Written by Scott Dunn   

I see that the President wants us to out-innovate the rest of the world. While I think as a country, we’re very good at innovation, I doubt very much we could compete and win against the mind-share of the rest of the world. Of course, to some very outspoken people, our ability to innovate is dependent upon the tax breaks we give to businesses for research and development. And what are they going to do with these tax breaks? Why, they’ll acquire patents and pay executive bonuses of course.

Anyone familiar with patents will know that a patent is a time-limited private monopoly on an invention or process. Companies like IBM, Microsoft and Monsanto are very good at “inventing” and filing patents for their inventions. IBM is said to have the largest patent portfolio in the world. Microsoft is the 3rd most prolific patent filer in the nation and IBM is #1. Monsanto has patents on genes in seeds for food and owns 90% of the seed market in the US. They are the Microsoft of seeds.

Obama says we can out-compete every other nation in the world to regain supremacy again. Well, judging by the behavior of the most prolific inventors here, we’re going to beat the competition to the point where we own the market again. Then we won’t have to compete anymore. The history of the US is replete with companies that took their first mover advantage and their patents and used it to create a private monopoly. Monsanto, Microsoft, AT&T and IBM are considered some of the largest and most successful companies on the planet. Each of them claims to compete fairly in the marketplace, yet all of them rely upon patents to maintain their market share. This issue with patents is not exclusive to these four, but they make great examples.

They have all demonstrated at one time or another, or continue to dominate their respective markets. And they do it with the help of the government, while at the same time claiming that they should be free to innovate. They don’t just get the patents that the rest of us cannot afford. They get tax breaks that allow them to pay a pittance in taxes after all deductions are considered. They get access to the various legislatures around the country that most of us cannot afford. And finally, they get access to the courts that again, most of us cannot afford.

Speaking of the courts, some of you might have heard about Lexis-Nexis, a global legal services corporation that has innovated to provide us with e-filing services in some judicial districts around the country. If we listen to Lexis-Nexis, they would have us believe that they’re competing fair and square with everyone else.

But that’s not what some Texans believe (of all people!). A Texan is filing a class-action lawsuit against Lexis-Nexis alleging that they are charging unreasonable fees for e-filing. According to an article published on January 25th, 2011, in The Courthouse News, Lexis-Nexis, that paragon of efficiency, capitalism and fair-play, has been charging $16 for each page in every document electronically filed. By an order of a judge, Lexis-Nexis has assumed a private monopoly on e-filing in the Montgomery County District of Texas. It would appear that American companies are so weak that they need a monopoly to stay alive in this economy.

A much better answer for the courts would be to create a patent-free, open standard for e-filing. Then publish that standard and allow anyone who adheres to the standard to provide the e-filing service. With real competition, I doubt very much we’d see $16 a page being levied against people who want access to the courts.

So, American businesses will take the tax breaks offered by the current administration for research and development, and use that money to pay bonuses to their executives. They will also use it to “invent” and turn that work into patents. These patents will in turn constrain other businesses from competing in the same area of business, driving up costs and reducing competition as well as keeping unemployment high.

I’ve been watching the patent wars in technology for years and they do the customer no good. This attempt to mollify business with patents and their accompanying monopolies will only serve to stifle businesses while our infrastructure withers. I see that Michelle Bachmann wants us to make things again. I couldn’t agree with her more (but I'm not sure I agree with anything else she has to say). When we make things we innovate.

If you want to see innovation, all you need to see is the Internet. The Internet, with its various operating systems, all run on open standards that anyone can use. TCP/IP and HTTP are both, open standards that are not encumbered by patents. The Linux operating system powers most of the web servers in the world. The Apache web server runs well over 60% of the websites in the world. They are all free and serve as a common infrastructure that anyone can use. Anyone can build a business upon them. The history of American innovation started with open standards and free ideas and will continue to do so if permitted. That will allow us to make things and create jobs better than private, rent-seeking monopolies.

Unfortunately, we won’t be able to make things as efficiently as other countries if we fail to invest in a common infrastructure that everyone can use to get things done. For the past 30 years, we have failed to invest what is needed to maintain and improve our infrastructure. American business, it seems, has been more concerned with establishing private and exclusive monopolies and taking profits from them than with investing in the infrastructure that makes business possible.

Profits before infrastructure? Unsustainable.