Do Patents Discourage Innovation?

Meurer_white_65wTwo former Boston University Law School Colleagues occupied New York Times headlines on Sunday in a discussion of the economics of patent law.   Michael Meurer and Jim Bessen are both economists and both law professors. Over the past few years, the pair has compiled a tremendous amount of economic data regarding patents and companies who patent.

Meurer & Bessen’s bottom line: On average, the patent system is bad for innovation.  They agree innovator firms often profit from their own patents. However, the pair’s data shows that the innovator firms are also the ones most likely to be targeted by other patent holders. (litigation, licensing, etc.) In today’s system, they find, the disincentives created by other people’s patents outweighs the incentives to build your own portfolio.  I.e., on average, the patent system discourages innovation. (Patents do a much better job in pharmaceuticals and much worse job in IT.)

Bessen_jamesMeurer & Bessen do not suggest dismantling the patent system — rather, they believe that a number serious reform measures are needed to shift the balance back to a positive state where patents incentivize innovation.

Their reform proposals call for clear predictable patent boundaries — something that every patent practitioner knows is a serious problem. Unfortunately, the current reform proposals hardly even touch this major issue.

Their book, Do Patents Work?, will be out in 2008 (Princeton). For now, you can find snippits of the research at the following links:

76 thoughts on “Do Patents Discourage Innovation?

  1. “PDS has it right. Life is about choices. You can be a chicken little and run in circles saying the big bad wolf (corporation, government, whatever) is coming after you (what a mixed metaphor!), or you can make choices.”

    Why cannot PDS and KCB both have it right? You do need to make choices and do the best for yourself as you’re able, but KCB is talking about deep politics- why the world that you, yes, you have to make choices in, is the way it is, and who makes it like that and who benefits from it being that way?

    When people here deep politics being talked about, they often mistake the questions being asked as being a type of complaining about the hardness of life generally. Life will always be hard for everyone, it’s the human condition, but that doesn’t mean that we should blindly accept any condition as our lot. The human condition doesn’t dictate that some people should live as slaves, for instance, that’s an inequity and an agony we imposed on ourselves.

    What KCB is saying , and this author is also supporting indirectly, is that the assignment of IP as it exists today impedes progress and favors some parties at the expense of society and other people in it. Since it has the direct effect of making some people rich and excluding others from market participation, and it is a system created and sustained and defended by people who benefit from it, then it does go to deep politics- why are things the way they are and do they have to be that way?

    This will probably be the last post to this now-stale thread, but I don’t see it as so very OT. If it’s not interesting to you, or you would rather not see it discussed, don’t read it.

  2. Patent Attorney wrote “As for not working 12 months of every year, that, too, is a choice. As an engineer I commonly took off 2 to 4 months a year and lived in Las Vegas, Hawaii, Florida, etc., and I made more money doing that than I do working as a small town lawyer.”

    You obviously were not employed by a corporation at the time of those travels.

  3. PDS, KCB and Pattent Attorney,
    Can you please take your side discussions off this blog string that is intended to deal with the theme and comments on Maurer and Bessen’s upcoming contraversial book? If you have no comments on it, just go rant elsewhere.

  4. If you review the Labor Code in your state you will probably note, at least in my state, that the changes you made to your agreement would be void as violating the state statute. It is basic contract law. An illegal agreement is void. Then the question becomes are you freed from the obligation to assign your IP rights to the company. I would suspect that a judge would say no. There is I am sure some doctrine that the court would use to say that the contract must be interpreted to maintain its force. Something like the amendments made were obviously a mistake because the party making them did not understand the law. It would be nice for a labor attorney to be in on this discussion.

  5. KCB admonishes PDS to get a clue.

    Before becoming a patent attorney, I worked as an engineer for 20 years. During that time I worked for 17 different companies, many of which wanted me to sign various types of agreements. I read every one of those agreements and made a conscious choice. I scratched out the words about inventions and wrote in what I was willing to agree to. I did not chose to blindly accept what the employer wanted. I always got the job. But, I also realized, and the changes I made reflected it, that I was being hired to do a job and my employer had rights to what he was paying me to do. What I did on my time, though, was mine.

    As for not working 12 months of every year, that, too, is a choice. As an engineer I commonly took off 2 to 4 months a year and lived in Las Vegas, Hawaii, Florida, etc., and I made more money doing that than I do working as a small town lawyer. But, again, my current lifestyle is my choice. I would venture to say that, today, there are more people not working a significant portion of the year and living a life of leisure than in the days of old.

    PDS has it right. Life is about choices. You can be a chicken little and run in circles saying the big bad wolf (corporation, government, whatever) is coming after you (what a mixed metaphor!), or you can make choices.

  6. Dear PDS:
    You are a product of constant bombardment of propaganda. The United States of America that we are taught about in grammar school ceased to exist long ago. How can one not work for a company. We each are born into at least $50,000 of debt brought about by deficit spending by the government. We are no longer allowed to own real estate. Real estate is, in effect, owned by the local muncipalities. Try not paying your property taxes and see how long you posess the real estate.

    Food can not longer be raised on your property for the inflationary pressures of the banking class has made property so exepensive that we can no longer afford to live on a sufficient amount of land for self slive in is nothing like the USA of 70 years ago, much less of the 19th Century. As a result, one must work to buy food.

    The long and short of it is this, the ruling class has established a system in which you are born into debt and without any means of self-sustenance. As a result, one must seek compensation in order to satisfy the debt. The debt that you pay is realized by the taxes imposed upon you. Therefore, how can one automatically start a company out of the womb. You have negative cash reserves at the moment of your first breath. PDS you are either completely ignorant of the gravity of the situation in the United States or have a separate agenda.

    Imagine this . . . having only to work six months a year and having six months off. I have spoken with two people in my life who lived that way. That was the United States culture in the western states in the 1890s. Now look at the statistics and you will see that most people don’t even take vacation.

    So get a clue PDS. The modern patent system is utilized for nothing more than to enslave those with ideas that could disrupt the returns of the investments of the elite.

  7. QUOTE:
    No people. The patent system is not about economics. It is about intellectual servitude in perpetuity. Sorry, but it appears I forced you to swallow the Red Pill without ever offering the Blue Pill.

    Well Amen. It’s class warfare pure and simple. Those that already posses the needed capital can exclude others from the marketplace. That’s the whole effect of the million bucks per claim per patent price tag on defending you IP.

    Sure, I can write my own patent (doh! I’ll get that cat back in the bag in a second here…). Can I afford to defend it? Ha. Can I afford to defend myself against a frivolous or not-so frivolous IP lawsuit. Ha.

    Look, it was pointed out on this forum- IP lawyers don’t even take cases from any entity worth less than a million. So it’s a millionaire’s club. Yes there are exceptions, but they only prove the rule.

    We’re living in a time when corporations rule the world. That won’t last forever, just the way the Divine Right of Kings seems quaint to us now, so also will the idea that corporations can somehow automagically bring forward all progress and increases in prosperity by acting in their own, local and selfish interest.

    As far as signing away your rights, yes you can say “no thanks”- when I was offered a very lucrative employment agreement with a very very big DOD contractor, they handed me the most egregious case of IP land-grab-into-perpetuity conceivable. I turned it down, and told them why. But the reality is, and this is the reality that undermines the bulk of Libertarian-Corporation arguments, employment contracts it’s not a free bargain being struck between two parties who are free to walk away, really, because one of those parties can hold out effectively forever and the other has a bilogical mandate to eat. Since all companies act in the same way (did I say collude in HR practices? Did I say that? OK then, don’t accuse me of saying that…) people are coerced into signing those things.

    Slightly OT, and I am not a lawyer (I had a mother), but for any non-lawyer who thinks they are under a non-compete from a previous employer, or a everything-forever IP agreement, you should know that the courts see those things as a constraint on the ability to practice your trade and throw them out of court left and right, even if you signed it.

    But this poster is right on. It’s not the market that’s being served. It’s not even YOUR 401K since there’d be a LOT MORE money out there if companies like Microsoft were acting as financial and creative blackholes that suck away value and progress from the larger potential market, crush it into a few billion dollars, then declare themselves a shining example of a market leader.

  8. I wish people here would stop using the word “innovation”.

    Innovation and invention of patentable subject matter are not the same thing. One is a species while the other is a genus. Innovation is much more expansive than our normal usage of the word “invention”. We fall into a framing trap by getting used to mindlessly using the word “innovation” as a substitute for “invention”. Innovation includes the creation of pure ideas. One cannot patent an idea. Example_1: I hereby claim the idea of determining the height of a tree by use of its shadow and the tangent function. Example_2: I hereby claim an idea I have for a new science fiction story.

  9. So, under any patent regime, small (“small” defined arbitrarily by patent law, of course) innovations ARE illegal!!”

    “You seem to have a misunderstanding of how patents work. ”

    No, what I wrote is absolutely correct. Maybe you misread it. Anyway, it MUST be the case that at some point, an improvement on an existing patented product must be deemed too small, and will thus be called an infringement. This can not be argued. It is also true that, since there are no units of “innovativeness”, this decision must be arbitrary. This necessarily leads to a state of affairs where small improvements never see the light of day — millions or billions of them over time. This is what you are defending. And since you are the one who wants to employ governmental coercion to bring about this state of affairs, the burdon is on you to demonstrate that a certain “valuable” product (a problematic assertion in its own right) could not arise without patents — i.e. that product X could not arise from the work of voluntary consortiums, or arise “organically” from a common knowledge base created by many people — each of whom made a minor and low-cost contribution to the knowledge base through simple improvements, suggestions, and the like (I hope that wasn’t too convoluted).

    “Without the prospect of obtaining a patent, many inventions would never be disclosed. Consider someone who comes up with an improved manufacturing process for a product. Without patents, the inventor would do best to keep the process secret for as long as possible, to obtain an advantage over their competitors. ”

    Again, if it were commonly possible to maintain this level of secrecy, why would one need patents in the first place? But more importantly, why should one be forced to give up ones ideas after X amount of time? This smacks of socialism. Why shouldn’t Bill Gates be forced to give $1 million dollars to the poor? Or maybe it should be $2 million. He’ll never miss it. The socialist central planners may have good intentions, but they don’t understand humanity and the complex systems in which they like to dabble.

  10. As a patent attorney in a small company involved in developing new and innovative products for world markets, I say from the coalface that patents (and trade marks, as a defence against cybersquatters, for e.g.) are integral to competing in a tough marketplace. A fair bit of time is spent working around the prior art and competitors’ patented inventions. As a matter of course (and forced innovation), new and better (the result of forced innovation) products are developed and new patents are sought to provide a little breathing space and better prices for better margins to invest in the next round of products. And so the cycle repeats.

  11. KCB

    Simple solution … start your own company. You can make/design products or you can even offer your engineering services to other companies. No one twists your arm to work for these companies.

    Also, you have a right to negotiate your contract. No one forces you to sign those agreements.

    BTW: Those companies also happen to pay you a salary for doing more than play foosball or surf the net and posting on patent blogs. There is this little something called “quid pro quo” you should look into.

    Life is all about choices … you made yours, so don’t gripe when the consequences of those choices leaves you unhappy. You don’t like the consequences? Then change your choice.

  12. Companies would never dare to end the filing of patent applications. The formula is quite simple people.

    The cost of filing a patent application $10,000.00

    The cost of owning all the intellectual property of each of every employee and prevent them from competing against use with their own idea-priceless.

    The facts are simple but opressive. We are conditioned as a people to work for companies. Every engineer worth their salt graduates from engineering school to enter into an employer-employee agreement with a company. The net effect is that they assign-away virtually all of their intellectual property rights to that company in which the employee has expertise. Upon terminating their employment with that company they go to work for another company; thereby entering into another similar employee-employer agreement. The net effect is that for their entire career they do not own what they conceive. Without patents, companies could only control that which is trade secret-kinda of difficult to control is one sells products to the public.

    No people. The patent system is not about economics. It is about intellectual servitude in perpetuity. Sorry, but it appears I forced you to swallow the Red Pill without ever offerring the Blue Pill. Nonetheless, I think this is of sufficient import to thrust upon you without your permission. Whereas in the past bodies were in chains, society has been morphed into where minds are in chains.

  13. Bessen & Maurer have rehashed the anti-commons arguments introduced years ago by fellow professors Merges & Nelson who asserted that patents of ‘broad’ scope block technological developments. M&N’s 1990 paper (90 Colum. L. Rev. 839) on the subject is also widely understood in both law and economics to have faulted Kitch’s ‘prospect theory’ of patents, a theory that a function of patents is to enable the coordinated development of novel technical ideas. These innovation suppression theories are not new but I am aware of no real evidence ever provided to support such assertions. M&N’s showing of such “evidence” in the historical record has been demonstrated to be flawed and erroneous (see John Howell’s paper on the subject at link to papers.ssrn.com ).

    Innovation suppression theory assertions must be testable to be considered or to be of any consequence. The fact that patents suppress follow-up technological developments by other parties that would *infringe* the claims cannot be considered as proof, because that is exactly what the right to exclude conferred by patents is supposed to achieve. The questions that must be answered are to what extent *coordination* takes place and whether R&D investments and innovations are directed to productive non-infringing solutions, bypassing the patent claims. Does the public disclosure of the patent improve efficiencies in such developments, helping avoid repeating certain experimentation? If those activities take place, they contribute to a diversification of solutions and technological paths that would not have otherwise occurred. Thus, how can one prove the suppression theory without even addressing such alternative activities? I am often struck by the indignation of patent critics who, shortly after a patentable invention becomes a mainstay in a given industry, believe that they should be allowed to expropriate the invention because otherwise it would “suppresses” their ability to introduce downstream innovations. The question to such critics is “What would you have done had this invention not been made at all? Why can’t you make your downstream innovation work without exploiting this invention? If it is so essential to you, why did you not invent it yourself in the first place?” Patents are all about the encouragement to “go find a better way yourself”.

    M&N’s premise is slightly sharper, though. It is that only patents with overbroad claims can give rise to subsequent suppression of development. They suggest that if an effective narrowing of such broad claims through, for example, a reverse doctrine of equivalents were available, the alleged suppression episodes they point to would not have occurred. Clearly, according to the suppression theory, if no patent claims were in place at all, developments should have been unimpeded. This can be tested in the special cases in which innovations were not protected by patents at a time and in countries that had no patent laws, by comparing these to innovations in countries that did have patent laws at the same time. Indeed, empirical data of such comparison can be found in Moser’s 2005 paper “How do Patent Laws Influence Innovation?” (available at link to papers.ssrn.com ). The evidence in Moser’s paper contradicts the suppression theory. It shows that in the absence of any patent claim barriers, not only was there no suppression but there were no follow-up developments or subsequent innovations at all in technical areas patented in other countries. In these examples, would-be follow-up innovators in countries having no patent protection had access to the disclosed information of patented innovations in countries with patent laws but were not barred from exploiting them in follow-up innovations. Yet no follow-up development or innovation had taken place in these technical areas in the countries without patent law. In contrast, innovations in these technical areas were striving in countries having patent laws. Can Bessen & Maurer explain that? There have been several accounts discussing what happened to countries that abolished patent law – they had to reinstitute patent law once they found that the effects were essentially identical to that of the loss of property rights in general.

    Bessen & Maurer seem to have joined the political cabal of those who would blame just about anything except global warming on the US patent system. We do not know exactly what will be published in their book but they are scholars who have generally produced quality research work that meets the scrutiny of peer reviewed papers. I challenge them to advance their “suppression” theories in peer-reviewed articles rather than in a politically oriented book that is not subject to prepublication peer review. They should formulate their hypothesis of suppression, suggest objective tests and provide empirical evidence that can prove that their hypothesis must be accepted over other alternative explanations. Until they do so, we should all remain very skeptical.

  14. “It doesn’t make sense to even ask this question. I thought we needed patents because inventions were too easy to reverse-engineer. That is, it is too easy to figure out formulas, blueprints, etc., so they need to be protected. But if this is the case, why do we need to concern ourselves with information dissemination? You can’t have it both ways.”

    Without the prospect of obtaining a patent, many inventions would never be disclosed. Consider someone who comes up with an improved manufacturing process for a product. Without patents, the inventor would do best to keep the process secret for as long as possible, to obtain an advantage over their competitors.

  15. Fred Mann wrote:
    “So, under any patent regime, small (“small” defined arbitrarily by patent law, of course) innovations ARE illegal!!”

    You seem to have a misunderstanding of how patents work. It is true that if someone has patented a product, you can not sell an improved version of their product without their permission (provided the improved product falls within the scope of one or more valid claims). However, you may be able to obtain your own patent for the improved product, in which case the original patentee would need YOUR permission to sell the improved product.

    As for “a smaller business going up against a larger company”, the larger company will certainly have an (unfair?) advantage because they are more able to afford the cost of litigation, but this is true across the board in any sort of dispute, patent-related or not.

  16. “Does anyone know of any scholarly works that address these technology publication-and-dialogue justifications?”

    It doesn’t make sense to even ask this question. I thought we needed patents because inventions were too easy to reverse-engineer. That is, it is too easy to figure out formulas, blueprints, etc., so they need to be protected. But if this is the case, why do we need to concern ourselves with information dissemination? You can’t have it both ways.

  17. I think Blaise and “Because it might…” above have excellent points about often-overlooked justifications for a patent system.

    Does anyone know of any scholarly works that address these technology publication-and-dialogue justifications?

  18. Just an Ordinary Inventor,

    Nothing I said was or was intended to be an endorsement of the article’s views on patent law.

  19. I think that the value of having patents as a resource for technical information alone is worth their existance. After all patents expire after only 20 years which is really not a great deal of time in the larger scheme of things. Even though some patents are written broadly, on average patents do go into more detail than any other technical literature source and are usually problem-centric focusing on very specific technologies making them more useful to the practicing engineer or technician in these technologies. If there were no patent system or the patent system were limited how would this effect societies capability to maintain a written record tracking technical improvements? Textbooks and scientific journals are usually too abstract and generic and not as problem-centric as patents. To me it doesn’t really matter whether or not patents are overall beneficial to corporations because their primary benefit is in the long term accumulation of knowledge.

  20. I am sure that the commentators are correct to a degree. There has been a sharp rise in patents and patent litigation. I think this blog and its popularity are evidence of this trend, but I think they fail to consider that information is much easier to get now. The internet has made it easier to view product offerings, obtain competitive intelligence, discover market trends, etc., etc. so of course there are more people out there looking for people who infringe patents. That is just a perk of the internet and all of the information available to those looking to enforce their rights. This doesn’t mean that the patent system is bad or broken. I think this means that it is maturing or evolving. Ultimately this will be good for business. It will force us to license more, collaborate and become more competitive here in the U.S. If we don’t have to reinvent the wheel every time we develop a product (like I have done countless times as an engineer) we will be more efficient.

    I don’t see it as fire and brimstone like these authors portray. This is simply a growing pain of the system. At some point it will normalize. The patent system is in puberty, it about time. I think we all now that after puberty we become more productive anyway.

    I haven’t had time to read all that is out there so I apologize if I am borrowing another’s idea.

    Just some simple thoughts from an aspiring patent attorney.

  21. For example — hot off the latest Mises.org patent blog:

    > It doesn’t explain why a for-profit company
    > would sink billions into developing a cure if
    > someone else could copy their result without
    > paying them anything.

    Actually, this is a very simple question to answer – the ones which will benefit from it. Health insurance companies – for which finding cures and drugs which really prolong healthy life (and not just some overhyped stuff which is patentable but is not much better (and ofter worse, Vioxx, anyone?) than the old drugs) directly translates to less payouts and more years to collect premiums….

    This is only a partial repost. Read the rest here:
    link to blog.mises.org

  22. IP/patent laws undoubtedly foster larger and more costly R&D projects. But what is the cost?
    By definition, IP *PREVENTS* small incremental changes in technology, goods, etc. . Obviously, if you make a very small improvement to an existing good, you may find yourself with an IP lawsuit on your hands. I mean, what good is IP if you can circumvent it with tiny changes? So, under any patent regime, small (“small” defined arbitrarily by patent law, of course) innovations ARE illegal!! Of course, “small” innovations are the most common type of innovation. Most people don’t have revolutionary ideas every day. So outlawing small innovations effectively blocks the most common type of innovation. What do you think is the cumulative effect of outlawing these millions (billions?) of tiny innovations over time?
    Of course, you might also find yourself with a patent lawsuit (or maybe thousands of them) if you are a smaller business going up against a larger company with greater legal resources. Just ask someone who works at Red Hat what they think of IP law. I did.
    And this tiny snippet of an argument only barely addresses the utilitarian angle — i.e. without patents there will not be “enough” research, books, movies, etc.
    There are many other angles to the anti-IP argument. I encourage you folks to visit mises.org and begin reading up. And if you think you have a valid objection, there is almost always an active blog covering some aspect of IP.

  23. “If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.” Fritz Machlup, An Economic Review of the Patent System, Study No. 15 of the Sub-committee on Patents, Trademarks and Copyrights of the Committee on the Judiciary, US Senate 85th Congress, 2nd Session, Washington: GPO, 1958, at p. 80.

  24. In my previous post, the $8.4B was based on the year 1997, not 1999, as I said, which is clear from the NY Times quote.

    Obviously, this affects nothing of substance in my argument.

  25. OK, here’s a still more pointed objection to the Meurer & Bessen analysis.

    Recall that according to the NY Times article, “Specifically, they estimate that about $8.4 billion in global profits came directly from patents held by publicly traded United States companies in 1997, rising to about $9.3 billion in 1999, with two-thirds of the profits going to chemical and pharmaceutical companies.”

    But here’s what a Fortune magazine article says about Lipitor:

    “Lipitor, which is designed to lower cholesterol, totaled $10.8 billion in 2004 sales, the first drug ever to surpass $10 billion. Deutsche Bank projects Lipitor sales will grow to $14.2 billion in 2007 if Pfizer successfully holds its patents, translating into annual earnings of $2.54 per share. But if Pfizer loses, it could face a $8.6 billion plunge in annual sales by 2007, most of it in U.S. revenue, resulting in annual earnings of $1.64 per share, according to Deutsche Bank. Bernstein’s projections for Pfizer are similar.”

    Link:
    link to forbes.com

    Now the drop of $8.6 Billion in sales is presumably almost entirely, if not entirely, a loss in profits to Pfizer because it can no longer charge a higher price for Lipitor in virtue of a patent.

    But, of course, the $8.6 Billion is essentially equivalent to the projected $8.4 Billion in profits stipulated in the Meurer and Bessen article. While the Meurer Bessen figure is for 1999, and the $8.6B was projected for 2007, that should have little impact on the comparison.

    But here’s the absurdity: the $8.6B represents the value to one company for one drug on one patent. The projected $8.4B supposedly represents the TOTAL profits of ALL patents for ALL companies in the United States according to the mathematical model of Meurer and Bessen.

    I simply ask, how can this analysis be anything but a sham, given how it fails even the most obvious sanity check?

    I repeat my earlier point: I can see no way that an economist could come up with figures like this, as absurd as they are on their face, unless they were driven entirely by ideology up front.

    This “analysis” looks less and less like scholarship to me, and more and more like propaganda.

  26. Very few here seem to be familiar with the scientific literature on this topic. Several studies have been done that have come to the same conclusions in various ways. Innovation in IT before algorithms were patentable was higher than it is today. The weak patents of the late 19th century fostered a period of increase in manufacturing that has not been equaled. The idea of patenting medical nursing procedures disgusts me and probably most of the population. The constitution allows patents only as a way to promote the useful arts. If patent trolls, overly broad and obvious patents and mere claim stakings become the rule you will see a drumbeat for the total abolition of the patent system since it will have failed that test. And all you patent lawyers and other hangers-on will have to find productive work.

  27. Sorry Lionel – I have trouble tellin when Malcolm is serious anymore.

    True, tis excrement – but the type that led to the “reasons” for the currnet changes to the rules. These guys should be embarrased. Do the law profs out there have any morales or ethics? Is it truly publish at any cost? Even the cost of a well built and well argued patent system? Back to the 70’s I guess – who cares!

  28. Lionel,
    You are correct about one thing; yours is an outsider’s view, just as you suggested earlier. Phototypesetting WYSIWYG software was replaced by WYSIWYG desktop publishing, which put typesetters in the same category as those who made buggy whips.

    Getting back to Article I, Section 8, clause 8 basics, using after working hours language:

    Anything that limits, restricts or reduces in any way the power or value of a U.S. patent to its inventor diminishes our nation’s competitive edge in the global economy.

    Now, if you want a flat world, where our country sucks hind tit like other nations suck, then by all means, let’s sterilize our patent system so it has no balls like the patent systems elsewhere. It seems the three branches of our sold-out government are going in that direction, so let’s follow like lemmings.

    In following, recognize that everything is a trade off:

    The weaker the U.S. patent system is, the fewer inventors, especially independent inventors, those who go on to created the backbone of the American economy and our world strength, the Apples and Microsofts, will publish their innovations, and the more other nations will eat our lunch.

    By all means, let us promote the progress of those nations who are yearning to eat our lunch.

    The Framers of our Constitution would be ashamed of us in the IP community, with our smarter-than-the-average-bear intellects, if we don’t stand up, go to the window and shout, “I’m as mad as hell, and I’m not going to take this anymore!”

    * * * * *

    Lest we forget: Winning isn’t everything — It is the American thing.

  29. Just Another Ordinary Inventor,

    phototypesetting software is not the same as desktop publishing, which is how I interpreted the computer WYSIWYG publisher. Certainly, the article was in no way crediting the author with inventing WYSIWYG.

  30. “Just Another Ordinary Inventor. C and D are not logically the same as A and B. Perhaps, a PHOSITA would [interpret?] the passage in the way you did, but I would not.”

    Lionel,

    For all practical intents and useful purposes,

    (A) your phrase, “computer WYSIWYG publisher,”

    (B) the NYT’s claim: “computer publishing software with Wysiwyg,”

    (C) my remark, “WYSIWYG phototypesetting software,” and

    (D) link to en.wikipedia.org ’s article,
    “The phrase was originated by a newsletter published by Arlene and Jose Ramos, called WYSIWYG … created for the emerging Pre-Press industry going electronic in the late 1970s … the first WYSIWYG editor,”

    are all referring to WYSIWYG software for typesetting for publishing “of one sort (pun intended) or another.” I’m not sure what logic has to do with it. WYSIWYG is essentially a simple typesetting invention to understand, but one that requires complex programming to implement.

    Most publishing of any sort requires some form of typesetting (starting with: chiseled in stone … wood type, metal/hot lead type, photo type, PDP-8 type, MAC or PC type). Today we take WYSIWYG for granted, but back in the 70s it was the cat’s meow for typesetters.

  31. Me,

    I know Malcolm can be a dick, but he actually has not been one this thread. Why are you antagonizing him?

  32. Meurer was actually my professor for “Patent Law” at my law school (as well as for “Copyrights and Trademarks” and “Public Policy in Hi-Tech Industry”) He does know the topics very well. I do look at this article and think “how does this have any more of a basis than any of those IP evaluation methods I hear about from time to time?” – Considering that the latter are all entirely crap.

    However, I will reserve judgment until the book comes out.

  33. Just Another Ordinary Inventor. C and D are not logically the same as A and B. Perhaps, a PHOSITA would the passage in the way you did, but I would not.

  34. “You’ll recall that I admitted to using Google early in its life because it had a clean, ad-free interface.

    I asked whether that aspect of Google — the aspect that led to my preference for Google — was patented.”

    No, BUT many aspects of their new ad based system for placing the right ads right before your nose are patented. So much for an “ad-free interface”.

    Remember the days when Yahoo was on a server at Stanford and was the first attempt at an internet catalogue? Nah, you probably don’t. That was before Al Gore invented the internet.

    Poor down-trodden Malcolm.

  35. Lionel,

    For what it may be worth, it being a bygone field with which I was intimately familiar, there is no meaningful distinction between any of the following descriptions, (A) to (D) — they are all referring to the same WYSIWYG invention that is/must be embodied in computer software used for publishing of one sort (pun intended) or another:

    (A) Your sentence:
    “It claimed he invented the first computer WYSIWYG publisher.”

    (B) The mistaken NYT’s claim:
    “In 1983, he [James Bessen] created the first computer publishing software with Wysiwyg (an acronym for ‘what you see is what you get’) printing abilities.”

    (C) My remark:
    “I personally recall WYSIWYG phototypesetting software being used in the graphic arts industry in the late 70’s, before digitized typesetting became popular on PCs in the mid-80s.”

    (D) and link to en.wikipedia.org article:
    “The phrase was originated by a newsletter published by Arlene and Jose Ramos, called WYSIWYG. It was created for the emerging Pre-Press industry going electronic in the late 1970s. After 3 years of publishing, the newsletter was sold to employees at the Stanford Research Institute in California. The first conference on the topic was organized by Jonathan Seybold and the first technology popularized at Xerox PARC during the late 1970s when the first WYSIWYG editor, Bravo, was created on the Alto.”

    What’s in a name?, that which we call a rose
    By any other name would smell as sweet; (Romeo and Juliet, Act II, Scene 2).

  36. Everyone assumes that the “innovation” sought to be advanced by patents is the innovation required to get the patent. However, patents also advance technological disclosure and dialogue, which no doubt leads to further innovation (which is not necessarily the subject of a future patent grant). Why are there no economists attempting to quantify this positive externality of the patent system?

  37. Just an ordinary inventor – The article did not claim that the author invented WYSIWYG. It claimed he invented the first computer WYSIWYG publisher. Not saying he did, but the quote you provided does not contradict that.

  38. Wasted Career? said: My only problem with the reports of “economists” and “experts” is that they often write from some sort of theoretical, pie-in-the-sky viewpoint and construe facts to somehow fit their viewpoint.

    Well it has ever been thus. I feel your pain because it’s I say the same things when I read economist’s blind-whore-ship (sic) of “so called” free trade. Science, even the dismal science, which, one might think is so dismal as to drive those with even a pixie’s thimble worth of passion in their veins to other pursuits, is only better than all other endeavors in this regard in one way- all such prejudice bites it in the face of a theory capable of prediction and generating falsifiable hypothesis. That’s all we have in this world, when it comes down to it.

    Haven’t read the book, probably will, but whether I do or not, there’s still something out there called reality and scientists know how to get at it. True, scientists may get at it and still have bricks thrown at them and be accused of having political biases (witness everything from Galileo to Global Warming), but the surety ad soundness of the endeavor, despite the imperfect participants is what this question will rise or fall on- IF WE’RE LUCKY.

    I happen to know the effect of software patents on my industry. People who are directly effected KNOW what’s REALLY going on… of course, those people are indistinguishable from people who BELIEVE they know what’s going on, so we trust only science. But still, that first group of people? They Know.

    Besides, if economists are such a shiftless lot, then how can the opposing side claim for itself the inherently economic argument that patents are good for the economy? See, it does no good to round up the economists and shoot them all… you have to either (be able and willing- both) get into it with them in their own field of play and rebut them or watch on from the sidelines as I do a a party with a dog in this fight. Everyone lives in times in which things are inequitable… in the long run (we’re all dead) inequities are uncovered, exposed and righted (we hope). I feel exactly that way about global warming and free trade. You feel that way about this book. My point is, we have to agree that science is the best and only tool to know truth and we have to wage the fight there and be ready to be shown we were wrong.

    Of course, I it helps if you Know…. ;)

  39. “Google is also hiring patent attorneys at a breakneck pace. Nothing like facts Malcolm.”

    And there’s nothing like a non-sequitur, “me”.

    You’ll recall that I admitted to using Google early in its life because it had a clean, ad-free interface.

    I asked whether that aspect of Google — the aspect that led to my preference for Google — was patented.

    Do you know the answer? I think I do.

    So take your smarmy non-sequitur and stick it, please.

    Thanks.

  40. Mr./Ms. softwarevisualization:

    35 U.S.C. 101, which I concur with, defines patentable inventions. 35 U.S.C. 101 states:

    “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor…”

    As time passes, countless laws will be passed amending the patent statutes in attempts to improve the patent system. No statutes are perfect, however, because it is impossible to conceive of every possible downside to each and every law that is passed. Nonetheless, the premise of Title 35 (implementing Article I, Section 8, Clause 8 of the U.S. Constitution) is sound.

    In the united states there are significant resources that, but for patent laws, would not otherwise be poured into research and development. If the U.S. were to eliminate the patent system, the negative repercussions on our economy would be significant.

    If the question is “can the patent system be improved?”, my answer is yes. If the question is “should the patent system be eliminated?”, my answer is absolutely no. Should software development be considered a “useful art”? I certainly beleive so. If we ever reach a point where two-thirds of the states support a Constitutional amendment excluding software development from the definition of useful arts, so be it. I reiterate that I beleive this to be highly unlikely.

  41. Softwarevisualization:

    I am not going to speak for Terry or anyone else on this issue, as they seem to be doing it better than I did in my post above. I do want to address your comment about looking at the patent system. I agree that we should always look at and examine the patent system.

    My only problem with the reports of “economists” and “experts” is that they often write from some sort of theoretical, pie-in-the-sky viewpoint and construe facts to somehow fit their viewpoint. Who is in the best position to tell the government that what it is doing may be wrong? Is it someone that has never worked in a company and has been a professor essentially their entire career? Is it an executive from a big company? Small company? Individual inventor? In my opinion, they all should be heard, but none are dispositive.

    Which is why I am constantly disappointed by professors that feel the need to title their articles in a manner that suggests they are the one true source of authority. Who in the heck are they to be the judge, jury and executioner of the patent system. Does the patent system need work? In mine and a lot of other patent attorney’s opinions, yes. Are we the only voice that should be heard? Not by a long shot.

    So when someone writes an article to the general public entitled, essentially, “Patents Dont Work”, that exudes arrogance. When they base their opinion on facts that are taken out of context and are deviod of any realistic and meaningful treatment, that exudes ignorance.

    Believe it or not, I am not sounding off against the writers of this article. I read the article and looked at the assumptions and equations behind their conclusions. I realized it was merely a way to sell books to buyers that want something on their wall to show how much they hate big business and the government. I would enjoy a meaningful examination of the patent system, but when people keep writing biased, to-sell-a-book articles, it makes it more difficult to start the movement.

    BTW, the taxes analogy really doesnt work. Some of our tax money is collected before the budget is approved, which means some of the money we dole out the government has not earmarked for any specific purpose. because of the way the system works, it is darn near impossible to know when my dollar gets spent or when it was earmarked for anything.

  42. Hi Terry,
    Then answer why shouldn’t play plots be patentable? Or pure algorithms? (in fact, they already are for all intents and purposes.). Why isn’t everything patentable? I have an answer, but do you, because it seems as if you might not have a principled answer 9no disrespect here).

    My answer is because such patenting activity would not promote the useful arts and sciences. Failing that, no patent is to be issued. Therefore, it’s needful for society to stop and recalibrate the patent system so that it continues in its stated purpose and doesn’t go outside the bounds of it’s justification and simply become a thing answerable to none but itself.

    I think you can see the sense with same argument with taxes. The Consitttion permits for taxation, but we don’t pay taxes to just to give the Government money; we pay taxes to fund the proper functioning of the government within its defined sphere.
    We’re not rendering a tax to the King because he says so, or because the Constitution empowers government to do so, even though it does. It’s not an unlimited power to tax.

    So every now and then you see the people push back against over taxation. You see them cut government and demand accountability.

    So also with patents. The question that is to be answered is- are they serving to promote the useful arts and sciences. In some cases, probably, in some entire sphere of patenting, I assert software is one such sphere, the answer is no.

    So yes, the Constitution gives the government the power to tax and to issue patents. That power, while enumerated, is not unlimited and such taxes and patents must serve the public interest, or the basis for their legitimacy evaporates.

  43. Hi softwarevisualization:

    I respectfully disagree with your position. The framers of the Constitution stated a single means that is explicitely directed to promoting the progress of science and useful arts, and that means is securing for limited times to Authors and Inventors the exclusive right to their respective writings and discoveries. Assuming you consider software development a useful art, software inventions fall under this clause.

    Of course, the Constitution can be amended to exclude software inventions, but I think the chance of that happening is highly unlikely.

  44. Thanks Terry, I often quote that myself. The part of the sentence that is most important is the part that states to what ENDS such power shall be granted- to promote the useful arts and sciences. We have serious players saying that they do not do that. And so goes the rason d’etre and with it, any reason to patent software, or business methods or play plots or any of the other innumerable things IP fanatics, KoolAid* drinkers and True Believers want to see patented .

    *KoolAid is a trademark of KoolAid International and is used here by special permission of KoolAid Corporation, Jonestown, Guyana. All rights reserved.

  45. Do Patents Discourage Innovation? The very concept is dung.

    The authors of the forth coming book “Do Patents Work?,” obviously have a profit driven agenda to sell their book, and their mantra spouting bias against patents is no secret.
    When I see bias, I always wonder what’s behind it.

    The comments above about “Do Patents Discourage Innovation?” do a through job dealing with the dung for what it is. I haven’t read all the links yet, or even all the great comments. But there is one comment by Mr. Caveman that stands out and says it all:

    “PATENTS ARE BAD FOR INFRINGERS” (emphasis added).

    However, I will point out the New York Times, well known for its continuing anti-patent rhetoric, does not mind ignoring the truth in favor of printing bullcrap about subjects including patents. For example, yesterday’s linked July 15th article reported the following apparently without even a minutes worth of research:

    “Today, over all, patents don’t work; for the information technology industry especially, they don’t work,” said James Bessen, who became a lecturer at Boston University’s law school after a career in business. IN 1983, HE [Mr. Bessen] CREATED THE FIRST COMPUTER PUBLISHING SOFTWARE WITH WYSIWYG (an acronym for “what you see is what you get”) printing abilities.” (emphasis added).

    Not so. WYSIWYG goes back to the 70’s. I personally recall WYSIWYG phototypesetting software being used in the graphic arts industry in the late 70’s, before digitized typesetting became popular on PCs in the mid-80s.

    The NYT didn’t bother to spend about a minute and goto
    link to en.wikipedia.org
    Here is an excerpt from this link:

    “The phrase was originated by a newsletter published by Arlene and Jose Ramos, called WYSIWYG. It was created for the emerging Pre-Press industry going electronic in the late 1970s. After 3 years of publishing, the newsletter was sold to employees at the Stanford Research Institute in California. The first conference on the topic was organized by Jonathan Seybold and the first technology popularized at Xerox PARC during the late 1970s when the first WYSIWYG editor, Bravo, was created on the Alto.”

    However, I’m not alleging that James Bessen ripped off WYSIWYG., but it does make one wonder what’s behind Mr. Bessen’s anti-patent stance.

  46. Anonymouse: You may want to review Article I, Section 8, Clause 8 of the U.S. Constitution.

    “The Congress shall have Power … [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

    CaveMan: Dennis is doing a great job with this Blog. This is the perfect forum to discuss these issues.

  47. Wasted Career? I dont’ see that we disagree. I was rebutting the blind assertion that Google success was due to patents… I was injecting doubt. I don’t pretend to know either. I do know 2 things- the original patent, whatever it’s effect was, was not much of an innovation so far as the idea of ranking “things” go. I also know the actual PageRank algo is not to be found in the USPTO for a good reason- it would be counterproductive to tell spammers and websheisters how it works.

    Is it the recreation of Middle Ages guild? Not more than already existed in the industry. Oracle has come out and said that they’re satisfied with the effectiveness of trade secret and copyright. That didn’t stop MySQL from writing a database, and Oracle didn’t seek to carpet bomb them with IP .

    The reality of the industry is, it take time to figure out and test and recreate any company’s solution. In that time, things have moved on. This is especially true with algos and the cat and mouse game that is ranking websites. There aren’t ever going to be long lasting black pits of secret knowledge that never see the light of day, one because anyone can eventually infer what must be going on just from the external behaviour of the system, and , in the course of rolling your own, you basically come up with your own novel solution and two because your approach and their approach and everyone else’s is so heavily based on very basic principles and incremental knowledge that anyone’s particular algo is either hiding in plain sight.

  48. “Google had a patent and Google was successful. TRUE. But the original patent by Larry wasn’t anything so special that others didn’t copy the gist of the idea, which Page himself merely ripped more or less wholesale from the ranking system of academic journals which was well known to all.”

    This is nothing more than your assertion about how Google succeeded, of course.

    While you pretend to know for a certainty how Google succeeded, I on the other hand don’t claim to know how much Google’s patents contributed to its success. How many potential competitors avoided the Google approach because of the patents? Even if some did in fact copy the approach, was Google’s ability to claim that it had patent protection for the idea, and that its approach was therefore uniquely powerful, crucial for its success in marketing, so that enforcement was mostly unnecessary? How can you pretend to know the answer to these questions?

    The reality is that in software, the crucial thing is network effects, and the winner can be determined by a variety of factors. It is entirely plausible that the patents Google had on its technique played a critical role in its success in being the winner in the search space. If so, how does one value the basic patents relative to its market capitalization?

    Unlike you and Bessen and Meurer, I just don’t think the answer to that question is obvious or even necessarily determinable – but then I am not driven by ideology here, so my certainties are harder to come by.

  49. I love it when professors and researchers who live in ivory towers and have never worked a significant period of time in the real world feel they know more than the people that actually do. I looked at the equations, and one significant problem is that the assumptions made are clearly made to support their point. For example, the equations do not effectively take into account the effects of patents on specific industries. The equations try to use maintenance fee payments to generalize across all industries. For example, pharma patents and regulatory duties affect pharma companies differently than how software patents and short lifespan products affect software companies.

    Where would the US be without patents? To be quite honest, no one knows. Why the heck risk potentially trillions of dollars of KNOWN profit to give a patentless world a try. Not in my 401k world please. These researchers will be set for life by selling junk science books to people that hate businesses, but I still need to save money to retire at some point.

  50. “Rather, there are any number of non-patent reasons to invest in R&D even if the patent system provides an overall negative return. Once you have done the innovation, Meurer & Bessen would agree that patent protection usually makes business sense.”

    What kind of argument is this?

    Forget about software patents — the claims of Meurer & Bessen plainly apply to far clearer examples of patent value, including pharma patents.

    Does anybody seriously think that the net value and impact of patents in the pharma industry alone can be measured at less than 10 Billion dollars per year (already more than the total value of patents for American firms in all industries as calculated Meurer and Bessen’s bizarre metric and statistics)? Imagine for a moment that pharma had NO patent protection available for its research, and that upon the moment a drug was introduced, generic drug manufacturers could reverse engineer it and make copies of their own. How do you think that would affect the R&D performed by innovative companies, especially when they must spend up to a billion dollars getting FDA approval? (And it’s irrelevant that the FDA requirement is itself in some ways an artificial imposition — the point is that the Meurer and Bessen analysis pretends to take account of this and all other factors in its generic analysis of patent value, but comes up with absurd results). In fact, of course, the absence of patents would simply devastate innovation in the pharma industry — if there were no protection for the vast investments that must be made, since they are generally easy to copy when the drug is introduced, there’d be virtually no financial incentive for innovative R&D. Where is this reflected in the analysis and conclusions of Meurer & Bessen?

    The Meurer and Bessen argument clearly fails to pass the most basic sanity checks. It’s hard not to conclude that they simply created a statistical argument to reach predetermined conclusions.

  51. There is actually a very strong case for saying that the singlemost valuable asset Google owns is its trademark. And that is IP, softwarevisualization.

  52. The CEOs, CFOs, GCs, and Strategic planners I have met are very bright, very good at what they do, and moral and eithical people. To argue the exception as the rule makes no sense, to “me”.

  53. DENNIS:
    QUOTE: I cannot blindly accept that they are presenting an unbiased assessment that patents harm innovation.

    Well it’s a good thing you don’t have to. Whether their arguments are sound and reasoned or not doesn’t require anyone’s blind faith. When the book comes out, reasonable people can judge it on its merits, not the perceived biases of tis authors.

    KEVIN:
    QUOTE: Look, Google was started based on a patented technology, and those patents clearly covered features that were essential to the success of Google’s search algorithms, and represented a major competitive edge over alternatives.

    You’re assuming the consequent. Google had a patent, therefore the patent was critical to Google’s success. FALSE. Google had a patent and Google was successful. TRUE. But the original patent by Larry wasn’t anything so special that others didn’t copy the gist of the idea, which Page himself merely ripped more or less wholesale from the ranking system of academic journals which was well known to all. The success of the company then had to do with execution and then more execution made possible by financing. It grew by word of mouth, like FaceBook. The IP was a fig leaf to investors who need to see that sort of thingm for no reality based reason.

    To underscore the point, the PageRank algorithm as it exists today is largely UNprotected by patents and is more of a trade secret. THere are over 100 variables and what they are and how they are used is not known to outsiders, even the USPTO office. So much for algorithm patents being needed for sucess. The reality is, Google’s success today owes to its NOT patenting it PageRank algos.

    The VAST majority of IT companies get patents just so they can engage in MAD with other companies and their own patents. No one counts on patents for squat, including protecting their IP. IT’s a sink hole for the company’s resources.

    The exception to this are those companies who DO go after other companies with claims of IP infringement, such as Verizon and MS (vs Vonage and Linux).

    Verizon can best be characterized as an old school non-value-producing (they disabled their phones from accepting user created audio files then sell those users pre-approved ringtones, which accounts for a huge amount of their profit) monopoly wannabe with a business model straight out of the 50s and a board to match (Verizon is trying to kill net neutrality, since tat would allow them to set up an imaginary non-technologically based rate differential for “bigger” pipes…. )

    These are companies whose fundamental business model is threatened by some disruptive technology and basically, they’re grasping at straws, with some success.

    The long term reality at least in the case of MS successfully following through with Ballmers threat to kill Linux with PI lawsuits, will be a n unstoppable tidal wave of patent reform. I can only hope that Ballmer is egomanical enough to follow thorough, because that will just hasten the end of days for the economic and innovation disaster called software patents.

    ME said: “So I should take these guys word over all the CEOs and CFOs who file and defend patents?”

    What, you mean the coke-addicted white trash who spends their weekends flying to Thailand and raping pre-adolescent prostitutes? Or the junk that has managed to dissolve a few trillion in investor wealth since the 80s? The Ken Lays, Andrew Fastows and Bill Gates and on and on and on and on ad naseum who have been caught lying in courts of law about their business practices….

    No one is a bigger advocate for a free market than I am but, you know bringing up CEOs and CFOs as defense witnesses to your point of view is perhaps not making the impression you intended. There’s being FOR business and capitalism and competition and then there’s being PRO XXX business and PRO XXX’s boards , CEOS and CFOS. Capitalism is about the former and the later can either learn to compete by providing value or become roadkill.

  54. taskmaster–
    Well put.
    While some of us were honing our skills in waxing the slide rule through college, there were others who were learning how to manipulate the mob with the tip of a pen.

    The word “innovation” is one of those management-speak meaningless abstractions that sends the brain into the fairly off balance zone. So are catch phrases like “costs and benefits”. Economists are never able to account for all the “costs” or all the benefits of any human activity. Costs to whom? Benefits to whom? What if you cannot quantitatively measure these things? What are the benefits to society as a result of the Founders having established a race that quickens the pace of “progress” by granting for limited times to “the first” across the finish line, “exclusive” rights to their “discoveries”?

    If we are going to challenge the underlying premise of the patent system, we need to start thinking about an amendment to the US Constitution because the idea of “promoting progress” is a fundamental given in our current Constitution.

  55. From the introduction:

    “We use estimates of the value of US patents that economists have obtained
    using well-established techniques based on patent renewal behavior (decisions to pay maintenance fees reveal the actual value patentees place on patents). We also draw on several studies of the stock market value of firms to obtain estimates of their worldwide patent values (investors’ valuations of firms reveal the value of firm assets including patents).”

    So if i’m reading this right, they are using a patent value of about 10,000$. Which I imagine what the median “value” that an academic would come up with. But the simple fact that businesses are willing to get patents and spend loads of money to protect their investment would lead me to the conclusion that businesses “value” patents more than 10,000$.

  56. NYT – transparently timed for the patent reform debate on the hill. Yet another couple of paid mouths to gin up ‘facts’ for the sky is falling cabal. Sure to see Sewall (intel gc) quoting the ‘science’ of this ‘work’ in his next WSJ bogus fact rant. Round and round she goes. BTW, Sewall when the shooting war starts with china – you should be taken out an shot at the drum head for all the tech you and intel have transfered to china. Noyce should give you three visits as the ghost of the past, present and (your proposed) future of the American tech landscape. BTW what’s the Intel definition of the patent troll? – Why, anyone without a $5 billion fab facility in china – that’s who.

  57. As we all know, professors and doctors have been in news lately because their published opinions are often influenced by the sources of funding. What we need to know is what companies and associations have supported these distinguished professors so the rest of us can assess the integrity their opinions. In our patent litigation, we all “buy” distinguished opinions; however, it is easy for everyone to recognize what might have influenced their opinions. As to statistal data, we all know that there are little lies, big lies, and worst of all, statistical lies!

  58. ME said: “So I should take these guys word over all the CEOs and CFOs who file and defend patents?”

    DDC: The analysis does not depend on an assumption of irrational corporate management. Rather, there are any number of non-patent reasons to invest in R&D even if the patent system provides an overall negative return. Once you have done the innovation, Meurer & Bessen would agree that patent protection usually makes business sense.

  59. Patents discourage innovation? Doesn’t the continued existance of patents basicly require industries that patent to reinvent themselves every 20 years to remain competitive?

  60. Not convinced that the ‘fessors developed or presented, what the Fed. Circuit categorized in Crystal Semi v. Tritech, “sound economic” proof or “credible economic” analysis.

  61. So I should take these guys word over all the CEOs and CFOs who file and defend patents? The analysis seems to assume that management at corporations are so dumb that they haven’t done this, but I know many that have and they come to the opposite conclusion – patents make you a ton of money as they provide exclusivity to your market.

  62. Doug – I agree with you up to a point. But wouldn’t it have been better, therefore, if the two authors had waited until they were ready to release their book so that their research could be properly scrutinised before they went to such a widely read publication as the New York Times and gave the interviews they did? Their research may well stack up, but on the snippets we have been given by them and the NYT, there are very serious doubts as to whether it does. It is surely reasonable to point that out. We could all make more accurate assessments if we had the full figures and findings, but it is the authors who have chosen not to supply them at this time.

  63. The authors may be right or they may be wrong. Either way its a much needed opening salvo in an academic and legal debate that is long overdue.

    Their conclusions should be judged by peer review in the economics and legal literature, and substantive comments, not by ad hominem attacks. The community who posts here is intelligent enough to consider their arguments on the merits. We all want the patent system to foster innovation, and if the authors’ work will permit our patent system to become better in some ways (or it fosters a debate as to whether our system is perfect (!) as it is), then we are better off for it. Judge Posner and Prof. Landis recognize there are economic aspects to innovation and whether patents foster innovation that need to be studied — do the commenters want to extend their attacks to that duo as well?

    We know the costs associated with innovation differ greatly by industry, and the time window for value derived from innovation varies greatly by industry. Maybe those differences are accounted for in the different number of patents obtained in different industries. On the other hand, it just might be possible that the current system is fostering innovation in some industries such as pharmaceuticals while hampering innovation in other areas like software development. On the other other hand, it may be possible that patents are partially responsible for the innovation in the computer industry the last thirty years. We need research like this upcoming book to figure these issues out.

    I hope some of us will seek to substantively study the work cited here and build some meaty criticism. I hope some of the intelligent commenters (and budding legal professor site owners) will consider their own analyses of the issue. Its important to challenge the assumptions we make every day, especially if it has the potential to increase innovation (regardless of whether the authors are right or wrong). The incorrect assumptions made above about one successful company are good examples of why serious research, and serious responses to that research, are necessary above and beyond our gut reactions to unexpected conclusions.

  64. Measuring the costs of procuring and enforcing patent rights seems straight forward. How does one measure profits from patents? Excluding licening revenue, are gross sales of a company the direct result of patent rights? I would not think so absent enforcement of patent rights that leads to increased market share.

  65. As with most economists, these two fellows are hucksters and spin-meisters. There is no “science” in their work, just a lot of mentally manipulative “framing”. Who gave them permission to frame the question as “revenues from patents versus costs of litigation” on a per IT company basis?

    How about if we look at nations around the world where patent rights do not exist at all and we measure the “cost” of not having a patent system versus the “benefits to society as a whole” of having one? Remember, the Preamble of the US Constitution says:

    “We the People of the United States, in Order to … ***promote the general Welfare,*** and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

    IT does not say, “to promote the welfare of a few individual IT firms who are willing to pay off some desperate economics majors who will say anything for a buck”. Sorry. This really boils my blood. I have zero respect for spin-meisters who hide behind a badge of professorhood, especially when it is in the allegedly scientific field of “economics”. They probably had a large population of economics majors on Easter Island right before the collapse.

  66. As someone once said, an architect needs three points to define a line, an engineer needs two points to define a line, but only an economist can define a line with a single point.

  67. I commented on this on my blog (link to iam-magazine.com). One thing that struck me about the New York Times article was this paragraph:
    “The two researchers have analyzed data from 1976 to 1999, the most recent year with complete data. They found that starting in the late 1990s, publicly traded companies saw patent litigation costs outstrip patent profits. Specifically, they estimate that about $8.4 billion in global profits came directly from patents held by publicly traded United States companies in 1997, rising to about $9.3 billion in 1999, with two-thirds of the profits going to chemical and pharmaceutical companies. Domestic litigation costs alone, meanwhile, soared to $16 billion in 1999 from $8 billion in 1997.”

    Is it really the case that all quoted US companies combined made just $9 billion profit from their patents in 1999? That was a year in which pharma companies alone made profits of close to $30 billion, while IBM was getting $1.5 billion or so from its patent licensing programme and Texas Instruments close to $1 billion. Obviously we will have to wait to see how they define the word profit, but I think it is best to be very sceptical of the overall message until we see how such figures are justified in the book.

  68. Google is assignee on 53 isuued patents, Google bought lots of patents with their acquisitions, and Google is assignee on 43 applications (probably a gross underestimate as assignee is not “assigned” on most applications in the PTO database). Google is also hiring patent attorneys at a breakneck pace.

    Nothing like facts Malcolm.

  69. Wow – some guys out to sell a book. This strikes me like the “Dow 50,00″ book during the stock boom – a silly analysis designed to sell a book by guys with little practical experience. Maybe we can change the entire patent system based on it though – ala Lemley…

  70. So many of the patent bashers we hear so much from these days seem to be fond of attributing some special connotations to the term “innovation” such as in the phrase “patents are bad for innovation.” What many of them really mean by “innovation,” I have found, is the unfettered ability to make, use, and sell whatever they come up with in their product labs without regard to pesky issues of infringement. In other words, the phrase “patents are bad for innovation” may as well be translated to what it really means to people with the authors’ mindset: “patents are bad for infringers”

    I hate to say it, but it seems like most of the patent bashing is coming from the political left, who as a group never met a property right or profit they liked (except, of course for their own). With all due respect Dennis, you may want to consider some political balance on your blog lest you risk alienating a large portion of your audience…

    All the calls for patent system tweaking are just thinly veiled attempts to hi-jack the system and install anti-property rights, anti-profit socialist drones.

    But, hey, I’m just a CaveMan

  71. I was a fan of Google from the beginning for one reason: cleanest interface, no ads.

    Was that aspect of their business patented?

  72. I read each of the links and must say that the equations presented were typed out quite nicely.

    Beyond that, what I really want to see is a statistical analysis that will enable me to tell a client if he/she has an economic winner or loser.

    In all candor, however, I do have to agree with two points that were made. First, real property is easier to envision than intellectual property. I can plant a tree on the former. I can only plant a hypothetical tree on the latter. Second, those in industries relying upon copyright law are much more informed than those relying on patent law.

    Now, if you will excuse me I have to take an Aspirina (TM). Looking at statistical equations brought back some quite scary memories from college and grad school. The only thing worse would be an explication involving thermo.

  73. Looking at the analyses offered, I just don’t see how these authors begin to make out their case, for all their fancy mathematical models.

    Look, Google was started based on a patented technology, and those patents clearly covered features that were essential to the success of Google’s search algorithms, and represented a major competitive edge over alternatives.

    Google is now worth about 172 Billion dollars.

    Now, please explain to me how much of that 172 Billion dollars is attributable to the patents, and how much is attributable to other factors. Please explain too how much innovation this 172 Billion dollars is itself enabling. If your analysis can’t tease those factors out, of what earthly use is it? I can imagine plausible arguments that Google’s entire success depends on it, and I can imagine plausible arguments quite to the contrary. Is any analysis that pretends that this is a easily answerable question doing anything more than just cooking its books? If Google’s success is indeed largely attributable to its patents, doesn’t that single factor swamp completely the amount of “cost” imposed by software patents?

    There may be good economic analyses that can come to grips with whether patents of a given sort offer a net positive effect on innovation. But imagining that simply coming with a dollar value that in some hokey way supposedly measures the real contribution of patents is mindless. It strikes me as economics at its worst, employing befuddled “precise” models that are grounded in vacuous and irrelevant assumptions.

    Don’t we already have enough bad economics to go around? Does the area of patents need its own brand of this wretched stuff?

  74. Dennis:

    Since we don’t have their data its difficult to assess the accuracy of their conclusions (and, since they are economists it may be difficult to assess the accuracy even after we have the data), but the history of economics has been that you can pretty much find the data you need to support whatever political position you have. If you look up their funding source, Research on Innovation, the two authors and Cecil D. Quillen, Jr. (of Quillen and Webster) are the only posted members on the site. They are faithful advocates of the IT associated, anti-patent cabal, and although I understand the frustrations that the IT industry feels over patenting, I cannot blindly accept that they are presenting an unbiased assessment that patents harm innovation.

Comments are closed.