Evidence from targeted firms. Management Science, 65(12), 5461-5486. Web.

Duan, C. (2019). Of Monopolies and Monocultures: The Intersection of Patents and National Security. Santa Clara High Tech. LJ, pp. 36, 369. Web.

Ferreira, J. J., Fernandes, C. I., & Ferreira, F. A. (2020). Technology transfer, climate change mitigation, and environmental patent impact on sustainability and economic growth: A comparison of European countries. Technological Forecasting and Social Change, 150, 119770. Web.

He, J., & Tian, X. (2020). Institutions and innovation: A review of recent literature. Annual Review of Financial Economics, forthcoming. Web.

Love, B. J., Oliver, E., & Costa, M. (2020). US patent sales by universities and research institutes. In Research Handbook on Intellectual Property and Technology Transfer (pp. 256-282). Edward Elgar Publishing. Web.

Mody, A. (2019). New international environment for intellectual property rights. Intellectual property rights in science, technology, and economic performance (pp. 203239). Routledge. Web.

Sampat, B. N. (2018). A survey of empirical evidence on patents and innovation. Web.

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