In the comments on Mike’s post yesterday about the Honeywell patent lawsuit against Nest, Ed asks in the comments how it is that patents stifle innovation rather than promote it. The theoretical answer is that, as a government-granted monopoly, patents embed both incentives — at the margin they increase the incentive to create new patentable knowledge while also slowing or stifling the dissemination of that knowledge, and/or knowledge deemed too close to it. The fine balance of managing the tradeoff between those two effects is the objective of a “good” patent law, because to get net benefits the breadth and duration of the allowed patents has to be enough to be stimulative, but not so much that it deters other innovative activity. A good patent law allows differentiation of breadth and depth for different types of inventions in different areas/industries, and holds diligently to the “non-obvious” requirement that is written into U.S. patent law and is part of any economic theory of intellectual property.
It’s increasingly clear, particularly in technology, that the U.S. patent law is not striking that balance, and is instead doing more of what Michele Boldrin characterizes as using the political and patent process to protect monopoly rents (as per a post I wrote on the topic in 2009, with links worth pursuing). At least to me, some of Honeywell’s patents don’t pass the common sense/non-obvious test, such as their “natural language temperature range setting” patent.
In following up on their extensive reporting at Earth2Tech yesterday, which Mike linked to in his post, Katie Fehrenbacher today offers several reasons why she thinks this Honeywell lawsuit will in fact deter innovation. She agrees with me that the natural language patent does not pass the “non-obvious” test, and she also discusses the cost of a patent war, the David/Goliath nature of this lawsuit, and some other important reasons why this lawsuit may bode poorly for robust innovation in the home energy technology space.