Last month was the 25th anniversary of the dissolution of the Soviet Union, marking the end of the Cold War. Just a few years earlier, it seemed unfathomable that a world superpower would simply disband. And yet, the USSR was destined to lose its confrontation with the U.S. despite having more nuclear weapons, being first in space, having a larger army, and sitting on a much bigger cache of natural resources. The reason was the insurmountable American lead in innovation.
But why was there such a lead? Were the American engineers, chemists, doctors and other professionals innately brighter than their Soviet counterparts? Obviously they weren’t. The Soviet Union, like every other country in the world had people with inventive and inquisitive minds. My father, who was an engineer in the USSR and remained a successful one after immigrating to the U.S, didn’t receive an extra dose of smarts upon landing at the JFK airport.
The reason we outinnovated the USSR is rooted in the American system that treats inventions as any other property, subject to the full protection of the law. In contrast, the Soviet legal system essentially made sure that the inventors’ creative capacities would not be directed towards improving lives of their fellow citizens. What made America win the Cold War, in large part, was our strong patent regime.
Under the Soviet system, the State Committee on Inventions and Discoveries would examine the claimed invention and if it found it to be new and useful, issue the applicant an authorship certificate. Similarly, in the United States, an inventor would submit his claimed invention to the Patent Office which would examine the application and then issue the applicant a U.S. patent.
But that’s where the similarities ended. In the USSR, receiving an authorship certificate meant receiving a onetime salary bonus of about 20 rubles (roughly the cost of two Rubik’s cubes or oneway airfare between Moscow and Leningrad) irrespective of the field of invention or its effect on the consuming public. The inventor was not given any exclusive rights to the invention and every state enterprise could use the invention without further licenses. (Although the law had a provision for additional compensation if the invention saved the government a significant amount of money, since the inventor himself couldn’t market the invention for the benefit of consumers, in practice this was applicable mostly to those who worked in the military or space programs).
This system had two perverse effects. First, by giving 20 rubles to every inventor no matter what, it encouraged a flood of fairly minor and useless inventions. Second, by denying inventors private property rights to the fruits of their intellectual labors it discouraged creative individuals from cheaply and efficiently solving problems that their fellow citizens faced in their everyday lives.
The American system was and is significantly different. An inventor who has obtained a patent receives nothing from the state other than the patent certificate. In fact, an inventor must pay various fees both to the government and the attorneys who are involved in drafting the patent. The government doesn’t guarantee any return to the inventor. Instead, the American system tells each inventor to go out and make as much money as they can by being the best and most efficient problem-solver. And if they are successful, they will see a return on their investment.
Our system leaves it to each of us to decide whether the inventor deserves compensation. Using our pocketbooks, we decide every day whether to spend our money on an iPhone or a Droid and whether to buy a Chevy or a Toyota. Corporations do much the same thing when they decide whether to adopt one technology over another. Inventors achieve commercial success either because their inventions are marketed directly to mass consumers or because they are adopted by various companies. Those inventors who do not find a market niche have to go back to the drawing board. This process ensures a constant stream of real innovation — one that benefits real consumers.
The lessons from the Cold War should be remembered now when it has become fashionable to call for weakening or even abolition of the patent system and replacing it with prizes. Innovation doesn’t just happen, and education and smarts are not enough. What is needed is a system that will entice people to innovate and reward those whose innovations improve the lives of their fellow citizens. And while we may debate the exact contours of such a system, there is no better system to encourage innovation than that which protects creators’ property rights in their inventions while letting the invisible hand of the free market judge the value of those innovations.
A strong patent system is vital to ensuring continued economic flourishing.
• Greg Dolin is an associate professor at the University of Baltimore School of Law and an immigrant from the USSR.