Tuesday, February 13, 2007

Patents: Capitalism versus Technological Advance (2007)

From the February 2007 issue of the Socialist Standard

The technological dynamism of capitalism is undeniable. But the functioning of capitalism also means the shelving of many useful inventions.

Capitalism has been widely celebrated for its capacity for rapid technological advance. Thus Marx in the Communist Manifesto of 1848: "The bourgeoisie cannot exist without constantly revolutionizing the instruments of production." A century later Joseph Schumpeter declared that "creative destruction" is "the essential fact about capitalism" (Capitalism, Socialism and Democracy, 1942). And surely this fact has never been truer than it is today, in the age of microelectronics and bioengineering?

The technological dynamism of capitalism is undeniable, especially in comparison with earlier historical formations. This, however, is only half the story. The functioning of capitalism also entails the shelving or suppression of many useful inventions. One common cause of neglect is the limited purchasing power of those who stand to benefit from some discovery, as in the case of drugs to treat tropical diseases (see 'Nonprofit Production: Wave of the Future?' in last month's issue). Another key factor behind the non-use of inventions is the patents system.

A patent is a legally protected exclusive right to use a new product or process, valid for a fixed period of time (typically 20-25 years). Patent rights supposedly belong to "inventors" and promote technological advance by giving inventors a substantial material interest in the results of their work. It's a dubious rationale because most inventors are members of the working class and the patents on their inventions, like the windfall profits from them, belong not to them but totheir employers. If they're lucky they might get a small bonus. They go on inventing things because it gives them satisfaction. That's human nature.

Nevertheless, the patents system does encourage companies to employ research scientists and engineers and in some cases to exploit patented inventions or license other companies to exploit them. In many other cases, however, a particular invention is viewed primarily as a threat to profits from the sale of an existing product, demand for which it would undercut. It will then seem more profitable not to make the new product while using the patent to prevent anyone else from making it. According to various studies, 40-90 percent of patents are never used or licensed.

But what if the patent on the unwelcome invention is already owned by a competitor who plans to exploit it? Even in this situation there is often some action that can be taken to ward off the threat. Firms interested in developing new technologies tend to be financially weak and vulnerable. They may be threatened, paid not to use their patents, or simply taken over, patents and all. The permutations are endless: there are many ways to skin a cat, as they say.

Let's consider a few examples. They are taken from articles by Kurt Saunders, an expert on business law at California State University, and Linda Levine, an engineer at Carnegie Mellon University. (The articles are available at here and here.)

Quashing a "wonderful advance"
Anaemia is a worldwide scourge, with a disproportionate impact on women, children, and poor people (due to iron deficient diet). Even in the US it affects an estimated 3.5 million people. It is treated with a drug called erythropoietin (EPO), which promotes the formation of red blood cells. A big problem with EPO is that the body secretes it almost immediately, so doses have to be very high. That makes EPO very lucrative for AMGEN, the company that owns the patents, while the patient suffers distressing side effects and foots the bill.

Thus, a person on dialysis for kidney failure requires lifelong EPO at $10,000 a year. Most of the world's sufferers, of course, have no access to such costly treatment. In 1997, Gisella Clemons, a scientist at the Lawrence Berkeley National Laboratory, discovered a protein binding factor for EPO - that is, a protein that sticks to it and blocks its excretion. Combining this protein with EPO increases take-up by 10-50 times, vastly reducing the dosage required and making the drug both safer and more affordable.

AMGEN was not interested. The company refused to make the more effective form of EPO themselves or to allow others to make it by giving them access to the patents in its possession. Martha Luehrmann, a colleague of Clemons, gave vent to her frustration:
"A wonderful advance that could save hundreds of thousands of children from anaemia and death stays on the shelf because the patent system protects a company that doesn't want to see any risk to its bottom line."

Another example from the pharmaceutical industry. Bloch, a medical researcher employed by Smith-Kline UK, devised a new dietary supplement for use in diuretic therapy. His supplement, a balanced combination of magnesium and potassium compounds, overcame the main defect of existing diuretic drugs, including Smith-Kline's own Dyazide - namely, potassium depletion and its effects (fatigue, dizziness, confusion, etc.). In 1974 Bloch and Smith-Kline concluded a licensing agreement by which Smith-Kline undertook either to develop the supplement itself or to surrender its exclusive rights to Bloch. In the event it did neither. Bloch went to court, where his claims were accepted but no effective action was taken.

Keeping products inefficient and dangerous
Many inventions have been suppressed in the motor vehicle industry. Several of these could have greatly improved the efficiency of fuel use and reduced or even eliminated polluting emissions. In 1936, for instance, Charles Pogue invented a carburettor that enabled a car to run over 200 miles to the gallon at speeds of up to 70 mph. More recently, Tom Ogle designed a car in which a series of hoses fed a mixture of gas vapours and air directly into the engine. Tested in 1977, it averaged 100 miles per gallon at 55 mph.

It is the oil corporations rather than the automobile manufacturers themselves that have the strongest interest in suppressing inventions that improve fuel efficiency and thereby reduce gasoline consumption. Thus, Exxon is said to have purchased and buried the design for a "momentum engine" with high fuel efficiency.

Patents do not last forever. For that among other reasons, many new products do eventually see the light of day, even if only two, three or four decades after being invented. Patent owners imposed such long delays on the appearance of many now familiar products. Thus, the fluorescent lightbulb was patented in the 1920s but kept off the market until 1938 in order to keep energy efficiency low and demand for electricity high. A "safe" (or at least safer) cigarette, from which much carcinogenic material had been removed, was invented in the 1960s but suppressed in favour of the more dangerous kind until the last few years. The same thing happened to the telephone answering machine, the plain paper photocopier, the auto-focus camera, emission control devices for motor vehicles, the electronic thermometer, and artificial caviar.

Patent law reform or social use of knowledge?
There are two divergent tendencies in patent law. On the one hand, patents are recognized as a form of property. An owner of property has the right to use that property or not at his or her discretion, and this applies to patents as it does, say, to land. On the other hand, legislators created patent law for the purpose of promoting technological advance in the public interest, so should the courts not try to discourage its misuse for the opposite purpose? Legal reformers like Saunders and Levine advocate changes to patent law that will strengthen the "public interest" tendency and impede the suppression of useful inventions.

The provisions of patent law do matter. The law already places certain restrictions on the rights of patent owners; otherwise inventions would be suppressed even more thoroughly. So legal reform might have a beneficial effect. But, as in other areas of industrial regulation, companies will find means of complying with the letter of any new requirements while thwarting their spirit. Let us suppose that the owner of a new patent is required to put it to use within a fairly short time interval or otherwise forfeits the patent (and Saunders and Levine do not suggest anything nearly as drastic). Could they not start production of the new product while "sabotaging" it to make sure sales of the old product would not be affected? For instance, the new product could be produced on a small scale and indeliberately slipshod fashion, sold at a very high price with hardly any advertising, and so on.

How much does it really matter if an invention has to wait a few decades before it is widely applied? Not very much, perhaps, if it's a new kind of camera or photocopier. The delay is harder to tolerate if it's an effective treatment for a previously incurable disease. And, with global warming upon us, new sources of environmentally harmless energy and new devices to raise energy efficiency are a matter of life and death for the planet. We can't afford to wait until capitalists finally find it profitable to make the switch to new technologies. It is high time to put knowledge and human creativity at the direct disposal of the community.
Stephen Shenfield