Patents Don't Pay

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 is also the Pirate Party's stance

[CrystalFalcon]

The Pirate Party also claims [piratpartiet.se], with good justification (although a bit less of it in English), that patents should be abolished outright. Good to see some others chime in.

Patents do pay

[Anonymous Coward]

From the 1990's, for publicly traded companies only. Mainly due to litigation costs.

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.

Re:If you can't tell the boundries, it ain't prope

[ardor]

This has been invented already.

Its called "copyright".

Wright brothers are another good example

[A nonymous Coward]

They first flew under barely controllable circumstances Dec 17, 1903, but then spent several years trying to keep it secret, or at least not publicize it, while they made it practical. They used wing warping which physically bent the wings to control roll, and in order to get around this patented idea, Curtis, in 1908 I think, invented ailerons, hinged sections of wing which have been in use ever since. The Wrights spent the next ten years in court over the matter, and it wasn't settled until the US government forced a settlement when it joined WW I. The Wrights never did much at all after the first few years except sue the competition in court. Everyone else made advances in the technology, but not the Wrights, and they later had to merge just to keep the name in business.

A real lesson in the relative merits of innovation to stay at the front of the pack instead of dying in court battles.

A tiny nitpick

[Anonymous Coward]

He considered patents to be bad for the little guy. Some people have found a way to make patents work; NTP for instance got hundreds of millions from RIM for what turns out to be bogus patents.

People in the electronics industry are familiar with the case of Edwin Howard Armstrong who invented many of the fundamental parts of modern radio. http://en.wikipedia.org/wiki/Edwin_Armstrong [wikipedia.org] RCA stole his ideas and basically lawyered him to death. RCA, on the other hand, had patents and could afford to enforce them with great vigour.

Armstrong's would be one case that Lancaster would use as an example of why patents don't work for the individual inventor. He never, afaict, said patents didn't work for the big guys.

Bad math

[davidwr]

They only counted the dollar value of having a patent vs. not having it.

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 companies like MS and IBM won't totally abandon patents any time soon.

Re:Wright brothers are another good example

[Paul Jakma]

They didn't invent that stuff at all. There had been several decades of experimentation in aviation with gliders, and the aerodynamics and control issues the Wright brothers used had been worked out using those already, e.g. the aileron first appeared on a glider in 1902.

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.

Re:Contributing factor

[Jah-Wren Ryel]

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]

Re:This is also the Pirate Party's stance

[Daychilde]

What incentive? Well, as soon as one of the twenty is off the list, #21 gets put on, now doesn't it? And as far as not working on #21, well, the other 20 are worse, yes?

Further, that assumes that a system was put in place specifically as written - why limit to 20? Why not come up with a list of needed solutions and bounties to cover more than twenty? ...this assumes that the system isn't crap - which for the sake of conversation, why not?