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.

Patent Business Model

[UncleWilly]

It doesn't surprise me that patents tend to be expensive & useless. The only place they are of any real use is in court. Any business model that has "time in court" from the get-go is probably not such a great model.

Not really surprising

[Iphtashu Fitz]

Especially in the world of computers it seems that so many of the patents are of questionable validity. A lot of software-related patents end up getting invalidated due to prior art when the patent holder tries to enforce it. Why do you think Microsoft isn't publicizing the list of patents that it claims linux infringes on? Tons of people will try to dig up prior art as soon as they know what patents MS claims are being infringed upon.

Its about raising the barrier of entry

[jorghis]

If the big companies all file for a bunch of patents it raises the barrier of entry very high for would be competitors. They may not get any revenue from these patents but they save a lot from not having to deal with smaller companies taking their business.

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.

Don Lancaster has been preaching this for ages

[Man On Pink Corner]

He's always considered patents to be a gigantic ripoff for everyone but patent attorneys. A lot of people dismissed his anti-patent rantings in the early 90s as net.kookery, but it appears he was ahead of his time.

Won't help

[Realistic_Dragon]

Everyone thinks they are special. It's a fundamental human attribute.

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:Opportunity Costs

[Anonymous Coward]

You're claiming that the true value of patents is to nullify patents? But not having patents at all would save all that, plus the cost of the patents themselves.

Re:Won't help

[ScentCone]

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?

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.

Re:Opportunity Costs

[bhmit1]

I was thinking of putting this slightly differently: getting a patent may not recover its own cost in the long run, however, not having a patent may very well cost more. You're better off losing $1 than you are losing $5.

Re:Not really surprising

[Iphtashu Fitz]

It's a nice thought but I wouldn't expect to see any significant changes in a long time. Companies like Microsoft that have huge investments in proprietary software are going to use the threats of patents to try to combat the growth of linux and open source software in general. I'm sure they'll continue to do that for as long as they possibly can. Even companies like Amazon, with their dubious one-click patent, use them as weapons in going after the competition. Unless/until something significant happens that puts an end to the abuse of dubious software patents I have a feeling they'll be around for quite some time.

Patents were never supposed to make money

[kasperd]

The purpose of patents were to improve inovation and make the results available to society. Before patents were introduced, people would try to protect their inventions by keeping the details as secret as possible. Patents are supposed to get them to reveal the details by getting a timelimited monopoly in return. Then others can keep inovating by building on top and eventually the inventions will become free for everybody to use. And anybody who sticked with the old habbit of keeping the details secret rather than patenting it would run the risk of somebody else being granted a patent on the intention.

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

[Anonymous Coward]

Drug companies don't do the basic research that leads to new treatments. Drug companies do research necessary to bring drugs to market. In the past they had agreements that forced university researchers to keep mum if they found adverse side effects of the drug under test. Treatments that don't result in profit for the drug companies aren't researched. Drug companies often make minor changes to a drug just so they can keep it patented for another seventeen years.

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:Patents Be Gone!

[ScrewMaster]

Patents weren't supposed to be about ideas. They were supposed to be about implementations, specific ways of making ideas work in the real world. The Founders were pretty clear about that. The problems came in (as so many do) when we stopped listening to them.

Re:An argument for doing away with drug patents

[jorghis]

I have always wondered where people get this idea that drug companies dont do research, they just take something from universities, slap a patent on it and sell it. Yes, some of this stuff is based on things that had some basic work done in universities, but guess who funds that research! Yup, evil old big pharma! These university departments get huge sums of money from those nasty drug companies.

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.

Re:Won't help

[jez9999]

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.

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.

Re:This is also the Pirate Party's stance

[senatorpjt]

What about pharmaceuticals (mentioned in the article)? That is actually my line of work - any commercially viable synthetic pharmaceutical can be made by a trained chemist in a couple weeks. All of the actual cost is in deciding what molecule to make, not in making the molecule itself. It may be feasible in the Libertarian circumstance where (1) chemical intermediates are available to the general public and (2) drugs are not subject to regulatory approval.

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.

Measure of innovation

[Pseudonym]

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.

Re:Patent Business Model

[sorak]

The only place they are of any real use is in court.

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.

Re:Patent Business Model

[mh1997]

I'd guess that patents are not useless. They may not earn money, but they probably generate a high return in cost avoidance due to lack of competition.

Re:Patent Business Model

[NewYorkCountryLawyer]

Any business model that has "time in court" from the get-go is probably not such a great model.

Except for a law firm.

Most law firms are lousy business models too.

Re:This is also the Pirate Party's stance

[ect5150]

So, what if you're dying from the 21st worst ailment on the list? What incentive is given for firms to find a cure for you then?

The government typically only does one thing well, and that thing is 'screw things up beyond belief.'

Another Use for Patents

[LKM]

Another use: Defending yourself in case you're accused of violating somebody else's patent. The more obvious patents you have, the more likely somebody else is to violate one of yours. If you ever get accused, you then may have the option of negotiating some cross-license deal.

So many companies are basically investing a lot of money into patents due to an issue caused by patents themselves.

Article: Inividual patents are still good

[MobyDisk]

This article is saying that being a big company with an R&D department designed to churn-out patents isn't worth it because the litigation costs more than the patents bring you.

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:This is also the Pirate Party's stance

[It'sYerMam]

Better than the current system where developing drugs for one of the 20 worst ailments probably isn't economically viable, so the drug is never produced. The pharmaceutical company instead goes for the easy cash by researching the next diet pill, and the result is obvious.