letter to European Parliament against the expansion of the patent space

Iraklion, Crete, Greece August 15, 2003.

Dear Sir/Madam,

I am writing to bring your attention to the unintended consequences that an expansion of the patent space could have on the entrepreneurial dynamics, and thus on the overall economic climate in Greece. As an economist, I strongly advise you to vote against patents in the impending vote that is scheduled to take place in the European Parliament on September 1, 2003.

In countries like Greece, where the majority of commercial exchanges are conducted by small and medium sized organisations, the capacity to experiment freely on viable alternatives, either in terms of technology, process, or organisation, is critical. When taken to an extreme, patents do not match well with a climate nurturing experimentation, and will hence hinder progress and economic prosperity within the small business segment, which is the dominant model of entrepreneurship in the entire Europe. Essentially, the argument for patents is not only misconceived, but it aims at dislocating, even shattering the economic incentives that provide the initial bedrock for starting a new small, regionally based business. If patents become more pervasive, in line with the US, the effect on our economy is bound to be dramatic. Small businesses will gradually evaporate, as they will be unable to shoulder the financial burden that legal struggles over patent ownership entail. A plethora of cases will have to be resolved at court, and small business owners will have no option other than kneeling down under the pressure forced upon them by the financial and legal clout that mega-corporations could command at their whim. On the one hand, taxpayers' money will be increasingly squandered into court cases; and in the absence of sufficient financial resources, small businesses will be excluded from a fair level playing field.

Please, don't take me wrong. Small businesses should not be protected because they have been playing a rather traditional and central role in our economy for so long. They should be fostered because they are a major engine of innovation and economic value. And this is an argument that cannot be easily dismissed. I am not suggesting here that by reviving small-scale entrepreneurship, all economic wounds will be automatically healed, although some arguably will. But beyond the shadow of doubt, locally based networks and clusters of small businesses are vital for a region's commercial community, since they give rise to a distinctive culture of risk-sharing. Risk sharing when coupled with intra-organisational relationships based on mutual trust and reciprocity stands a much better chance of delivering sustainable economic and social growth. This is the real contribution that small and medium sized enterprises could make to our communities. They promote collaboration, cultivate trust, and encourage further social cohesion. This is not something that more patents are equipped or meant to deal with. Their purpose is to minimize risk by granting exclusive rights over the use and commercial exploitation of knowledge. But risk can be more effectively minimised when the local marketplace thrives on networks of collaboration and trust.

Most importantly, it is inevitable that the local community life will be affected too as healthy marketplace dynamics are restored, and trust is rooted in the market. In fact, it is a definite prerequisite for social growth along with economic growth. Patents discourage knowledge sharing and experimentation, and this is not our vision of the future. Knowledge-based economies are driven by knowledge spillovers - that stem from the free sharing of research knowledge, and it is also widely recognised that knowledge transfer contributes to wider social and economic progress. On these grounds, I urge you to consider the unintended harm that more patents could inflict upon the spine of our economic system - that is small and medium sized organisations.

Yours faithfully,

George N. Dafermos BA, MA, MSc Economist, Freelance Management Consultant