The great 20th century economist Fritz Machlup was right: “It was madness to invent the patent system, but now that it exists, it would be even madder to want to abolish it”. The patent system has many flaws and suffers many abuses. Patents often fail to define the precise contours of intellectual property, opening the door to legal conflict. Furthermore, patents are often used as strategic weapons. Large companies accumulate gigantic patent portfolios that are less a reflection of their innovative strengths than of a desire to block their rivals. Last but not least, it’s clear that in many cases, patents could very well be abolished without harming innovation (or creativity anyway). In many situations of collective creation, obsolescence seems to have befallen the patent that must individualise contributions in order for it to work.

Patents by their nature have a mixed effect on innovation and competition. On the one hand, patents enable an innovator to benefit from a certain exclusivity, which allows him or her to obtain a surplus of revenue. The patent tends also to favour competition. It offers new firms an intangible asset, thanks to which they can obtain external financing and enter their target market. On the other hand, patents can delay and even block subsequent innovators, who cannot freely recombine the patented knowledge to produce new solutions. Furthermore, the patent creates a form of monopoly that is obviously unfavourable to competition. The almost automatic result is an increase in the price of innovative products (drugs, for example) and a concomitant reduction of consumer surplus.

So why do I think that the net impact on innovation is still positive? First, the increase of patent tax levels in Europe and the United States represents a healthy development. Higher fees better reflect the social cost generated by the privatisation of a public good (knowledge) and they serve to slow the inflation of patents and improve their quality.

Secondly, we can see that there is no contradiction between open innovation and intellectual property. We realise that careful intellectual property management by companies is a critical instrument of open innovation. The rise of open innovation has thus coincided with the growth in the market for technology.

The patent remains an important instrument because of its economic function. It not only rewards invention, but also provides a secure economic environment for the investment that converts ideas into reality. The ‘D’ in R&D is expensive. Patents are particularly important for start-ups that are dependent on external finance and for inventions that must be transferred from one firm to another in order to make the transition to commercialisation. Patents are therefore important in the economy because they protect investors (though not necessarily the inventors). It is important to stress that the argument about securing the economic environment of investors in no way justifies extending patentability to scientific discoveries and fundamental knowledge.

Dominique Foray is a professor of economics and management innovation at EPFL in Lausanne.

Start-ups and small companies are especially innovative. They are often created as a result of publicly financed, basic research, and in the engineering sciences and biomedicine, they’re usually founded on the basis of patents. Without them, it’s almost impossible to get the risk capital needed today to set up a new company. Consequently, the everyday life of innovative companies – and increasingly of researchers, too – is dominated by issues regarding patents, licences and legal proceedings around intellectual property.

At least in my own field, agro-biotechnology, patents have proven to be stumbling blocks for innovative developments. In the 1980s and ’90s, very broad patents were issued for key technologies. That meant there were patents covering all varieties of a cultivated plant. Other patents applied to general methods for genetically engineering plants, without taking into consideration which agricultural plants or genes were being altered. That meant in turn, for example, that the developers of golden rice at ETH Zurich and the University of Freiburg im Breisgau had to cope with at least 46 patents. Golden rice is fortified with a precursor of vitamin A.

Patents on basic foods are fundamentally problematic in my opinion. Patenting the most varied forms of basic technologies has also put a brake on developments in genetic engineering. On the one hand, start-up companies weren’t able to afford the necessary licences, while the big companies were able to swap their licences among each other. On the other hand, protecting genetically engineered plants by means of patents also meant that they were subject to regulations different from the classical variety protection afforded to other cultivated plants. So it became incredibly expensive to plant genetically engineered crops in the field. Patents thus promoted consolidation in the agrochemical and seed sectors. Today, just a few mega-companies dominate the global market. This concentration is bad for farmers and consumers, and endangers global food security. The innovation potential of such giant companies is also acknowledged to be poorer than that of young companies.

Just like in agro-biotechnology, patents will repeatedly hinder innovation in other fields, too. I think we should try and find new models that are oriented, perhaps, on the ‘open source’ movement in computing. There is an initiative to this end that goes under the name of ‘Biological Innovation for Open Society’, BiOS for short. It aims to promote the development and dissemination of innovative ideas in the biotechnology sector. Regrettably, this idea has so far been unable to catch on. But I really hope that in future there will be viable alternatives to patents. Until then, patents will remain a necessary evil for researchers in the public domain. They are the only way for them to determine how, by whom and under what circumstances their discoveries are used.

Ueli Grossniklaus is a professor in the developmental biology of plants at the University of Zurich, where he is also a member of the Steering Committee of the Plant Science Center, which aims to facilitate plant research synergies and to promote dialogue with the public. He is also a member of the Forum for Genetic Research of the Swiss Academy of Sciences.