I have spent 7 years and a large sum of my own money to develop a data model and application development tool that revolutionises the task of complex data sets. But the cost of patenting is a huge burden, which I do not want to incur. Nor do I want to publish my invention and innovations in open source. I have the satisfaction of having invented something. What if i just decide to bury my invention? Would the world be a better place? (M A J Jeyaseelan, Director, Infotwins Technologies India, New Delhi, India)

If you patent your tool, it will generally cost you a fair amount (depending on where you patent it), although taking this step does have the advantage of publishing the information for others to use, so the world is at least no worse off and may be better off.

If you do not enforce the patent, this is approximately equivalent to some kinds of open source publication so in effect, you have made a donation to world welfare at some cost to you.

If you enforce the patent by requiring licenses to use it, whether or not the world is better off depends to a certain extent on the quality of the invention and whether anyone is willing to pay for it.

If you do not patent but simply publish on the web, the same donation to the public good occurs as when the patent is not enforced, but possibly at lower cost to you.

If you bury the invention, there is no cost to you, but the world does not have access to it, so it will not improve world welfare. Of course, in this case, a different version can easily be invented by someone else and so the overall loss to world welfare may be small.

Is there any empirical evidence that it is good for the developing countries to maintain strict IPRs, especially for products with low marginal cost like software or drugs? It is hard for me to imagine that Microsoft will stop producing Windows if some developing countries do not pay for it; but it is easy for me to imagine that many developing countries will suffer from productivity drop if they are forced to pay the "monopoly" price. (San Mateo, CA, USA)

There is almost no empirical evidence on software and very little on drugs. However, note that software entrepreneurs in India are generally anxious to have patent protection for their inventions introduced in that country, which suggests that they consider it to confer private benefits at least, if not social.

As a general rule, the best achievable solution for pricing and protection in high fixed cost technology industries such as software and drugs is worldwide IPR protection (to provide incentives for development of inventions) accompanied by very substantial price discrimination, with developing countries facing much lower prices for the product (as they do in the case of Microsoft Windows, I believe).

However, this solution requires prevention of reimportation of lower priced products from developing to developed countries, something which has proved difficult to achieve in some cases. In some ways counterfeiting or imitation is a partial solution to this problem, in that it provides lower priced lower quality goods to those with lower willingness to pay; unfortunately it also deprives producers of some of their legitimate returns.

As open-source communities confer little or no direct competitive commercial benefit to their participants, does open source act to minimize Ricardian comparative advantage in international trade?

I am not sure I understand this question, but I suspect there is relatively little connection between the two (partly because open source is a rather small share of the world economy). If what you are asking is how to determine comparative advantage when one sector is unpriced, I agree it is a somewhat open question – open source production uses costly inputs (the time of skilled programmers) that might be employed in other activities so from the perspective of the economy, it is not free, even though it might be difficult to compute the full opportunity cost.

Patent litigation is becoming an incredibly expensive activity for firms in some of the key industry of the US economy. Do you think there are going to be patent litigation reforms (rather than patent filing reforms) to reduce firm litigation costs? (Alberto, London, UK)

I wish I knew. Several bills have been introduced in the U.S. Congress to try to reduce some of the expense-inducing features of litigation such as extensive discovery to establish willfulness (of infringement), failure of best mode (in describing the implementation of the invention), and inequitable conduct (on the part of the patentee). At the present time, however, these bills have met with some opposition from the pharmaceutical sector and firms in traditional industrial sectors and they are still in committee in the U.S. Congress.

If open source is becoming a viable alternative to patenting, why are we experiencing such a boom in patenting across industries and countries? Will there be a “patent inflation”? (Benjamin Garnett, Toronto, Canada)

Open source is a viable alternative only in a few relatively small sectors, primarily software and upstream biotechnology. The boom arises for a number of complex and interrelated reasons.

First, there has been an increase in worldwide inventive activity, driven to a great extent by discoveries in the biological sciences and the invention of the PC and related technologies.

Second, along with this boom we have seen the increased important of venture capital financing for new companies that have ideas and possibly proof of concept but no products. For such companies, their primary asset is their idea or invention and therefore establishing ownership via patenting of the invention is important for obtaining financing.

Third and probably most important, products, especially those in the ICT sector, have become more complex and use many different technologies produced by firms with different areas of expertise. This has raised the probability that a product will be found infringing because a small piece is covered by a patent held by another entity. Large semiconductor firms such as Texas Instruments, IBM, and Intel were among the first to realize that one way to defend against such costly patent litigation was to have a large number of patents themselves that could be used to threaten those who threatened them. This has led to an “arms race” of patenting in some sectors, primarily those associated with semiconductors, computers and electronics more broadly, and telecommunications.

The international boom is driven both by these phenomena and by the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement for (almost) uniform standards of intellectual property in all countries.

I am creating a start-up firm to commercialize software applications of neural networks. As I am worried by the costs of patent litigation, I am considering litigation insurance, which some insurers have recently started offering. Do you think it is a good idea or a waste of money? (James G., San Francisco, CA, USA)

I am afraid I do not know enough about existing litigation insurance programs to answer this question. Obviously it depends on the probability of facing litigation and the cost of the insurance, neither of which I know in this case. I am a bit worried however, that if litigation insurance is not widely taken up, the adverse selection problem (only high risks insure themselves) will mean that the price is relatively high compared to the coverage you get.

As deputy dean of a German university, I am responsible for setting up a technology transfer office. I see a lot of bureaucracy involved in it and lots of skepticism from the faculty who should provide the inventions to be patented and marketed. Can you give me any advice?

There are two issues here: one is that many faculty, especially older faculty who grew up in what they thought was a different system, resist the idea of patenting and marketing their inventions because it is not part of their “culture” and they do not wish to see the university going down that path. In the U.S., where we have had more experience with technology transfer offices, attitudes of some younger researchers seemed to have evolved to accept or even encourage the activity. This means that over time your faculty may become more accepting.

The second issue is that reporting inventions to a technology transfer office and having to spend time explaining them, filling out forms, etc. is something faculty with limited time available resist, not without cause, as it is probably not the most productive activity for most of them. Recent research (such as that by Saul Lach and Mark Schankerman) suggests that faculty do respond to financial incentives such as the share of royalties they get to keep when an invention is successful. I am not completely familiar with the German system but my understanding is that formerly professors were able to take out their own patents and exploit them, and that this has changed so that now the university is responsible for patenting. For some professors, this may not be a welcome change.

I can suggest some fairly mundane advice: 1) include a range of professors with invention experience on an advisory committee for your office if you have not already; 2) emphasize the social value of helping inventions to get out of the university and into society that your office can provide. In my view, this is an important justification for the existence of these offices, but the task can be difficult; 3) be prepared for your staff to take time to learn how to do their job well - in the U.S., tech transfer staff were viewed as rather incompetent and inexperienced by industry in many cases in the early days (this evidence comes from a number of surveys).

In your opinion, is there a role for the European patent system, or is it only a bureaucrats’ ill-conceived project, since what ultimately matters is whether or not a patent is registered in the US? (Pablo Vicente, Barcelona, Spain)

For many if not most goods, the market in Europe is as large as the one in the United States, so having a European patent is in principle just as important. A U.S. patent does not cover the invention in Europe, nor does a European patent cover the invention in the U.S. So imitators would be free to infringe in one jurisdiction if the patent was only taken out in the other. Of course, whether or not this is a problem for the firm depends on whether or not they are willing to cede the other market to imitators.

In my view, patenting is an ally of universities, as it allows them - and their faculty - to raise funds. Isn’t it likely that open source will push brilliant minds towards the private sector, to the detriment of universities? (Chicago, IL, USA)

I think this is a non-problem. Universities and industry differ as workplaces in a number of dimensions, and open source as a model is only viable in a few sectors. Also, the premise is wrong - the funds raised by patenting for universities are greatly exaggerated. Even one of the most successful universities in this area, the University of California, receives over 10 times as much from direct industry funding of research as from royalty payments on patents. And industry funding itself is less than 10 per cent of university research funding.