Lab studies suggest that markets can work for promoting innovation if there were no patents

Physorg.com - Markets outperform patents in promoting intellectual discovery, say scientists

This article reports on small-scale lab test that contrasted a patent-system of reward (the first person with the best solution wins it all) with a market-system of reward (each participant making different bets about what the best solution will turn out being). In so-called knapsack problems, participants try on their own to fit too many items into a knapsack; there are no perfect answers, but there are optimal ones. In the 'patent' scenario, the first person to get the most items in took the entire prize. In the 'market' scenario, people traded futures-contracts based on the items that were going to go into the sack, each betting about what items would eventually fit, and which ones weren't. It was clear that many of the participants got pieces of the optimal solution right, but not the whole of it. The suggestion was that giving many groups vested (market) interest in working on an innovation may also underwrite breakthroughs.