To patent or not to patent, that is the question

Inventors, Patents and Inventive Activities in the English Brewing Industry, 1634-1850

Alessandro Nuvolari (alessandro.nuvolari@sssup.it) and James Sumner (james.sumner@manchester.ac.uk)

URL: http://ideas.repec.org/p/ssa/lemwps/2012-18.html

Abstract

This paper examines the relationship between patents, appropriability strategies and market for technologies in the English brewing industry before 1850. Previous research has pointed to the apparent oddity that large-scale brewing in this period was characterized both by a self-aware culture of rapid technological innovation, and by a remarkably low propensity to patent. Our study records how brewery innovators pursued a wide variety of highly distinct appropriability strategies, including secrecy, selective revealing, patenting, and open innovation and knowledge-sharing for reputational reasons. All these strategies could co-exist, although some brewery insiders maintained a suspicion of the promoters of patent technologies which faded only in the nineteenth century. Furthermore, we find evidence that sophisticated strategies of selective revealing could support trade in inventions even without the use of the patent system.

Review by Chris Colvin

Much about the recent legal dispute between Apple and Samsung suggests that our patent system is broken. The conventional economic argument for patent protection is that it is socially beneficial because it: (1) incentivises invention in areas where there would otherwise be few rewards for inventors; and (2) aids in the dissemination of ideas and combats secrecy (for a good explanation of the conventional view, see Suzanne Scotchmer’s excellent textbook). But in their 2008 polemic, and again in a recent working paper, Michele Boldrin and David K Levine argue that patents create only ‘an “intellectual monopoly” that hinders rather than helps the competitive free market regime that has delivered wealth and innovation to our doorsteps’. The authors argue instead that: (1) patents neither increase invention, nor adequately reward inventors; and (2) patents simply create a market in patents and in associated legal services.

Nuvolari and Sumner try to understand the remarkably low propensity to patent in brewing before 1850.

It is against this on-going debate on the value and efficacy of patent protection that Alessandro Nuvolari and James Sumner’s new working paper should be read. Distributed on NEP-HIS-2012-11-03, the paper offers an excellent industry case study from history with which to understand the role of patents within a single sector. Nuvolari (Scuola Superiore Sant’Anna, Pisa) and Sumner (University of Manchester) track their use in the brewing industry before, during and after the Industrial Revolution. Not only do they compile a new dataset of patents and patentees in brewing across the period, but they also catalogue alternative appropriability strategies used by innovators at the time: trade secrecy, complete openness, and everything between. Of particular interest to economists and historians studying innovation and incentives are the authors’ findings that the strategies of “insiders” and “outsiders” to the brewing industry differed substantially, and that there was a large trade in inventions, even for those that were not protected by patents.

Today, and with few exceptions, we have a one-size-fits-all patent system that offers the same levels of protection to inventors in all sectors of the economy. One mooted solution to our current patent mess is that these government-granted monopoly rights should be redesigned to be sector-specific; they are perhaps more appropriate to some industries than others and should have different protection lengths, breadths and costs to reflect this. For example, patents that relate to tablet computers should be weakened, whilst those relating to pharmaceuticals strengthened. Nuvolari and Sumner give us a warning shot from history for policymakers considering such an approach: a great deal of different appropriability strategies can be present even within the same industrial sector, let alone between sectors. Redesigning today’s patent system to be sector-specific would fail to reflect the different ways in which inventors compete; it may force rivals to use the same strategies, and may hamper rather than help progress.