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In 1899 the commissioner of the American Office of Patents recommended that his office be abolished because “everything that can be invented has been invented”. The fact that there has been so much innovation during the subsequent 100 years may owe something to the existence of patents. Economists reckon that if people are going to spend the time and money needed to think up and develop new products, they need to be fairly confident that if the idea works they will earn a decent profit. Patents help achieve this by granting the inventor a temporary monopoly over the idea, to stop it being stolen by imitators who have not borne any of the development risk and costs. Like any monopoly, patents create inefficiency because of the lack of competition to produce and sell the product. So economists debate how long patent protection should last. There is also debate about which sorts of innovation require the encouragement of a potential monopoly to make them happen. Furthermore, the pace of innovation in some industries has sharply reduced the number of years during which a patent is valuable. Some economists say that this shows that patents do not play a large part in the process of innovation.
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- Company: The Economist
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