Patent Costs Outweigh Benefits In Many Cases

from the more-people-catching-on dept

Fri, Jul 20th 2007 6:45am — Mike Masnick

It's no surprise that we have trouble with the patent system and have seen all sorts of examples of why it often seems to lead to results that are the opposite of the system's intended purpose (to promote innovation). Over the past few years, the amount of research supporting the position that patents are harmful to innovation has been growing rapidly, and the latest addition looks to be quite useful. James Bessen and Michael Meurer have looked at the issue and have discovered that, especially recently, patents have become more costly than helpful. Studying the data on patents, they found that the value of patents is quickly being surpassed by the expense of patent litigation. In fact, they found that the more research a company did, the more likely they were to get sued for patent innovation. This probably isn't too surprising to many around here, but it clearly goes against the idea of what the patent system is supposed to encourage. Bessen and Meurer are working on a book discussing this very topic, which will probably end up on the big reading list.

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Filed Under: patents

15 Comments

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Ajax 4Hire, 20 Jul 2007 @ 7:00am

New patent Idea...
troll the techdirt site and wait for a new article and then jump with a "First!" on the 1st post.

Ohh wait, prior art. Oh well better get my application in anyway and contact my lawyer.

"First!"
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Ajax 4Hire, 20 Jul 2007 @ 7:06am

Re: New patent Idea...
Sorry about that, sometimes I can't resist.

I work for a largish corporation and there is at least a yearly if not quarterly push by corporate to actively submit patent ideas to the company lawyers. Got forms, incentives, lawyers lined up and the skids greased, ready for that continuous wave of "good" ideas.

I have a hard time trying to distinguish between obvious and new&improved. Everything I dream up seems obvious. Judging by what the Patent Office hands out as patents, I think there is a serious lack of exposure to the real world.

3-wire cable carries electric power with extra ground for protection! new patent.
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tlhwraith, 20 Jul 2007 @ 8:24am

a little surprised...
so what is techDirts stance about the patent reform act of 2007 about to hit the full house and senate?
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ranon, 20 Jul 2007 @ 9:47am

Wrong reasoning
The reasoning used is wrong. In the study only direct income from patents is considered (around $9.3 billion).

What is not considered is the income from the sales of various products that are protected by patents. This covers almost the entire US manufacturing industry and would be in the range of trillions of dollars (yes thats a t).
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Anonymous Coward, 20 Jul 2007 @ 10:51am

also keep in mind that an unmeasurable part of the value of owning patents is prevention of patent litigation and the leverage to enable cross-licensing with other patent holders.
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Harry, 20 Jul 2007 @ 10:52am

Patents useful?
I think patents were a great incentive a century ago for inventions like the lightbulb, the telephone etc - in other words, things existing in the real world. But software doesn't really exist in the real world, being just a string of numbers. One wonders what will happen in the next hundred years...you may not be able to open your mouth without infringing upon a patent!
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Mike (profile), 20 Jul 2007 @ 11:57am

Re: Wrong reasoning

What is not considered is the income from the sales of various products that are protected by patents.

How is that stopped if there are no patents? You can still sell goods.
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Shalkar, 20 Jul 2007 @ 12:58pm

My Opinion is:
It seems to me that patents have outrun their usefulness BECAUSE of "Patent Trolls". If it wasn't for companies like them, then it would be pretty much okay, but instead we have all of these ideas patented... and nobody using them. They just want to wait until somebody makes something that has that patent in it, then sue them for loads of money. They want "easy" money. That's what's really messing everything up. That's my opinion anyways.
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Mike (profile), 20 Jul 2007 @ 2:13pm

Re: a little surprised...
so what is techDirts stance about the patent reform act of 2007 about to hit the full house and senate?

It's basically the same bill we've discussed in detail before. Didn't seem worth discussing any more until it actually gets passed (which still seems unlikely).
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ranon, 20 Jul 2007 @ 2:47pm

Re: Re: Wrong reasoning
>> How is that stopped if there are no patents? You can still sell goods.

It is really simple. Imagine that tommorrow all patents on all products are lapsed. The sales of the companies which have patented products will go down. The value of the patent is the reduction in the sales in this hypothetical event.
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Shaun, 20 Jul 2007 @ 8:58pm

Re: Re: Re: Wrong reasoning
The sales of companies would not immediately go down. Some people would immediately start to work on coppying products exactly and say about 5 years later they would bring out an exact copy of your product. In the mean time you've brought out an additional updated version each year and so your product is continuously 5 years ahead of the competition ie everyone still buys your product and very few people buy the 5 year old coppy.
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ranon, 20 Jul 2007 @ 9:18pm

Re: Re: Re: Re: Wrong reasoning
That may be true in industries which have substantial innovations every year or less. In the case of industries in which innovation happens much slower (e.g. chemicals, manufacturing} this falls apart. in these industries an innovation comes along every 5-10 years, while a copy can be made in a fraction of the time and effort.

Also I take issue with the time frame to make a copy of a product. 5 years is too long. Once the market knows that patent protection is not existent, copies can start being produced extremely quickly (of the order of months).
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Vincent Clement (profile), 21 Jul 2007 @ 7:32am

Re: Re: Re: Wrong reasoning
The sales of the companies which have patented products will go down.

Aspirin and Tylenol no longer have patent protection, but both Bayer and McNeil PPC continue to sell their respective products, despite the plethora of generic alternatives and other analgesics. It was the lapsing of the patent that forced these companies to develop new products.
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ranon, 21 Jul 2007 @ 12:43pm

Re: Re: Re: Re: Wrong reasoning
Aspirin and Tylenol no longer have patent protection, ...........

In the case of Asprin and Tylenol, they were under patent protection for 20 years. When patent protection ended, they had significant market share and that was maintained (by good management). But they had the initial market share given by the patent. So, maybe there are effects of a patent on sales even after the 20 years.

Also, most medical drugs reduce in price after patent protection ends. This causes loss in sales, as demand is (mostly) inelastic.

In a general sense, when patent protection lapses, competitors enter the market, price reduces and sales reduce. Simple economics.
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