Patently-O Bits and Bytes by Juvan Bonni

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27 thoughts on “Patently-O Bits and Bytes by Juvan Bonni

  1. 5

    Professor Feldman has bought into the Big Lie that the pharmaceutical companies tell, that the reason they have to charge unconscionably high prices for their new (patented) drugs is to pay for all the drugs they develop that fail.

    From that she concludes that the problem is with the patent system.

    The reason she does not offer a solution is because the problem is not with the patent system.

    The pharmaceutical companies charge unconscionably high prices even for drugs whose patents have expired.

    For example, in 2005 you could buy 180 tablets of Erythromycin for $30, and that was without insurance. If you were to buy it now without insurance it would be $2,300. With insurance it would be $600.

    How is that possible for a drug whose patent expired several decades ago?

    They do it because they can.

    In 2005 the main company that made Erythromycin was Abbot. They sold the product line to a small drug company named Arbor Pharmaceuticals. They use Erythromycin as a cash cow and milk it for all it’s worth. Erythromycin is an old antibiotic that is not used very much anymore as an antibiotic. It has other uses that other drugs cannot be used for.

    The problem can only be fixed by the politicians. The politicians are not going to fix the problem because the pharmaceutical companies own them.

    Professor Feldman should write about that.

    Professor Feldman seems to be a really smart person so I have to wonder why she is promoting the Big Lie that the pharma companies tell.

    1. 5.1

      Bravo NOIP – a perfect response to some of the self-serving B$ from obfuscating Big Pharma mouthpiece Greg.

      You knocked it out of the park.

    2. 5.2

      The pharmaceutical companies charge unconscionably high prices… because they can.

      This is exactly correct. Pharmaceutical companies—like all companies—charge the prices they charge because these are the revenue maximizing prices. If an AI were invented tomorrow that allowed companies to foresee which research projects will not pan out, such that all efforts were successful and none were failures, the price of drugs would not be affected one iota.

      Incidentally, the fallacy to which Prof. F’s article subscribes is related to the fallacy that U.S. drug prices are so high because the rest of the world is “free riding” off of us. Once again, the U.S. price is set at the level that we see because that is the level that U.S. drug-buyers have proven willing to pay. Even if European and Asian prices were to rise to current U.S. levels, the U.S. price would not go down one iota, because nothing about the increased European and Asian prices would mean that U.S. drug-buyers are unwilling to pay those same prices.

      The problem can only be fixed by the politicians.

      Once again, exactly correct. There are tools that other jurisdictions have found to hold down drug prices. Notably, those tools have almost nothing to do with adjustments to those other jurisdictions’ patent laws. We have the wherewithal already at our disposal to bring down U.S. drug prices, but it requires a political choice to make that happen, and so far the U.S. political system—with its structural bias in favor of political conservatism—has resolutely thwarted repeated efforts by various political leaders to take that choice.

      1. 5.2.1

        More dust kicking from Greg and his attempt to “falsify” the known fact that Big Pharma engages in world wide price factoring that very much overindulges in charging US customers — because Big Pharma CAN.

        He also conflates different eligibility arguments as if they were all the same (or that every sector wants the same across the different Justice-written eligibility laws).

        This evident falsehood is well known – as has been pointed out in Greg’s own comments on those arguments affecting computing eligibility (by me and others like Wt).

        Greg needs a friend (again) to let him know that his posts have that “empty shill” effect (again).

    3. 5.3

      Great points NOiP.

      “The politicians are not going to fix the problem because the pharmaceutical companies own them.”

      With widened scope:

      “The politicians are not going to fix the eligibility problem because the pharmaceutical and Big Tech companies own them.

      1. 5.3.1

        The politicians are not going to fix the eligibility problem because the pharmaceutical and Big Tech companies own them.

        If the pharma companies “owned” the politicians, the eligibility issue would already be fixed. Go back and re-watch the 2019 Tillis-Coons hearings. You will see that all of the pharma witnesses were in favor of reform.

        The whole reason that there are any bills being raised at all on this issue is that pharma is pushing reform. It is the Silicon Valley lobby that pushes back. Lumping those two in as if they were the same thing on this issue is rather akin to treating Palestine and Israel as basically the same thing.

  2. 4

    I tried to figure out what Prof. Feldman was referring to when she talked about “Rewarding Failure.” This is from page 3 of the article:
    In the pricing context the argument is that the price of drugs must be sufficient to compensate for failed research attempts; in the patent context, the argument is that the patent reward must include compensation for failed efforts at innovating products other than the one on which a patent has been granted.
    and this is from page 6 of the article:
    In short, the patent reward must be firmly and solely rooted in the successful invention alone, and the emerging modern notion of including failures in the patent reward threatens to cost society dearly.

    Her big argument is that the patent system shouldn’t be used subsidize drug research that doesn’t result in commercialized drugs (i.e., what she calls failures).

    When I read articles written by those that live in ivory towers, I’m always curious to see what the author recommends as a solution to the alleged problem. However, when I got to the end of this article, I found zip, zilch, nada, nothing. It is basically, a 55 page long negative diatribe about the pharmaceutical industry/patent system.

    A good portion of the discussion is about valuation. However, valuation is incidental to the patent system — not a direct result thereof. The patent system doesn’t direct how many a drug can be priced at or what a patent can be licensed or sold for. Also, a lot of her complaints involve non-patent issues such as FDA approval, reimbursement formulas, and volume discounts.

    There are many things to dislike about the pharmaceutical system in the US. However, Prof. Feldman is trying too hard to tie those issues to the patent system and she fails to explain how the patent system can be modified to address her concerns.

    1. 4.1

      Agree in very large part, Wt (and much of MY animosity towards Big Pharma comes from their audacity (said audacity though DOES include “patent twist” — see NOIP above).

      1. 4.1.1

        I’m not a fan of Big Pharma either. However, I don’t think she appreciates the collateral damage resulting from her (misplaced) attacks.


          I hear you – and her penchant for simply being anti-patent DID give me pause (perhaps that was not emphasized enough in my first post).

  3. 3

    Prof. Feldmans points seem rather confused.

    One does not receive a patent for an invention one tried and failed to create, and the patent reward is based on success, rather than failure.

    Agreed. I do not see that anyone suggests otherwise. No pharma applicant of which I am aware is trying to get patents on drugs that they failed to create. The idea that the price for a successful drug should compensate the company for the money spent on its development failures does not mean that the company is receiving patents on its development failures. It only receives patents on the drugs that it actually succeeds in inventing.

    Failure compensation has the effect of encouraging inefficient invention and leads to a perverse reality in which the more one fails, the higher the compensation.

    This is a common but erroneous way of thinking about patents, and it is a bit disappointing to see someone as intelligent as Prof. Feldman repeating this canard. Mike Konczal derides this line of thinking as “pity-charity liberal capitalism”—the idea that companies set prices out of a spirit of generosity, and thus the way to lower prices or raise wages is to bolster their bottom lines or hector their CEOs with diatribes of moral suasion, such that they feel more generous.

    This not how actual market actors set prices in a market economy. Rather, prices are set at whatever level will maximize revenue in the market context that exists at the time. A patent does not permit the patentee to sell the product (in this example, a drug) at any price that the patentee wishes to charge. Rather, the patent merely permits the patentee to set the price at the maximum that the market will bear. If the patentee tries to set the price higher than that point, then the drug simply will not sell.

    In other words, the price that the drug company charges does not actually rise in proportion to the company’s failed development attempts. The price is set at the peak of the supply/demand curve (or at least as close to that peak as the company’s marketing and economist specialists can estimate). If that price brings in enough revenue to compensate for the losses that the company suffered in its failed venture, then the company remains profitable and continues in business. If the revenue that comes from the successful drug franchises is not enough to cover the losses from the unsuccessful attempts, then the company goes out of business. It cannot, however, simply raise the price higher to compensate for those losses, because a higher price will only suppress revenues, not raise them.

    1. 3.1

      Couldn’t have put it better myself, Dozens. Could not even have said it as well. I too am baffled how a person who carries the title Professor and writes about patent law could write such a strange piece. Perhaps to gain attention, to get cited? But not every instance of “being cited” is a cause for celebration, eh?

      Does the good professor seriously suppose that if the compensation that an innovative drug company is crimped back, the company will immediately resolve to crimp back its research lines heading for future failure and instead focus more intensively on those lines of research that are predestined to deliver future blockbuster drugs. Is the academic world so far away from the real one?

      1. 3.1.1

        Is the academic world so far away from the real one?
        In this instance, the answer is: Yes.

    2. 3.2

      “I do not see that anyone suggests otherwise.”

      I mean, many computer-implemented inventions are given to people who didn’t even try to build their “invention”… the “invention” really being the specification of some functional goal. Suggest that these people don’t deserve a patent, and you will see quite a few angry responses here.

    3. 3.3

      >>One does not receive a patent for an invention one tried and failed to create,

      So, I didn’t read the article but how does one get a patent for something that is not enabled?

      1. 3.3.1

        Of course, it happens all the time that patents are issued without adequate enablement, owing to faulty examination standards. Those patents fail when asserted.

        I do not think, however, that this is what Prof. F means when she talks about “rewarding failure.” She somehow thinks that if a company runs ten lines of research and seven of them fail while three succeed, that it somehow counts as “rewarding failure” to grant patents on the results of the three successful lines, because the commercial successes from those three will be used to cover the losses of the seven. To my mind, the patents on the three constitute rewarding success (those are, after all, the three successful projects), and the other seven are just hard luck.


          I see. So, another loony anti-patent theory is afoot.

          I agree with your analysis. What strikes me is that she doesn’t understand that those 7 that were granted patents also make public the “failure”.


            Plus, the “professor” is complaining about a patent on something that is not commercially viable? She just doesn’t like the idea of a patent granted on something unless she feels it is “patent worthy.”

            That is the heart of how the USSR granted patents and it was a dismal failure.

      2. 3.3.2

        So, I didn’t read the article but how does one get a patent for something that is not enabled?
        ben is just pining for the past when operational models were required.

  4. 2

    As to the “blockchain” article, as it admits to having an EU baseline, it may be put on the back burner for awhile.

  5. 1

    I have to say that I am not usually close to the same page as Academic Feldman, but her paper hews to one of my long standing pet peeves about Big Pharma and the reliance of “well we need to pay for our expensive development” rationales (which was always overplayed to me).

    Sure, there may be pain with companies going under with non-successes, but as I have always suggested – “protecting” a bad Model of Innovation only means that the process itself of innovation (in that sector) won’t be subject to the forces of innovation. Remove that “protection,” and one could expect innovation pressures to innovate the Pharma innovation model.

    1. 1.1

      You are not in tune with the socialism of today. One need not worry about efficiency or the best model. One merely raises taxes and subsidizes businesses that aren’t working out.

      1. 1.1.1

        I disagree that I am “out of tune,” as I am in agreement with your modern day prognosis (and many of my prior posts are already directed to such as such).

      2. 1.1.2

        One merely raises taxes and subsidizes businesses that aren’t working out.
        Be careful where you go with that statement. The government subsidizes
        a LOT of businesses, and many of those subsidies are from those who would blanch at being called a socialist.

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