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Patents: Horizontal vs Vertical Innovation

I reprint below (with permission) an email from Prashant Singh Pawar:

Hi Mr Kinsella,

I am a long time opponent of patents and Intellectual Property rights (to a great part because of your work), but something always bothered me and that was the ‘innovation’ argument by the patent supporters. I could always see both the sides of the arguments, yet was never sure which side is right. I can see that without patents there is no incentive to develop a technology with a large investment, on the other hand, without patents, there is probably no need of a large investment.

I can see that patents make companies develop new things which without patents they wouldn’t do, but at the same time patents prevent companies from doing things which they would have without patents. I found this thing common across all the anti-IP and pro-IP work I have read that they both talk about the kinds of innovations they would promote and other side would demote, but there is no clear distinction between the kinds of innovation they are talking about.

So I finally came up with the terms ‘Horizontal innovation’, and ‘Vertical Innovation’. Horizontal Innovation is when a parallel technology is discovered (usually to avoid patent infringement). For example if a company develops a flying car using (say) hydrolic expansion, and they get a patent of it, another company develops (or has to develop) a flying car technology by using Thermo-plazma radiator engine. Both these technologies achieve the same end, they enable a car to fly, so this is horizontal innovation. This is what patent proponents talk about being squashed when they say innovation will be reduced when patents are removed. There will not be Google G1 phone,Blackberry and iPhone if there were no IP rights.

Vertical innovation is when a technology is built top of another technology merely by adding a new element to it. For example if you develop a Car which can travel on water, and I take that car, and add a Sail to it to make it use wind then that’s called a vertical innovation. With patents, only the patent holder can think of adding a sail on the boat-car and sell it, without patents, innovations will be done all over the world by every kind of boat and car enthusiast. There will be only one smart phone in this world, but it will be having numerous variants, such as a Google gPhone (synced with google services), a Microsoft mPhone (synced with microsoft services), and so on.

Patents promote horizontal innovation, but restrict vertical innovation. Without patents we will have more vertical innovation but less horizontal innovation. Even if Horizontal and Vertical Innovations are equally good in terms of their merits, one thing is clear, without patents, a lot more people will be able to use the technology, this is some place where a patent-less society will beat a pro-patent society hands down.

Just like if words were copyrighted, and you required a license to use the words, we would have had a LOT of innovation (horizontal) in terms of development of language and you required a license from John Locke’s estate to use the term ‘liberty’, there would have been billions of words in English (a lot of them doing the same thing what others do), but a lot less number of people would be educated, and most of our brain cells would have been wasted on keeping track of 15 different terms for ‘liberty’, and ‘passion’.

I described everything in detail in my article (its completely different from this mail). Please take a look at it, and let me know of your thoughts on it.

Patents: Horizontal vs Vertical Innovation

[AgainstM. crosspost]

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{ 4 comments… add one }

  • iawai August 24, 2009, 2:53 pm

    This is a great definition, and really drives to the heart of what IP really protects: a developer’s right to further develop ‘his invention’, and late-comers’ rights to patent sub-ideal developments that solve a problem that an earlier invention already solved.

    True Innovation (solving novel problems) and truly meeting the needs of society are goals that will never be met in an IP society, but are the residual effects of a liberty-minded policy.

  • Dale B. Halling August 25, 2009, 9:39 am

    Iawai, I agree that IP is associated with a “liberty-minded policy”. Liberty minded policies are associated with innovation, economic growth, human rights, peace, longevity, just about every good in the world. Unfortunately, some people have been mislead that IP is not a “liberty minded policy.” These people argue for the “scarcity theory of property”, which is mistaken historically and logically, see http://hallingblog.com/2009/06/22/scarcity-–-does-it-prove-intellectual-property-is-unjustified/

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