How Much Harm Do Bad Patents Do To The Economy?

from the billions-and-billions-of-dollars-worth dept

Fri, Feb 29th 2008 2:09pm — Mike Masnick

We've been discussing how patents can have a serious economic downside (as was recognized by Thomas Jefferson and James Madison as they designed the patent system). It appears that some researchers are trying to quantify just how much damage bad patents are doing to the economy. Against Monopoly points us to a blog post at Technological Innovation and Intellectual Property that discusses the results of a preliminary study (pdf file) that estimates a loss of $22.5 billion due to bad patents. The researchers admit that the findings are preliminary, but it does create an initial framework by which to look at the negative impact of bad patents on the economy. Among other things, the paper lists out the following ways that bad patents harm the economy:

Cause consumers to absorb monopoly prices over "inventions" that were already effectively common knowledge
Direct resources away from productive research and instead towards strategic accumulation of patents already filed over innovations already deployed
Divert resources to "defensive patenting" or securing offensive "blocking patents
Direct research away from areas of existing patents that should not have been granted
Direct resources toward acquiring and enforcing substandard patents and collecting royalties rather than other more-productive fields of economic activity.

We've seen all of these in action lately. And, of course, this doesn't even get into how much is thrown away in legal resources to litigate patents and defend infringement claims on patents that should not have been granted. Also, it's worth noting that the TIIP blog post reminds us that the author's own book Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk comes out next month.

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Filed Under: bad patents, economic impact, patents

14 Comments

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Anonymous Coward, 29 Feb 2008 @ 2:19pm

Maybe a stupid question, but has anyone tried to quantify what economic good patents have done?
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Anonymous Coward, 29 Feb 2008 @ 2:40pm

NVMKHGJ,GK
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db0, 29 Feb 2008 @ 2:50pm

Software companies? Patent Lawyers?
...Big Pharma? All of these and everyone else who stands to gain have been trying to prove that patents are the greatest thing for progress and they have failed miserably. The research is heavily slanted and their outcomes wrong.
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Bruno, 29 Feb 2008 @ 3:23pm

How Much Harm Do Bad Patents Do To The Economy????
This question is odd. If there was not that golden ring to strive for, the progress we have seen would have been seriously retarded. People want the $$$ and are willing to invest time, $$$ and inspiration for it. You are always hearing about the new gizmo that everyone wants. People come up with these things to make there lives financially well off. Without this goal, always there, our lives would be late sixties dreaming of what could be but TODAY. The only bad thing that is happening is that chemical companies adding an extro oxygen molicule or what have you now think that because of the change they can patent, which this system was not meant for!
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Anonymous Coward, 29 Feb 2008 @ 4:05pm

Re: How Much Harm Do Bad Patents Do To The Economy
That is not a completely true statement. Heck, thats not even a reasonably accurate statement. Most "hard" science isn't being done by companies trying to make a profit. They are instead taking science done by other people or groups, and then re-arranging a few bits here and there, to make a profit. A lot of the tech hitting the market now is over a decade old since it left research stage, it just took that long for someone to figure out how to make it profitable. Either it was too expensive then to be a viable product, or simply no one knew what to do with it. For instance, I really doubt the people doing research on Dark Matter have any idea how their research could cause a shiney do-dad to end up in someone's living room 70 years from now.. or what shape that do-dad could possibly take. They aren't doing the science to make you're quality of life better so much as doing it because they want to know how or why the universe works. Much of the things we take for granted, in one way or another can be directly traced back to people doing science, for the science.
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Mike (profile), 29 Feb 2008 @ 5:30pm

Re: How Much Harm Do Bad Patents Do To The Economy
If there was not that golden ring to strive for, the progress we have seen would have been seriously retarded

What's wrong with the "golden ring" known as demand from the market?

And your assertion that progress would have been retarded is provably false. As we've pointed out repeatedly, studies have shown over and over again that patents have no direct impact on innovation, and in some cases clearly impeded it. The Netherlands got rid of its patent system, and that allowed it to *speed up* progress so it could become an industrialized nation. Ditto with Switzerland, who delayed implementing a patent system and saw the same thing happen. Look at Eric Schiff's research to learn more about this.

Also look at Petra Moser's research on innovation in places with patents and without. The research shows that there is still plenty of innovation in places without patents.

Look at David Levine and Michele Boldrin's research on the pharma industry in Italy both before and after patents. Before patents there were many more firms, a lot more competition and a lot more new products being developed. Afterwards that went away.

So, the idea that there is less innovation without patents hasn't been shown to be true.

People want the $$$ and are willing to invest time, $$$ and inspiration for it. You are always hearing about the new gizmo that everyone wants.

Yes, so they sell the gizmo and they get the $$$. What's that got to do with patents?
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Steve R. (profile), 29 Feb 2008 @ 8:21pm

Re: How Much Harm Do Bad Patents Do To The Economy
The premise that the quest for $$$ drives research is not exactly correct. A lot of research is funded by the government and undertaken by Universities. One of the big impetuses behind scientific progress has, in fact, been research to fight wars. The concept that patents and copyright are a vital ingredient for innovation is overrated.
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Bruno, 29 Feb 2008 @ 11:11pm

It Looks like everyone thinks that people create for the hell of it. History states everything, without the patent system Bill Gates would have nothing and we would be in the dark ages. To say that "studies have stated so and so" is after the fact. No Golden ring, no drive to be the first and that states it all! Just to clarify, the golden ring is the right to ask for royalties. If I was coming out with something new and demanded, do you think I would waste my money on inventory if I knew someone else could copy it and be in the market the next day? It would be a different planet if people respected your rights and left things alone without laws forcing them to do so.
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Anonymous Coward, 1 Mar 2008 @ 6:14am

Re:
You got your history wrong.

Many of the major software innovation occurred before the patent system.

Heck, even Bill Gates said patents are bad.
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Steve R. (profile), 1 Mar 2008 @ 7:11am

Tecnological Advance Doesn't Need Patents
Seems to me that we made a lot of advances before the concept of patent was "created". Fire is one, bows, arrows, and the business plan of the tribe hunting and gathering as an organized unit.

To say that without a patent system we would be in the dark ages is ridiculous.

You wrote "do you think I would waste my money on inventory if I knew someone else could copy it and be in the market the next day?". Well, capitalism is about competition not monopolies. If you invent something and it can be copied easily and you can't derive any revenue from it - to bad. Think of it as an altruistic act that benefits society, and by the way thanks for helping to promote progress in the science and arts. Society might even give you a plaque for your public service.
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Evil Mike, 1 Mar 2008 @ 8:16pm

Patent It! The Online patent abuse game...
* Cause consumers to absorb monopoly prices over "inventions" that were already effectively common knowledge
* Direct resources away from productive research and instead towards strategic accumulation of patents already filed over innovations already deployed
* Divert resources to "defensive patenting" or securing offensive "blocking patents
* Direct research away from areas of existing patents that should not have been granted
* Direct resources toward acquiring and enforcing substandard patents and collecting royalties rather than other more-productive fields of economic activity.

This is such a neat list! Somebody should make an online game wherein people use these activities to gain points and quash their opponents.
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Hellsvilla, 2 Mar 2008 @ 2:16pm

Re:
Maybe a stupid question, but has anyone tried to quantify what economic good patents have done?

The economic good is what other markets get, when they are not bound by our restrictions. OUR patent system is benefiting China to the nth degree.
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Chronno S. Trigger, 3 Mar 2008 @ 9:20am

Re:
Actually you have it backwards.

Bill Gates would be nowhere if Apple or Xerox patented their ideas and sued Bill. Remember Bill stole his OS basically from Apple who stole it from Xerox. And we don't know where they got it.

Microsoft became the dominant OS because of four things. One, Apple was on a proprietary system. Two, Linux was basically useless to the end user. Three, Bill Gates is one hell of a marketer. Four, rampant pirating of Windows.

Patents had nothing to do with it.
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Mr X, 3 Mar 2008 @ 1:16pm

current pattent law
Personaly I think there should be les time that the patent is held. Patents can be good for the company that is investing in new technology, in that it does give them some time where they can expect to be able to get a return on that investment.

However the way patents are curently does stifle inovation.
Companies use patents as a way to thwart new and upcoming companies that don't have the means to have the searches done to see if there idea was already thought up. Companies also patent things that realy should not be able to be patented.

a reform to the current system realy does need to be put into place. I belive we need to make what you can patent and how long the patent lasts shorter. Personaly I think 5 to 10 years is the maximum for IP type patents that are used in the computer industry. Most software makes its profits back in the first year so 5 years is plenty of time to hold off the compitetion from stealing your ideas without you being able to make money off your investment.

physical type patents do take a little longer to recoupe the investment and so they should be protected longer thus 5 years for software type ip and 10 years for hardware ip.
chemical proces I don't know enough about how long it takes to recoup on general the investment.
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