Friedman describes an efficient rule as a rule where “total gains [are] larger than total losses, making the net effect positive.” This applies to any type of law– be it criminal, tort, or patent law. I’m sure many of you have read about the patent dispute between Apple and HTC. This article discusses the possible inefficiencies if Apple wins the case. The article mentions Apple’s “legal temper tantrum” over “HTC’s alleged infringement on up to 20 Apple patents,” with emphasis on the multi-touch-interface patent. I believe patents are crucial for innovation, because if Apple didn’t have a patent on its multi-touch, what incentives would Apple have to spend millions or billions on R&D? But what happens when patents deter competition and innovation? In that instance, I think some things must be adjusted.
Eric Von Hippel, a professor at the Sloan School of Management, said it best: “It’s a bad scene right now. The social value of patents was supposed to be to encourage innovation — that’s what society gets out of it. The net effect is that they decrease innovation, and in the end, the public loses out.”
I am a happy iPhone user, but I am pleased to know companies like HTC with Google Android are competing with the iPhone. This competition forces Apple to innovate more and charge a lower price, which is better for me! If HTC is shut down because of this, I will be a less happy iPhone user in the future.
March 4th, 2010 at 11:29 am
I absolutely agree! I am a satisfied iPhone user (not happy), but I’m not a big fan of Apples business approach in general. Getting a 3GS wasn’t an easy choice because there are some great competitors out there. But every device has their pros and cons. I felt like no matter what I chose I was making a compromise on one or more features. Besides the fact that their products are way over priced, they are super sticklers on DRM and what I am allowed or prohibited from doing with my device (at least “legally” that is). I didn’t lease it from them, I own it, it’s mine. So how can they tell me what I’m allowed to do with it? But we’re not talking about particular devices here, even as much as there is to say about those comparisons. We’re talking about patents. Most people don’t see patent laws and intellectual reserve things as a hindrances to innovation and progress. The general view is that it protects the inventor/producer and is essential to business. Economic historian Eric Schiff looked at countries that got rid of their patent system, and found it increased innovation because there was more competition in the marketplace. That is companies focused on making more goods for the market, rather than focusing just on patenting things and not having to compete in the market. Look at the history of the steam engine — which only grew the market after the patents expired, because James Watt made it prohibitively expensive to use, and no innovation could occur until the patents were gone. Look at the research of Petra Moser, who found that countries without patent systems innovate just as much, if not more, than those with patent systems. Here is a concurring opinion about the HTC issue going on right now. I’m interested to see how our class views these issues as we go through chapter 10 & 11 in Laws Order by Friedman.
http://blog.mises.org/2010/03/apples-suit-against-htc-pits-patents-against-innovation/
http://www.thefreemanonline.org/featured/do-patents-encourage-or-hinder-innovation-the-case-of-the-steam-engine/
P.S. Why can we put hyperlinks in an original post but not in a comment? Am I doing something wrong?
March 10th, 2010 at 12:51 pm
I agree with your above points. Another thing to think about, the Apple suit not only affects HTC. Google is highly invested in many HTC phones with their Android OS, including the Nexus One (which I would say is the best alternative to the iPhone). HTC is also building phones for Microsoft, which is also planning on introducing Windows 7 phones soon (1). Once again, I hope the courts support innovation over Apple-ism.
(1) http://news.yahoo.com/s/nf/20100305/tc_nf/72028
p.s. I don’t know how to embed hyperlinks in comments either.
March 12th, 2010 at 1:59 pm
Apple’s legal thought has always been odd. I agree that their system of control, even after you buy a device, is strange. I find it fascinating that countries that have eliminated their patient system find more innovation. It makes sense. If you constantly have to be changing your product in order to stay on top of the market, it is those people that will come out on top. More innovation is required in a system like that. I believe that a similar problem actually happened when Bill Gates was first starting off with Microsoft. Apple thought there was some infringement there as well. Can you imagine if Apple had been able to stop Microsoft from taking off? Do you think Apple would be as good as it is now? Or would they be worse because of no competition? I think that the best course of action is to allow the competition.
March 15th, 2010 at 4:59 pm
I don’t think that apple would be near as good as it is now without the competition from Microsoft. It seems like great things come in pairs competing. Look at Mark McGwire and Sammy Sosa, I doubt either would have hit as many home runs as they did without the thrill of the competition. It just makes better sense to allow for innovation and allow competition rather than restrict competition.