Against Intellectual Monopoly

Okuno-Fujiwara,
Postlewaite, and Suzumura put focus on the fact the innovators may have
strategic reasons to reveal secrets as well as to keep them: by revealing
secrets they may induce R&D from competitors that they will benefit from
in turn. 25 Ponce considers the possibility that under existing patent law, by
disclosing a secret, a rival might be prevented from patenting the idea.26
Boldrin and Levine show that an innovator who does not have the option
of using a legal monopoly will invest less in productive capacity than an
innovator who has access to patents, as less capacity increases profitability
after the secret is lost.27
    However, patents, which are meant to reduce secrecy, may lead to the
opposite result. If imitation is possible early in the life cycle of the industry, an
innovator has little reason to enforce a patent, as there is no reason to restrict
capacity when industry capacity is low anyway. For this reason, an innovator
with the option of a legal monopoly may have greater incentive for secrecy
than one without - to make sure that imitation cannot take place until
it is profitable for him to make use of the patent. By way of contrast, we have
pointed out that under competition there is a strong incentive to make
public small intermediate steps - by doing so, competitors are encouraged
to make additional advances that the original innovator will benefit from.
If instead there is a race for a patent, the incentive is to keep intermediate
results secret so as to keep competitors from winning the race.

    In fact there is much evidence that secrecy and legal monopoly are complementary rather than alternatives. Despite copyright, producers of books,
music, and movies have aggressively attempted to encrypt their work with
digital rights management, not only encrypting DVDs, but even going so
far as to encrypt CDs using methods that are incompatible with many CD
players and, in some cases, physically damaging to computers.
    There is evidence that the possibility of legal monopoly does have an
impact on the direction of R&D, if not on the amount of R&D. Recent
research by Moser on countries with and without patents in the nineteenth
century shows that those countries without patents did not innovate less,
but tended to focus innovation in areas where secrecy is relatively easy, such
as food processing and scientific instruments. Whether such innovations
are more or less socially desirable than other innovations is difficult to say,
as Moser stresses in her work.28
    Although replacing secrecy with legal monopoly may have some impact
on the direction of innovation, there is little reason to believe that it actually
succeeds in making important secrets public and easily accessible to other
innovators. For most innovations, it is the details that matter, not the rather
vague descriptions required in patent applications. Take, for example, the
controversial Amazon.com one-click patent, U.S. Patent No. 5,960,411. The
actual idea is rather trivial, and there are a variety of ways in which one-click
purchase can be implemented by computer, any one of which can be coded
by a competent programmer given a modest investment of time and effort.
For the record, here is the detailed description of the invention from the
patent application:
    The present invention provides a method and system for single-action ordering
of items in a client/server environment. The single-action ordering system of the
present invention reduces the number of purchaser interactions needed to place an
order and reduces the amount of sensitive information that is transmitted between
a client system and a server system. In one embodiment, the server system assigns a
unique client identifier to each client system. The server system also stores purchaserspecific order information for various potential purchasers. The purchaser-specific
order information may have been collected from a previous order placed by the
purchaser. The server system maps each client identifier to a purchaser that may
use that client system to place an order. The server system may map the client
identifiers to the purchaser who last placed an order using that client system. When
a purchaser wants to place an order, the purchaser uses a client system to send
the request for information describing the item to be ordered along with its client
identifier. The server system determines whether the client identifier for that