Great post by Richard Langlois at the Organizations and Markets blog about the extent to which “James Watt’s steam-engine patents retarded innovation in steam technology and slowed the British industrial revolution.”

Typically, we teach that the patent is an imperfect solution to the “appopriability” or “positive externality” problem, where individuals and firms are reluctant to innovate because they cannot capture the full value of their efforts due to competitors copying the innovation.  The patent offers temporary monopoly power in exchange for the inventor disclosing technical information to the public. Watt certainly benefited from that protection.

In this case, however, some say the patents were so broad in scope that they allowed Watt to stifle competitors altogether.  There is an on-going discussion in the innovation world about this “strategic patenting,” and the Langlois piece is a nice introduction if you are interested.

Rumor has it that Professor Langlois’ book, The Dynamics of Industrial Capitalism, will be featured in this fall’s I&E Reading Group.  Watch this space.