Against Intellectual Monopoly

determining the direction of innovative activity. Exhibition data show that
countries without patents share an exceptionally strong focus on innovations in two
industries: scientific instruments and food processing. At the Crystal Palace, every
fourth exhibit from a countrywithout patent laws is a scientific instrument, while no more than one seventh of other countries innovations belong to this category. At the
same time, the patentless countries have significantly smaller shares of innovation in
machinery, especially in machinery for manufacturing and agricultural machinery.
After the Netherlands abolished her patent system in 1869 for political reasons, the
share of Dutch innovations that were devoted to food processing increased from 11
to 37 percent.8

    Moser then goes on to say, "Nineteenth-century sources report that secrecy
was particularly effective at protecting innovations in scientific instruments
and in food processing. On the other hand, patenting was essential to
protect and motivate innovations in machinery, especially for large-scale
manufacturing."9
    Evidence that secrecy was important for scientific instruments and food
processing is provided, but no evidence is given that patenting was actually
essential to protect and motivate innovations in machinery. Notice that
in an environment in which some countries provide patent protection and
others do not, bias caused by the existence of patent laws will be exaggerated.
Countries with patent laws will tend to specialize in innovations for which
secrecy is difficult, while those without will tend to specialize in innovations
for which secrecy is easy. This means that variations of patent protection
would have different effects in different countries.
    It is interesting also that patent laws may reflect the state of industry and
innovation in a country:
    Anecdotal evidence for the late nineteenth and for the twentieth century suggests
that a country's choice of patent laws was often influenced by the nature of her technologies. In the 1880s, for example, two of Switzerland's most important industries
chemicals and textiles were strongly opposed to the introduction of a patent system,
as it would restrict their use of processes developed abroad.10
    The nineteenth-century type of innovation - small process innovations -
are the type for which patents may be most socially beneficial. Despite this
and the careful study of economic historians, it is difficult to conclude that
patents played an important role in increasing the rate of nineteenth- and
early-twentieth-century innovation.
    More recent work by Moser, exploiting the same data set from two different angles, strengthens this finding - that is, that patents did not increase
the level of innovation." In her words, "Comparisons between Britain and
the United States suggest that even the most fundamental differences in
patent laws failed to raise the proportion of patented innovations."12 Her
work appears to confirm two of the stylized facts we have often repeated in this book. First, as we just mentioned in discussing the work of Sokoloff,
Lamoreaux, and Khan, innovations that are patented tend to be traded
more than those that are not, and therefore to disperse geographically farther away from the original area of invention. On the basis of data for the
period 1841-1901, innovation for industries in which patents are widely
used is not higher but more dispersed geographically than innovation in
industries in which patents are not used or are scarcely used. Second, when
the defensive patenting motive is absent, as it was in 1851, an extremely
small percentage of inventors (fewer than one in five) choose patents as a
method for maximizing revenues and protecting intellectual property.

    To sum up, careful statistical analyses of the nineteenth century's available
data, carried out by distinguished economic historians, uniformly shows
two things. Patents neither increase the rate of innovation nor are the
best instrument to maximize inventors' revenue. Patents create a market in
patents and in the legal and technical services required to trade and enforce
them.
Intellectual Property and Innovation in the Twentieth Century
    A number of scientific studies have attempted to examine whether introducing or strengthening patent protection leads to greater innovation by using
data from post-Second World War advanced economies. We have identified twenty-three economic