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Another guest blog by IP mentor, Doug Calhoun

The McGuinness Institute is to be congratulated on its exhaustive analysis of science in New Zealand, ‘Report 9: Science Embraced: Government-funded Science Under the Microscope’:

The report will no doubt generate considerable debate.

In focusing just on the very brief patent policy aspects of the report I feel a bit presumptuous – like Spike Milligan when he wrote ‘Hitler: My part in his downfall.’ But it is the patent bit about which I would like to continue the debate.

In my first guest post: I pointed out the inconsistencies between the MED and the MSI approaches to patent and innovation policies. The McGuinness Report concludes (on pages 94 and 95) that these inconsistencies are symptomatic of a wider problem:

‘There is a lack of clarity surrounding the respective roles of MSI and the Ministry of Economic Development (MED) regarding economic development. MED clearly has a role in fostering economic development and prosperity for all New Zealanders, and many of its portfolios are aligned to the six areas of investment determined by MSI: high-value manufacturing and services sector (HVMSS); biological industries; energy and minerals; hazards and infrastructure; environment, and health and society. It is not clear how the two ministries coordinate their strategies in these areas given that the difficulty in distinguishing the stated aims of these two ministries has been noted in the science-policy community.’

The report discusses the role of intellectual property on pages 72 and 73. The teaching that it extracts from the Uniservices Report: is that although there is some evidence that patents act as an incentive to innovation and thereby increase productivity, it did not find evidence that IP on its own is a driver of productivity.

What the McGuiness Report did not really get to is that the primary role of patents is to incentivise investment in the commercialisation of inventions.

A comprehensive study of the importance of patents to US entrepreneurs was the Berkley Patent Survey that is discussed by its authors: here, here and here.

While they urge readers not to leap to too many conclusions, one common theme that comes through is that patents are seen as being more important to the investors in entrepreneurial ventures than to the entrepreneurs themselves.

There is some evidence of this in New Zealand. At the Grow Wellington launch of its Innovating for Health Challenge on 5 March, Robert Feldman, a venture capitalist with Pacific Channel: outlined his company’s expectations of entrepreneurs who are seeking funding. His two highest priorities were the quality of the management and the quality of the IP, with particular emphasis on patents. Dr Feldman then drilled into what he meant by high quality patents. They must be:

1. Focused on the product that they are intended to protect,
2. They must be free of prior art, and
3. The entrepreneur must have freedom to operate.
4. The enterprise should have a track record in New Zealand (Underlining the point I was making in my first post that NZ patents do matter!)

(‘Freedom to operate’ means that you have done a comprehensive search for other patents in markets you intend to enter and have determined there are no patents you are likely to infringe. And, if there are such patents, you have arranged to licence them or made some other accommodation.)

With some technologies, freedom to operate may involve having to navigate your way through a dense patent thicket. How this is being done on a global basis through private collaborative arrangements is described in chapter 3 of the WIPO publication here.

The McGuinness Report (probably without realizing it) did consider one approach to solving the problem:

‘Creating better forms of co-creation based on collaborative practices between institutions, and new initiatives that allow inventions to be put into the public domain more quickly, seem part of the solution. For example, New Zealand could consider becoming a leader in Common Patents [I think that should read a Patent Commons], patents that register the creator and are fully transparent, but allow free use with acknowledgement (along the lines of the approach used by the Creative Commons, but through specific ‘New Zealand Invention Commons’). There are obviously a number of different ways to explore this landscape, but it is clear that such a system, which puts vast numbers of inventions into an open marketplace where entrepreneurs have access to them, can help economic growth, health and well-being. The challenge is therefore to create a system where new knowledge and technological advances are created and then traded in an open marketplace, which recognises the creator but also enables the entrepreneur to bring benefits to society.’

The reference to ‘patents that register the creator and are fully transparent’ is a bit of a mystery. All New Zealand patents do ‘register the creator’ by the requirement to name the inventor(s). And before a patent will be granted it must describe how to put the invention into practice — in terms that would be understood by someone able to put it into practice — so they are ‘transparent’.

Firms who invest in R & D and seek to protect that investment through patents are hardly going to be motivated to give up their exclusivity by donating their patents to a Patents Common when the only reward is an acknowledgement of authorship.

The ‘public domain’ is a part of an ‘accessible domain’ (there is a chapter in the book ‘Driving Innovation’ by Michael Gollin on this). The accessible domain includes a vast Patent Commons of published patents in other countries that are not enforceable in New Zealand and New Zealand patents that are no longer in force because a renewal fee has not been paid. And the accessible domain includes patents that others are prepared to license out a right to exploit. Freedom to operate can be thought of as finding a place in the accessible domain.

The WIPO Report at pages 118 and 119 explores why the open source software business model seemingly exists without patents. Studies it refers to show that:

‘both producers and users of open source products often blend participation in open source and proprietary software. In the case of producers, it is common for firms to develop both proprietary and open source programs. Firms may also participate in open source software projects strategically to upset dominant players.’

It then asks:

‘whether similar practices are transferable to other industries. Indeed, models of the open source type have been applied to other innovative activity. However, their uptake appears less spectacular than for software. One explanation may be that the success of open source software is closely linked to the special circumstances of software development: projects can be broken into small, manageable and independent modules; input by geographically dispersed developers can be easily shared; upfront capital costs are limited; and new products do not face lengthy regulatory approval processes. Nonetheless, additional opportunities for open source types of collaboration may well arise in the future as technology and the nature of innovation evolve.’

The business models that the WIPO Report describes in chapter 3, such as patent pools and markets for the sale and purchase of patents or patent licences, are being used by those seeking to monetise their IP instead of the open source software model.

Both the Uniservices and the McGuinness Report say that a lot more research needs to be done (they would say that wouldn’t they). And that research should begin where the WIPO report leaves off.

The McGuiness Report also mentions the importance of Talent (with a capital ‘T’). At the Grow Wellington launch Elf Eldridge promoted nurturing that talent with a dose of real world interaction through a programme to be run by Chiasma:

The Uniservices Report survey noted the shortage of understanding of the management of IP. The call for nurturing science talent should extend to nurturing IP talent in talented scientists.

~ Doug Calhoun
IP Mentor
Serial Stirrer