Patents Don't Pay 210
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.
Opportunity Costs (Score:4, Interesting)
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."
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.
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:Not really surprising (Score:2, Interesting)
ch-ch-changes to patent law (Score:3, Interesting)
Re:This is also the Pirate Party's stance (Score:5, Interesting)
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.
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.
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.
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.
Re:This is also the Pirate Party's stance (Score:2, Interesting)
Maybe I'm not putting that right - with pharmaceuticals, you can only get one molecule at the end. Nature has defined the interface. There are lots of ways to design a music player.
I don't see carpet patenting easing unless laws are changed, tho - it provides a forum for corporations to compete, even if they would save money by not playing the game or by playing by different rules.
I find it a bit worrying that so many corporations are pouring so much money into the false security of patents; since a patent is still limited by national boundaries, the corporation is in fact selling the rights of a citizen to choose products that the patent holder doesn't approve of - but only within those boundaries.