Planet Money Continues To Show How Damaging Software Patents Are To Innovation

from the repetition-is-good dept

Thu, Aug 4th 2011 3:03pm — Mike Masnick

Just a week after the Planet Money team did the absolutely wonderful This American Life episode on problems with the patent system, the folks there are continuing to dig into the subject. This week they have an episode that includes interviews with two of the top experts on the subject: James Bessen and Nobel Prize winning economist Eric Maskin, both of which have done tremendous research into the problems of the patent system. In the podcast beyond explaining why the patent system is hindering innovation, they also take a stab at estimating the very real "cost" on innovation.

Of course, actually showing the specific costs is difficult, but Maskin and Bessen have a few different ways to show it. For example, Maskin talks about the research that shows an increase in patenting has not increased investment in R&D -- and, if anything, it's shown that investment in R&D has potentially been limited due to patents. They note that there's an overwhelming amount of evidence at this point that we would likely be seeing greater innovation "if intellectual property were relaxed." As he notes there are numerous "natural experiments" that provide data to support this.

Separately, they discuss Bessen's research into how much the market has valued the "loss" due to bogus software patent lawsuits from patent trolls. That research shows that patent trolls have basically evaporated half a trillion dollars in value and wealth from companies that are actually innovating. And yet, all Congress can do is pass a useless patent reform bill that doesn't even come close to dealing with these issues.

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Filed Under: eric maskin, james bessen, patents, planet money, software patents

29 Comments

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Jay (profile), 4 Aug 2011 @ 3:25pm

Off topic
This has just reminded me about the copyright project, regarding the cost of copyright to the public domain. With patent law proven to have tremendous innovation costs, how about copyright? I know it's not entirely conclusive, but it would be good to see progress on the costs to enforce ip law.
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6, 4 Aug 2011 @ 3:28pm

To be sure, the patent system does necessarily siphon off money from the companies engaged in it. But they also enable some of them to make money.

Although I don't know if software does that more or less than normal inventions I would say that it will get to be doing it more and more over the years.

On the other hand people do get enabl(ed)ing disclosures of the technology. Although this is debatable as to whether or not one (or the public) would want or need an enabl(ed)ing disclosure of some software.
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:Lobo Santo (profile), 4 Aug 2011 @ 3:29pm

Theoretical:
Well, if I were a Congress-person and lobbyists were willing to woo me to the tune of $50,000,000 to not reform patent system properly, then the cost of patent reform, so far as I am concerned, is $50,000,000.
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Bill W (profile), 4 Aug 2011 @ 3:44pm

Hang on a sec here ...
Those half-trillion dollars did NOT just "evaporate" ... as you have pointed out in other posts frequently. They are merely redirected to different places in the economy, such as luxury cars, and skilled gardeners, Hampton vacations, etc. Those dollars go to build the underlying economy, they do not evaporate.

Come on Mike, let's not fall into the same trap you accuse the IP Maximalists of! ;-}
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Prisoner 201, 4 Aug 2011 @ 3:54pm

Re: Hang on a sec here ...
That's right!

The whole business sector of luxury prostitutes and expensive designer drugs depends on this money.

This is generating American jobs.

And really, without these fringe benefits, where would the incentive be for people to become IP lawyers, power hungry CEOs or corrupt politicians?
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Anonymous Coward, 4 Aug 2011 @ 3:57pm

Re: Hang on a sec here ...
That's not a half a trillion dollars in lawsuit winnings/settlements. That's a half a trillion dollars in loss of company worth. If people will buy a company for x dollars on day one, and the next they'll only buy it for x/2, where did that money go to?
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Mike42 (profile), 4 Aug 2011 @ 4:03pm

Re:
As a software engineer for the past 12 years, I can safely say that software patents don't do ANYTHING useful.

You can't use them to write code; therefore you can't reproduce the "invention". They are written in legalese, and until they write a legalese compiler, they are useless.

Something that hasn't been touched on is how many open source projects have been closed down by patent threats from large companies. I've seen several projects shut down, but thanks to the EU having more sense than the US in the software world, the projects have sprung back up where the patents are invalid.

Oh yeah, that's another point not touched on: software patents only work in the US. Use the same algorithm as someone else in the EU, no problem. Use that technique in the US, and you have "stolen" someone else�s "technology." And lest we forget, software is a collection of algorithms akin to lists, recipes and mathematical formulas, none of which are patentable.
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Bill W (profile), 4 Aug 2011 @ 4:09pm

Re: Re: Hang on a sec here ...
Ah, but where DIDN'T the money go is the question. It stayed in the buying company's coffers. Or isn't an interest-bearing liability.

But perhaps you didn't detect the sarcasm in my post? Or are you a troll? (Damn, I really NEED a "sarcasm font!!")
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Bengie, 4 Aug 2011 @ 4:17pm

Re: Hang on a sec here ...
"Those half-trillion dollars did NOT just "evaporate""

Just like how giving welfare money to people who don't want to work(not saying welfare people don't want to work, but many don't).
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Chosen Reject (profile), 4 Aug 2011 @ 4:20pm

Re:
How does a patent enable companies to make money in ways that they couldn't make money otherwise? If licensing and litigation is your only answer, then that goes to show how bad patents are.
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Anonymous Howard, Cowering, 4 Aug 2011 @ 4:31pm

AC #6 Re: Hang on a sec here ...
Nowhere. It never existed.

If people will buy a company for x dollars on day one, they do so.

If people value a company at x/2, they never would have bought it for x.

That doesn't mean the buyer didn't have the other x/2; just that the company didn't have a value of x.

Freakonomics is a great read!
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dwg, 4 Aug 2011 @ 4:58pm

Re: Re: Hang on a sec here ...
Um...did you just say "welfare people?"
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jsl4980 (profile), 4 Aug 2011 @ 6:11pm

My costs
I've seen a big cost in time money and productivity due to software patents. I've been on patent review teams at my old company where we spend a few days with mountains of patents printed out and go over them one by one to see if they impacted our company. The best thing to happen to patents however is Google's patent search, that saved countless paper cuts. I've lost weeks of my life to weak and phony patents and I'll never get that time back.
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out_of_the_blue, 4 Aug 2011 @ 6:37pm

Without going round on patents again: real problem is lawyers.
Everyone knows there are WAY too many. And why? Because it's generally an easy route to riches, particularly if already connected. There's an easy solution: do away with "the bar" association and its legalized privileges that are only a "bar" to free market. There would, if markets work as we're told, be a shake-out to reduce numbers, a lowering of prices, and consequent improvement of their "product". -- But keep the code of conduct, just enforce it through common law (one can't now actually bring an action against a lawyer without another lawyer, and then only through "the bar"; it's a guild system).

Anyhoo, lawyers have built most of the problems with patents into the system as barriers to other people that also provide lawyers with lucrative niches, so can't attack this problem without looking at lawyers and what they get from it.
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Donnicton, 4 Aug 2011 @ 9:28pm

Re: Re:
They are written in legalese, and until they write a legalese compiler, they are useless.

I thought it would be a good idea to try to, but then I realized that there's probably a patent on it, so now I'm too afraid to.
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Anonymous Coward, 4 Aug 2011 @ 9:39pm

Here is one of those wonderful situations where Mike Masnick manages to contradict himself, picking sides only because they serve his needs.

Piracy has "evaporated" billions of dollars out of the recorded music industry. Yet, Mike will tell you it's okay, they money went somewhere else and was spent in the economy.

Yet, when "patent trolls" license technology for a billion dollars, that money has just "evaporated". Yup, that's right, because there is a patent involved, that money actually disappears and never comes back. They guys who get it never spend it, never invest it, never do anything with it, they just shovel it into a furnace and burn it.

It's amazing that anyone can take you seriously Mike.
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Frost (profile), 4 Aug 2011 @ 11:30pm

Re:
For your argument to make any sense whatsoever, you first have to have proof that "piracy has evaporated billions". Nobody has yet managed to demonstrate that believably, not even the RIAA/MPAA. Especially since even that part of the copyright brouhaha have had to admit that people who copy also buy a lot, and that the copying may well act as a form of advertising.
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Frost (profile), 4 Aug 2011 @ 11:32pm

Now let's take one more step in the logic chain
Patents (and copyright) service the money side of society to the detriment of said society. Two options then appear - do away with patents (which is a symptom) or do away with the folly of allocating resources via a money system (the cause).

Any doctor - and any sensible engineer - would tell you that what you have to fix is the root cause, not try to patch the symptom...
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Lawrence D'Oliveiro, 5 Aug 2011 @ 1:08am

Re: Hang on a sec here ...
To take this seriously, I think the key point is whether the money is paid willingly, or whether it is seen as extortion.

When people feel good about handing over the money, they will happily do it again. Result: you prosper.

When people feel unpleasant about handing over the money, they will look for ways to avoid doing it again. Result: you suffer.

A thriving economy is about people willingly exchanging goods and services and money, not being seen as parasites off each other.
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The eejit (profile), 5 Aug 2011 @ 5:16am

Re: Re: Hang on a sec here ...
IT was a patented bug designed to control the flow oe money to them dirty Poor People.
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Anonymous Coward, 5 Aug 2011 @ 7:05am

Re: Re:
Frost, it is something that Mike has discussed before here on Techdirt. People buy less music (they can get it for free, so why buy more?), and that money goes to other places such as video games, live concert tickets, whatever. People are choosing to spend the money they use to spend on music in other places, all the while people have the largest music collections in history.

Billions of dollars has "evaporated" from the recorded music industry.

You would have to be the ultimate in head in the sand person to day that recorded music sales aren't down, and down sharply, and you would also have to deny that people today have huge collections of music. Since those two facts don't add up together to make sales, we know what happened.

Now, how come piracy doesn't make money evaporate (even as the music industry sees billions of sales a year evaporate), yet someone enforcing a patent makes money evaporate, and somehow magically removes it from the economy?
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DannyB (profile), 5 Aug 2011 @ 7:13am

Re: Hang on a sec here ...
> Those half-trillion dollars did NOT just "evaporate"
> They are merely redirected to different places in the economy

Using that logic, protection rackets are great for the economy.

A guy comes to your business. "Hey, nice business you have there. It would be a shame if anything were to happen to it."

Just pay 25 % of your profits to the extortionist, to prevent something bad from happening to your business.

That money didn't just evaporate. It was merely redirected to different places in the economy.
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DannyB (profile), 5 Aug 2011 @ 7:19am

Re: Re: Re:
> You would have to be the ultimate in head in the sand
> person to day that recorded music sales aren't down,
> and down sharply

You manage to contradict yourself. Today you say sales are down sharply. Other times you say they are up. Which is it?
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The Groove Tiger (profile), 5 Aug 2011 @ 7:26am

Re: Without going round on patents again: real problem is lawyers.
Lawyers are just "a bunch of mindless jerks who will be the first against the wall when the revolution comes".
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Anonymous Coward, 5 Aug 2011 @ 9:52am

Re: Re: Re: Re:
Sorry,I have never said recorded music sales are up. They are down, down sharply.

Please show where I ever suggested recorded music sales are up.

by the way, clever attempt to dislodge the discussion... I know that I have once again caught Mike in an incredible contradiction, but I doubt he will reply to it. Even if he replies in the thread, it will no doubt be some sort of vaguely worded "you don't understand economics" or "you are an idiot" type of answer, without addressing the contradiction.
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Anonymous Coward, 5 Aug 2011 @ 9:56am

Re: Re: Hang on a sec here ...
The point is the money didn't evaporate, it went somewhere else. Instead of being a business investment, it's someone buying a new mercedes or whatever. The money didn't evaporate, it just went in different directions. Mike claims this all the time when it comes to declining music sales, why would it not apply here?

Unless the money is being physically destroyed, it is still there. It makes the whole story laughable that it's hung on something that Mike has "debunked" before. So either he doesn't believe his debunking, or he is just trying to mislead all of you in this case. I wonder which one it is?
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Gene Cavanaugh (profile), 5 Aug 2011 @ 11:20am

Software patents
They're terrible. As a former software engineer and an IP attorney, I think they are a threat to our society.

Good article.
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bob, 10 Aug 2011 @ 2:13am

the point is over there guys....
The discussion in the comments has totally missed the point, all about 'the same money used elsewhere.....

The point your all missing is about the new money that will never happen. All of the start ups that fail to gain a foot hold, the new innovations that the original 'inventor' didn't think of but still somehow infringe their patent, the chance for more American companies to produce competing products to sell in a global market and a hundred other revenue streams /job providors that never happen because it's possible to patent a line of code or a geometric shape.

Seriously if you an get a patent on moving a finger across a screen then something is broken.

If only one company in the country is allowed to produce a 'device that streams music ' then something is broken. It doesn't take a genius,inventor, patent lawyer or elementary school kid to see that.
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Anonymous Coward, 20 Sep 2011 @ 9:05am

Re: the point is over there guys....
As long as persons keep thinking of patents as granting monopoly power over a market they will continue to to make statements like:

"If only one company in the country is allowed to produce a 'device that streams music ' then something is broken."

The scope of a patent if defined by its claims. Frankly, I have never seen one in any industry where the claims are of such scope that prospective market entrants are locked out. Yet, some here would have others believe "lock out" is the rule. Clearly it is not and never has been.
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