Cartels as an alternative to patents.
Innovation is luck. Some inventors would brainstorm the idea quick and others never. It is just luck finding and deducing the correct idea. But most inventions involve incredibly amounts of time, even for a genius, to solve.
Creativity is genetic. It depends on a number of factors such as latent inhibition, motivational systems, neurochemicals, cognitive biases, abstraction, visuospatial perception, priming of semantic associations and other hard coded heuristics selected by evolutionary pressures.
However, many people of average intelligence invented a much of our technology. It is a combination of luck, subjective motivational values and genetics. This is one reason of why "less" intelligent human races can invent many of our world's technology. The differences of intelligence between a village idiot and Einstein is comparably very small.
The more creative the solution to a problem would be, the more the person would procrastinate instead of inventing a solution. The more tedious the task is, the less likely humans would procrastinate. This is what you see people doing housework and weaving do not procrastinate.
The more innovative the sector is, the more firms arise in that sector. Every individual who has a creative idea is capable of starting a profitable firm.
Firms can participate together to do research and form a cartel that sells at a higer price. In article 81 of European competition law, innovative technologies are exempt from cartels.
Inventors can sell-out their ideas to companies, if barriers-to-entry is low. The high barriers-to-entry industry would would have many firms.(not sellout)
Patents are commonly abused and many obvious ideas are patented. The software industry is suggested that it hurts innovation more than the benefits. Most software ideas are not developed by the software industry, but by individuals not employed at this industry. (Bussen & James, 2004) Large software companies, such as Microsoft, can use patents to bully smaller competitors.
Letting the government to perform obviousness tests is not good. Many obvious patents are tested in courts but they are not repealed.
An improvement to patenting agencies is to require software patents to include code. This reduces the patent lawyers writing patents to make them look more complex by typing complex and length descriptions. Obvious patents, like the One-Click Patent, is described using pages of text, but can be implemented using only a few lines of code. Think of how much out tax money are burned from forcing the bureaucrats to read all of these lengthy nonsense.
In addition, the government cannot find an optimal term for a patent. Many obvious ideas that are patented decades ago cannot be implemented now. This is potentially disasterous for sectors involving rapid innovation, such as technology and software, regardless how obvious or non-obvious the idea is. Additionally, companies and courts are continously fighting patent trolls.
In this case we would prove our theory for these four scenerios:http://en.wikipedia.org/wiki/Barriers_to_entry#Classification_and_examples
The software industry has low barriers to entry. In these industries, patents might be valid, to prevent competitors easily copying ideas.
Sectors with high barriers-to-entry would value innovation more. In industries with high barriers to entry, patents have lesser social benefit, because companies can reclaim its R&D costs before other firms enter the sector.
Industries with high barriers to exit have more competition because of increase quantity of firms. But this type of industry does not necessary have more innovation, as creative ideas can be distributed to other firms.
In industries that can be protected by trade secrets, like the manufacturing sector, patents are not needed. Some software, like Mathematica, is protected by trade secrets.
The medical industry has high barriers-to-entry (mostly forced by the FDA). However, a couple of subsectors of medicine, for instance, chemical engineering, can be totally protected by trade secrets.
Summary: Patents are valuable.
References
Bussen, James & Hunt, Robert. The Software Patent Experiment.March 16, 2004. http://www.researchoninnovation.org/softpat.pdf
libertarian:Summary: Patents are valuable.
Patents are valuable to the patent holder.
What about in cases where an idea in invented independently by two different people? The current system it is first to invent (soon to be changed to first to file in the US) so one of the innovators is out of luck for, what is it now, 19 years.
I'm still trying to parse your title, are you saying that patents are valuable in mathematical algorithms? You do realize that's one of the few areas that are specifically barred from patent protection?
I just don't buy the argument that innovation would stop without patent protection when there is somewhere around 100,000 years of evidence to the contrary.
A more interesting question is whether firms can find alternative arrangements in the absence of IP law, via contracts, technology and the like. Firms are extremely efficient at calculation; I do not see why they could not find ways to do so.
Anonymous Coward: What about in cases where an idea in invented independently by two different people? The current system it is first to invent (soon to be changed to first to file in the US) so one of the innovators is out of luck for, what is it now, 19 years. I'm still trying to parse your title, are you saying that patents are valuable in mathematical algorithms? You do realize that's one of the few areas that are specifically barred from patent protection? I just don't buy the argument that innovation would stop without patent protection when there is somewhere around 100,000 years of evidence to the contrary.
Yes, I like these kinds of patents because I am biased. I have knowledge of the mathematical algorithm and artificial intelligence sectors. It is very hard to develop new algorithms. Thus I like to patent them.
A vast majority of technology-related patents I have seen are very obvious. Almost all of these patents are just obvious ideas, not complex algorithms.