Slashdot Log In
Patents Don't Pay
Posted by
kdawson
on Sun Jul 15, 2007 04:07 PM
from the crunching-the-numbers dept.
from the crunching-the-numbers dept.
tarball_tinkerbell sends us to the NY Times for word on a book due out next year that claims that beginning in the late 1990s, on average patents cost companies more than they earned them. A big exception was pharmaceuticals, which accounted for 2/3 of the revenues attributable to patents. The authors of the book Do Patents Work? (synopsis and sample chapters), James Bessen and Michael J. Meurer of the Boston University School of Law, have crunched the numbers and say that, especially in the IT industry, patents no longer make economic sense. Their views are less radical than those of a pair of Washington University at St. Louis economists who argue that the patent system should be abolished outright.
This discussion has been archived.
No new comments can be posted.
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
Patent Business Model (Score:5, Insightful)
Re:Patent Business Model (Score:5, Funny)
Except for a law firm.
Parent
Re:Patent Business Model (Score:5, Insightful)
Except for a law firm.
Parent
Re:Patent Business Model (Score:4, Insightful)
It also has use in keeping competitors out of the market, by (dishonestly) telling competitors that they must pay to overcome some ridiculous and undeserved government-mandated monopoly. That isn't to say that all patents are ridiculous, or even that we should get rid of them, but it would be difficult to measure the value of intimidating would-be competitors out of the business.
Parent
Another Use for Patents (Score:4, Insightful)
So many companies are basically investing a lot of money into patents due to an issue caused by patents themselves.
Parent
Not really surprising (Score:5, Insightful)
Evidence? (Score:2)
A lot of software-related patents end up getting invalidated due to prior art when the patent holder tries to enforce it.
Inside the Slashdot Bubble this may seem true, but do you have any empirical evidence to support this assertion?
Re: (Score:2, Interesting)
Re:Not really surprising (Score:5, Insightful)
Parent
This is also the Pirate Party's stance (Score:5, Informative)
Re:This is also the Pirate Party's stance (Score:4, Insightful)
Hell, even if the general public were allowed to buy chemicals and lab equipment, they could make their own pharmaceuticals, since patents only apply to commercial use. Another "good" (bad) reason for the war on drugs.
Parent
Re:This is also the Pirate Party's stance (Score:5, Interesting)
Parent
Re:This is also the Pirate Party's stance (Score:5, Interesting)
Since you work in the industry, you are probably a bit biased. But here's my $.02:
Pharmaceuticals should be developed by government grants and the IP turned over to Public Domain. A list of the 20 worst ailments that *could* be treated with drugs should be created. Then, funding would go from the Federal Government to Universities willing to work on those problems.
Parent
Re: (Score:3, Insightful)
The government typically only does one thing well, and that thing is 'screw things up beyond belief.'
Re: (Score:3, Insightful)
Opportunity Costs (Score:4, Interesting)
Re: (Score:2, Insightful)
Re: (Score:3, Insightful)
Re: (Score:2)
What a beautiful example of the fallacy of a circular argument [fallacyfiles.org]
It reminds me of reading about a famous case of two inventors racing to the patent office on a pro patent website some time ago. The site specifically mentioned that independent invention and races to the patent office was a rather common occurrence. It proposed patenting everything the minute you came up with it, so that it wasn't pate
Its about raising the barrier of entry (Score:5, Insightful)
I mean the whole point of the patent is to give its inventor exclusive license to be free from competition, the author of this piece doesnt take that into account at all. Im not saying that this is good or bad for innovation, just that there is significant financial incentive that the writer fails to account for.
Re: (Score:2)
Are you suggesting that we add patent spamming to the list of illegal monopolistic practices?
Re: (Score:2)
I would agree back then, but not today. (Score:2)
But today, you don't even have to show a new idea. If you hear that a competitor is working on something, you can file a patent for "a process that
No real idea required. No working model. Not even a schematic or pseudo-code.
Just requiring SOMETHING more than "a process that
Re: (Score:2)
If a competitor has already shown the concept then you cant run out and patent it because of the prior art clause. You can lock out people who would potentially compete with you but once someone already has prior art you dont have a legal leg to stand on. Yes, I realize that there are some patents that have plenty of prior art filed by researchers under pressure
Patents do pay (Score:5, Informative)
For others patents did better:
Mr. Bessen said that besides girding the pharmaceutical industry, the system did seem to work reasonably well for small companies and individual inventors.
I know slashdot editors hate IP as much as they hate nuance, but the headline does not refect this guy's research.
If you can't tell the boundries, it ain't property (Score:2)
Re:If you can't tell the boundries, it ain't prope (Score:5, Informative)
Its called "copyright".
Parent
Don Lancaster has been preaching this for ages (Score:2, Insightful)
information vs things (Score:4, Interesting)
No longer are the widgets and doohickeys manufactured in large plants the items of value - and the concomitant world of patents to protect them. Frankly we have way too much stuff already, and mostly the need for more physical stuff is artificially manufactured by ads and more-pompous-than-thou one-upmanship insecurity. It's bags o bits, and bags o water that are the future, my boy.
In short: "Well, duh."
Won't help (Score:5, Insightful)
How else would you explain the people who play the lottery? Gamble at casinos? Think that out of all the millions of oppressed masses, _they_ are the ones who will live the American dream and become someone?
It makes life more interesting; without that drive there would be little innovation, little hard work and drive, few no obsessively hard workers spending three years of nights in a garage writing software, no interest in going for American Idol... ok, scratch that last one.
In the same way companies, which are only an aggregation of people, will think that they can be the one out of a million who will benefit from patents. Even if you can empirically and theoretically show that they are being taken up the arse by a banana. Human nature. Infuriating, isn't it?
Re:Won't help (Score:5, Insightful)
Um, except... people DO win the lottery, some people do win at a casino and then have the brains to get up and leave, and people who don't have everything they wish they could have aren't "oppressed." People DO live the dream. Not everyone does or is equipped to.
Human nature. Infuriating, isn't it?
Why look at it that way? I'd rather just sit back and be impressed by the people who DO invent a new process or widget that hugely benefits us all when they put it to work, or marvel at the less creative people who none the less have the discipline to just work their asses off and build something of value to improve their circumstances and leave as a legacy to their kids. That plenty of less insightful or lazy people take a sloppy stab at that sort of thing and don't get anywhere with it MAY be like gambling badly in a casino, but it's mostly just less intelligent or worldly people behaving according to their nature and experience (and idle hopes). But human nature, if you can define such a thing at all, has also provided us with refridgeration, anti-biotics, incomprehensibly cool integrated technology widgets that would be considered magic not many decades ago, and so on. It's not infuriating, it's amazing. And if someone thinks they're on to something, and end up patenting something that they don't have the wherewithal to turn into a viable part of their business... well, too bad. Some airlines fly with a lot of empty seats, lots of expensive theatrical productions play to empty theatres, and plenty of great chefs have no-one to cook for because the restaurant's on the wrong side of the street during rush hour.
Parent
Re:Won't help (Score:5, Insightful)
Erm, yeah, but the difference is that those businesses aren't prohibiting competitors (and their customers) from benefitting from their incompetence; businesses who sit on patents are.
Parent
How is he determinig profit? (Score:3, Interesting)
I RTFA, and I still don't know how he counted profits.
And that doesn't even factor in the fact that many IT patents last, what, 17 years. So it's also a gamble on the future needing that IP.
Wright brothers are another good example (Score:5, Informative)
A real lesson in the relative merits of innovation to stay at the front of the pack instead of dying in court battles.
Re: (Score:3, Informative)
The important patent the Wright brothers got didn't have anything to do with aerodynamic designs at all. They patented an engine design that was efficient enough, in terms of power/weight, to be viable for powered flight.
Contributing factor (Score:5, Interesting)
Let's say you invent some new physical item, obtain a patent and line up licensing with a manufacturer to produce the product. In the first six months you manage to line up significant interest in large retailers for this product and the money starts flowing in.
Two months later you discover your retailers are deserting you and are buying an identical product made in China. Your revenue ceases because nobody wants your overpriced product when they can buy the cheap knockoff made in China. Unless there are substantial reasons to purchase your original (which there probably aren't), nobody is interested.
You are now looking at your investors that put up the money to get the product manufactured and advertised. They would like the big returns you were promising them and looked like they were going to get. Instead, you are bankrupt and have no friends (they were all investors).
50 years ago US Customs would have blocked the import of a patent-violating product. I don't know when they stopped, but today it is common to find products made in foreign countries that violate US patents and other licensing agreements. Where do you think all those cheap DVD players come from when it is $5 per player for the license? Any player under $100 retail is unlicensed and the Customs folks know it.
Rule 1: If it is a physical product that can be duplicated, it will be.
Rule 2: International trade is a race to the bottom with the lowest cost winning, always.
Rule 3: Patents and copyrights are only as good as the enforcement behind them.
Today, enforcement is a joke. You can sue someone in the US for violating a patent, but if they are violating it from outside the US (say, from China) you can't sue them. China would laugh - they don't enforce US laws. Customs will not block imports. Do you believe you can sue Wal-Mart for selling the product? You can't prevent people from getting cheap stuff - it is almost the 11th item on the Bill of Rights these days.
What this means is that patents are only good as tokens to impress potential buyers of a company with.
So how do you keep something from being duplicated? Have some encrypted software required to operate the device. The R&D effort to duplicate the development would make copying the product too expensive. Sure, they can copy the hardware but without copying the software they have a useless piece of junk. Maybe you can license the software to them, but doing so would be suicide - it turns your company from a hardware vendor into a software supplier.
Re: (Score:2)
Re: (Score:3, Informative)
Where do you think all those cheap DVD players come from when it is $5 per player for the license?
Actually, the total of all licenses required for a complete DVD player is closer to $20. If I had the time, I would dig up the specifics of which licenses cost what, but here's a news article that makes the same general statement:
http://www.chinadaily.com.cn/english/doc/2005-01/2 0/content_410667.htm [chinadaily.com.cn]
Patents were never supposed to make money (Score:5, Insightful)
That is how it was supposed to work in the theory.
In reality we see abuse such as companies patenting things they didn't really invent, companies patenting trivialities, and patents that don't include all the details which were the purpose of patents in the first place. If software patents weren't bad enough in itself, it is made even worse by them not containing the full source of a working implementation. If patent applications were really being treated within the original spirit of patents, any software patent application not comming with the full source would be rejected. And of course once the patent is granted, the source is published available for anybody to use as long as they have a licensee for the patent. Once the patent expires, the source can be used essentially the same way you can use BSD licensed source.
Somebody seems to have forgotten why patents were introduced. And some companies seems to want to not only keep, but also extent patents (and copyright as well) because they want to make money from it. If making money is the only reason for keeping those kinds of protections in place, they should be abandoned. But for gods sake, don't make the big mistake of abandoning them only for economical reasons. Rather think the system over again and adjust it to serve its original purpose, even if that means companies will make less money on average.
An argument for doing away with drug patents (Score:3, Insightful)
Drug companies game the patent system like crazy. We would probably be much better off without drug patents. Research could then be re-directed to non-drug (cheaper) treatments.
Re:An argument for doing away with drug patents (Score:5, Insightful)
Pfizer spent 8 billion dollars on research and development last year.
Merck spent 5 billion.
Novartis spent 5 billion.
And so on, all the big pharma companies have R&D budgets of that size.
So my question then, is if you honestly believe that this R&D isnt producing anything meaningful, where on earth is this money going? You think they are just flushing money down a rathole since according to you they have never actually produced anything meaningful? Really, I want to know, do you seriously believe that all these billions in R&D are just wasted? Do you think that for the past century they have continued blowing all this money, never seen any results from it, and noone ever stopped to say "oh hey where are all those billions going?"
Drug companies may try to game the system some with patents, but its not like they are just sitting there not producing anything of value. There may be some validity to the complaints people have about big pharma, but you lose credibility when you claim that they dont produce anything of value.
Parent
Defensive patents (Score:2)
Bad math (Score:2, Informative)
They didn't count the value of the leverage of having a large portfolio when used against another company that has a large portfolio.
If a large company unilaterally stopped accumulating patents, pretty soon it would have to start paying everyone, not just the patent-holding companies, royalties on patents it needs to license. As it is, you can just horse-trade your patents and call it even.
Without a systemic fix, large software compani
Measure of innovation (Score:3, Insightful)
The system is, unfortunately, rigged such that a modern startup needs patents. First, they need to stockpile them against existing companies who would rather litigate than compete. Secondly, they need to be able to measure, in some tangible way, how much "innovation" they've done, for the benefit of investors.
The latter point is critical. The value of a startup should be based on how valuable the products are. A patent is an asset which increases the value of the company, even if it's a loss-maker by itself. It's used as a measure of how much innovative stuff is in your product, even though the only value of the innovation is in the product itself.
I'd like to hear some suggestions as to how we could show the value of innovation without patents. I'm sure there must be a better way.
ch-ch-changes to patent law (Score:3, Interesting)
China (Score:3, Interesting)
That's it, the end. Make a product, China will rip it off and sell it for 1/2 the price. Make a web/software product and they will copy it. I've had one of my websites mirrored entirely, tweaked, and put up in China (for an open source product, so I don't know WTF the point was).
Patents would have some value if they were enforced, but they are not. Add to that the fact that less then 1% of patents are in any way valid to start, and the system is just silly. They do let large companies intimidate small companies, and easily put them out of business with lawyer costs, so the system lives on.
Very true - here's my China/patent story. (Score:4, Interesting)
Watching that happen to the company I used to work for. It's a really funny thing to watch. I'll tell the story without too much detail to avoid any hot water that might land myself in.
My former company - they make a widget. A specialized consumer widget. Other companies make similar widgets. They all began a patent war.
Widget for my former company has feature A and feature B. Other company patents the idea of combining features A and B in the widget. Company now has to make two widgets, one that does A and one that does B, even though the functions are complimentary and easily related. Obvious. And so on, and so on, and so on. The company would pay you if you had a patent idea there, so they would have something new to beat each other up with. Situation continues for years, with these small companies carving up the widget patent space so tightly it becomes a maze of legal decisions to simply make a non-infringing widget. Two main players emerged, my former company and one other.
Then, super-huge conglomerate X shows up in this widget space, and buys both major companies in the battle, as well as a couple of the small ones. Anyone see the punch line yet?
They didn't care about the companies - they wanted their patent libraries to lock out competition. Soon as they shored up their position in the market, they dismissed the engineering staff for all the companies but one - and outsourced the widget to China. And now that widget's market is locked up. There are no entry level players in this widget market anymore. Just megacompany X, and their single Chinese knockoff.
Sometimes everyone loses a patent war.
Parent
Premise is Dead Wrong (Score:3, Interesting)
I also suspect he can't possibly quantify the amount of money submarine patent owners are making. After all they are taking on the biggest of the big companies in the U.S. The money to lawyer-up doesn't just appear.
So, it does pay. It puts small companies at a perpetual disadvantage. Considering the author's publisher, it will probably get way more consideration than it should.
I didn't bother reading TFA, so mod me down if it doesn't matter.
Article: Inividual patents are still good (Score:3, Insightful)
The article is not saying that patents in general, or even software patents, aren't worth it. It only looks at aggregate statistics for the entire market. So if you are a developer or engineer who creates something new and unique and wants to patent it to protect yourself, go and do it. Nothing in this article is saying you should not.
Re:Patents Be Gone! (Score:5, Insightful)
Parent