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Patents Don't Pay 210

Posted by kdawson
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.
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Patents Don't Pay

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  • by UncleWilly (1128141) * <UncleWilly07@gm[ ].com ['ail' in gap]> on Sunday July 15, 2007 @04:09PM (#19870511)
    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.
  • by Iphtashu Fitz (263795) on Sunday July 15, 2007 @04:14PM (#19870539)
    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.
    • 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)

      by kg261 (990379)
      In the corporate world, from what I have seen, many patents are just applied for on behalf of someone who is looking for the purposes of self-promotion: sometimes at the individual level, or a group level. I am not making any comments on the patent system here, just that it does not surprise me that many patents do not make sense economically.
      • This doesn't seem hard to believe at all to me. At the actual boots-meeting-pavement level, what most people who file patents (while working as part of a big corporation) are looking for is just a resume line or feather in their cap, something to bring them a little closer to the next promotion. Whether the patent actually turns into anything hardly matters -- since most of them don't.

        At a lot of companies, just having a patent with your name on it is a way to get yourself a little respect and maybe a littl
  • by CrystalFalcon (233559) on Sunday July 15, 2007 @04:14PM (#19870545) Homepage
    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.
    • by senatorpjt (709879) on Sunday July 15, 2007 @06:26PM (#19871425)
      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.
      • Does this mean a non-profit can circumvent a patent simply by making and giving a drug away away?
        • Does this mean a non-profit can circumvent a patent simply by making and giving a drug away away?
          No. The relevant laws usually define "commercial" so as to include "give away."
          • by salec (791463)
            Then there is another loophole: you sell to the consumer DIY kit of generic components in right measures and a test indicator to verify success of resulting chemical and a recipe (instructions), strap all the disclaimers ("DON'T do this if you are not a ...", blah, blah, blah) and of course a legal warning about not giving it to someone else when prepared.
      • by Bios_Hakr (68586) <xptical.gmail@com> on Sunday July 15, 2007 @06:59PM (#19871655) Homepage
        >>What about pharmaceuticals

        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.
        • Re: (Score:3, Insightful)

          by ect5150 (700619)
          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.'
          • Re: (Score:2, Informative)

            by Daychilde (744181)
            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?
          • by 19061969 (939279)
            This assumes that the 21st ailment is one that big pharma are actually interested in developing drugs for. As opposed to slimming pills, hair-loss treatments, etc. And for those conditions that are life-threatening, the development of "dependence" drugs rather than complete cures. Making patients dependent upon continual doses to reduce condition severity is better than absolute cures when it comes to monetizing IP.
          • Re: (Score:3, Insightful)

            by It'sYerMam (762418)
            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.
        • by jinxidoru (743428)
          I know that people will disagree with you vehemently, but I agree 100%.
      • Re: (Score:2, Interesting)

        by ardle (523599)
        I'd be guessing that pharmaceutical patents generate the most revenue because they actually apply to end products, rather than components of components of components, as in the case in software and hardware.

        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, ev
  • Opportunity Costs (Score:4, Interesting)

    by Belacgod (1103921) on Sunday July 15, 2007 @04:15PM (#19870559)
    Are they counting opportunity costs? If having a patent allows you to get into patent detente with other patentholders, then the patent saves you the license fees/amount you'd be sued by that you'd accrue if you tried to operate without it. That's where the value of patents truly lies.
    • Re: (Score:2, Insightful)

      by 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.
      • by Belacgod (1103921)
        I'm not saying it's socially optimal. I'm saying that, to patentholding businesses, it's not in their interest to unilaterally give up patents, even if acquiring patents isn't cost-effective by itself. It's a prisoner's dilemma.

        Or it would be if not for the anticompetitive atmosphere caused by large companies holding lots of patents. Since that is the case, those with enough patents to get in on the detente enjoy an advantage over those on the outside that makes up for the costs of the patents.

    • Re: (Score:3, Insightful)

      by bhmit1 (2270)
      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.
    • by SmokedS (973779)
      So what you are saying is that the value of patents truly lies in the ability to disarm other patent holders?

      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
    • by localman (111171)
      Yeah, but that's only a benefit in a world where patents exist -- I think the bigger question they're getting at is should patents exist at all? Assuming I'm understanding your point, if patents didn't exist at all then this "advantage" would disappear.

      I've been involved in real patent discussions and yes, the value of patents at this point is mainly as a form of arms -- you have them so that people are afraid to threaten you with their patents, because then you can threaten them with yours. But overall I
  • by jorghis (1000092) on Sunday July 15, 2007 @04:21PM (#19870597)
    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.
    • If the big companies all file for a bunch of patents it raises the barrier of entry very high for would be competitors.

      Are you suggesting that we add patent spamming to the list of illegal monopolistic practices?
      • by jorghis (1000092)
        I'm not suggesting anything either way, just making the observation that there is real financial incentive there which the article in question seems to claim is false. There are pros and cons to both sides. As an example, look at all the innovation that IBM produced in decades past so they could keep their patent spam going. Just because they were monopolistic and using it to lock out competitors doesnt mean that there wasnt real innovation being produced as a result.
        • If a company is REALLY producing new ideas ... that's one thing.

          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 ..." and then fill in whatever you want.

          No real idea required. No working model. Not even a schematic or pseudo-code.

          Just requiring SOMETHING more than "a process that ..." would completely revamp our patent system.
          • by jorghis (1000092)
            >> If you hear that a competitor is working on something, you can file a patent for "a process that ..." and then fill in whatever you want.

            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
          • Which is why I'm not part of the group around here that insists that the only good solution is to completely eliminate patents. The first step towards fixing the patent system should be to actually enforce the existing rules, then we can see what actually needs to be changed.
  • Patents do pay (Score:5, Informative)

    by Anonymous Coward on Sunday July 15, 2007 @04:24PM (#19870611)
    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.
  • That looks like a promising chapter. It the sample it talks about the obvious problems with vague, fuzzy patents. I think one strong possible answer for the software patent problem, is to only allow patents on an exact piece of code. it's like supplying a blueprint. A program that does the same thing as you patent, but doesn't share the same code is not covered by your patent.
  • 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.
  • by drDugan (219551) on Sunday July 15, 2007 @04:29PM (#19870663) Homepage
    google started the trend: information is the most valuable thing in the world. a close second are the people who control and can quickly assess and manage information (as a group) are the second most valuable thing.

    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."

    • Without computers/dvd players/iPod's/etc. (i.e. physical devices) "bags o bits" are completely worthless.
    • by jbengt (874751)
      "google started the trend: information is the most valuable thing in the world"

      This "trend" was started millenia before google existed.
  • Won't help (Score:5, Insightful)

    by Realistic_Dragon (655151) on Sunday July 15, 2007 @04:29PM (#19870667) Homepage
    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:Won't help (Score:5, Insightful)

      by ScentCone (795499) on Sunday July 15, 2007 @04:51PM (#19870803)
      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:Won't help (Score:5, Insightful)

        by jez9999 (618189) on Sunday July 15, 2007 @06:05PM (#19871299) Homepage Journal
        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.

      • 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.

        And that's the grand delusion of it all, and it's exactly what the GPP meant: Some people DO live the dream; but much if not most of the American (and most of the developed world, really) way of life is predicated on the idea that YOU CAN TOO, if

  • by Actually, I do RTFA (1058596) on Sunday July 15, 2007 @04:35PM (#19870701)

    I RTFA, and I still don't know how he counted profits.

    1. A percentage of the profits from patented inventions.
    2. Licensing the patents.
    3. Engaging in a reciprocal arrangement with other companies vis-a-vie patent portfolios.
    4. Discouraging small competitors from making non-infringing competing products because of potential legal fees.
    5. Using one product to help sell another because of compatibility.

    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.

  • by A nonymous Coward (7548) * on Sunday July 15, 2007 @04:36PM (#19870711)
    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.
    • by jez9999 (618189)
      A real lesson in the relative merits of innovation to stay at the front of the pack instead of dying in court battles.

      You're assuming the court battles are initiated by the potential innovators.
    • Re: (Score:3, Informative)

      by Paul Jakma (2677)
      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.
      • The important patent the Wright brothers got didn't have anything to do with aerodynamic designs at all.

        The patent squabble that lasted until forcibly resolved by the government, and which Curtis fought tooth and nail, was for wing warping.

        Here [lib.oh.us] is something from a Wright Brothers website.

        August, 1909 also marked the initiation of a long patent war with Glen Hammond Curtis, who earlier that year had formed the Curtis-Herring Company with Augustus Herring and built a successful airplane with a control system
    • Here's something from a Wright Brothers website [lib.oh.us] I found for a different reply below.

      It was becoming clear, however, that the lead in flight technology had passed from the Wright Company to other manufactures, in particular the French. Wilbur felt that this was due to the enormous time they had been compelled to devote, since 1906, to protecting their patents and exploiting the commercial value of their invention. Had they been able to sell their flying machine to governments, as they originally intended, th
  • Contributing factor (Score:5, Interesting)

    by cdrguru (88047) on Sunday July 15, 2007 @04:58PM (#19870837) Homepage
    Today, a patent can certainly be useless.

    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.

  • by kasperd (592156) on Sunday July 15, 2007 @05:18PM (#19870975) Homepage Journal
    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.
  • by Anonymous Coward on Sunday July 15, 2007 @05:23PM (#19871009)
    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.
    • by jorghis (1000092) on Sunday July 15, 2007 @05:50PM (#19871203)
      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.
      • by Zerth (26112)
        He didn't say they don't do research, he said they don't do basic research, which is where most of the value comes from.

        Just to go down your list and compare research to marketing, using their 10k/20f SEC filings:

        Pfizer $7.6b : $15.6b
        Merck $4.8b : $8.2b
        Novartis $5.35b : $10.5b

        If research was so important to pharma, why do each of those 3 companies spend much more on advertising and marketing? I think that is rather indicative of where their priorities lie.
        • by jorghis (1000092)
          Thats the real world. Every company even those that rely heavily on R&D like big pharma spend less on R&D than they do other stuff. Being in business is expensive. Unless we are going to abolish all companies that rely on R&D things will always be that way. It isnt just pharma. Frankly, pharma has a better ratio than most other industries.

          Since this is slashdot here are some heavy R&D companies revenues and R&D budgets for comparison over the past 12 months. (i hope this formats cor
          • by Zerth (26112)
            How does comparing Microsoft's research budget to their revenue have anything to do with comparing pharma research to marketing. If I cared about it as related to their revenue, I would have posted their revenues, not their marketing expenses.

            However, Microsoft is a prime example of why pharma companies' priorities are skewed. Microsoft spent $6.6b on research and $9.8b on marketing in 2006. I could understand if MS spent nearly double on marketing than R&D, because marketing is what brings in the $ f
            • by jorghis (1000092)
              I compare the revenue to R&D because the cost of doing business may be different between industries. For example, Pfizer markets viagra to people on their television. Google doesnt spend as much on marketing, but spends heaping gobs on salesmen to call up people to convince them to buy their trendy little text based ads. I dont understand why you want to compare marketing to R&D rather than sales+marketing+other to R&D. Personally, I count myself lucky to be working at a company that spends
            • by jorghis (1000092)
              Also, I feel silly replying twice, but I want to point out that Applied Research != Safety Testing. Not at all. Here is a quick reference for you if you want: http://www.emory.edu/ACAD_EXCHANGE/1999/decjan00/a pplres.html [emory.edu]
        • by Ogemaniac (841129)
          First, I have no idea what relevance marketing has to R&D.

          Second, I am just flabbergasted that you forgot to mention that most of that "marketing" is the free drugs that reps give to doctors, so that they can be given for free to the elderly and poor. How hideous of them!

          Third, most of the remainder of the "marketing" budget involves the reps interacting with doctors. While you may think this is waste, it is not COMPLETELY waste. It may not be the most effective way to transfer this information
      • by jbengt (874751)
        I don't completely agree with the AC, but AC was talking about basic research, which IMO is very underfunded, and your answer was about R&D, which you would expect any company to do.
        Nonetheless, patents are useful in encouraging the development of drugs, especially because trades secrets are out of the question if you want assurances of drug safety.
        The drug companies do try to game the system - doesn't almost everyone?
        • by jorghis (1000092)
          I have a tough time with this idea that basic research is underfunded. Why do you think this? I mean there is only so much basic research that can be done. There are only so many top notch scientists to hire. Usually there is intense competition between pharma companies to hire all the 'good' scientists. Although this is secondhand and anecdotal information from friends who work in this field.

          Also, why do people not want to count applied research? I would argue that its logical for it to be larger per
          • In the US, basic research is seriously underfunded, and the situation has become worse under the Bush administration. In the belief that they are being pro-business and savvy, the Bush administration has pushed short-term, immediate results at the expense of the fundamentals. They've pretty much done across the board cuts for research funding, arguing that businesses rather than govt should do more research. In support of this idea that research should be conducted in the disciplined fashion only possibl

            • by jorghis (1000092)
              I have never heard of a research scientist making less than 60k in industry (and thats the very low end) although I am sure they exist. Most of the people I know who went into that whole research thing went to a highly regarded technical school though, so maybe my sample is flawed. But the talented ones are absolutely getting paid the big bucks. You want companies to run out and hire anyone who calls themselves a scientist?
      • by greenbird (859670) *

        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?"

        I couldn't find the article but I read recently that the large majority of pharmaceutical research dollars are spent on developing one off molecules clinically similar to current drugs that are about to go off patent e.g. Clarinex. They're cheaper and easier to get through the FDA. Depending on your perspective it's not exactly throwing the money down a rat hole but from a clinical perspective it's a tremendous waste of money.

  • Unfortunately, it's better for you to get a patent for X than it is for you to allow company Y to patent your X and then sue your S off.

  • Bad math (Score:2, Informative)

    by davidwr (791652)
    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 compani
  • by Pseudonym (62607) on Sunday July 15, 2007 @06:27PM (#19871437)

    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.

    • Why base company value on a patent? A company's value should be based on its product.

      Turnover is incredibly fast today, especially in IT. I don't say abandon patents, but limit the time considerably. Enough to be the first on the market, but also short enough to give competing companies a chance.

      You have a head start against your competition. It shouldn't be more than that. Usually, the first on the market has a serious advantage, and that should be it. Competition increases value, if the product is success
  • on average patents cost companies more than they earned them.

    "On Average"? We are all aware of the way software companies will create patent "minefields" to entangle other companies, and I have to think that the word "on average" means that SOME patents are money-makers for companies, but a large number of patents (perhaps the ones they use to entangle competitors) might cost more money than their worth. If that's the case, then the article isn't really an argument against patents per se, but an argume
    • So they pay indirectly. We already see how: The MS litigation FUD against Linux, the SCO vs. Linux FUD trial to keep a failing company afloat on the hopes of the investors.

      Basically, such patents are a tool for big corporations to fight against what they can't buy out.
  • by cleandreams (755229) on Sunday July 15, 2007 @06:42PM (#19871549)
    I just filed for a patent and the comments here don't reflect the current situation re: software patents. Basically, the Supremes made it a lot harder to get a patent. The intent is to increase the value of good patents, filter out the copycat trash, and reduce litigation overall. A patent is a "teaching". You give up trade secret protection in return for patent protection. It's not code; that's protected by copyright. I think the premise of the NYTimes article is silly. Patents are part of a large IP 'eco-system' and judging the value of patents requires looking at the whole system. From my point of view (small company, great new idea) I think a patent will make my company more valuable in an acquisition. I absolutely have no intent or interest in defending this thing. Leave that to the stable of attorneys in the acquiring company. Thus is is absolutely a good for the small company / entrepreneur to have patent protection in that it motivates me to both innovate and then publish the innovation.
    • So it's not about getting an exclusive right, or to publish an invention, it's just to increase your company value so you get more cash for it.
  • Wanna bet that this will in certain circles not be seen as the proof that the patent law is broken, but rather that patent length is not long enough to get a return of investment, and thus it needs to be prolongued, preferably forever?
  • I'm a big proponent of dismantelling drug patents. Now a bunch of people will cry "Bloody Mary" and claim that the patents are needed to fund additional research for new drugs. Here's a brilliant idea: They aren't!

    Here's the alternative:

    Rather than drug companies rolling in massive profits (which, might I add, are calculated AFTER R&D expenses), provide grants for drug research. Even better, provide purses for people who come up with cures and treatments. This will still stimulate pharmaceutical re
  • I wonder how the average profitability of actual patents would rise if the patent rolls were purged of all those that are created and maintained for solely "defensive" registration.

    Patents that are never used to stop an infringer, but rather to protect the registrant's use of the invention. If those patents were instead published into the public domain, they would have exactly the same defensive value. But publishing them into the public domain would cost very little compared to patenting them.

    The rest of t
  • It sounds like they were looking at how much patents made in licensing or in lawsuits. But what about patents that are neither licensed out nor lead to a lawsuit? The third way to make money off a patent is to be the exclusive provider of whatever is covered by the patent.
  • China (Score:3, Interesting)

    by Duncan3 (10537) on Sunday July 15, 2007 @08:10PM (#19872153) Homepage
    You can't stop China (the US won't even try since they own our debt) so there is no real value to patents anymore.

    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.
    • by Weaselmancer (533834) on Sunday July 15, 2007 @10:42PM (#19872939)

      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.

  • by mpapet (761907) on Sunday July 15, 2007 @09:01PM (#19872421) Homepage
    I've only worked for small companies and every single one of them (six?) have been dragged through courts on patent/trademark issues. Usually both. Usually from the leader of the industry.

    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.
  • There's been detente between the big guys for ages -- you nuke my product line, I'll nuke your product line, so lets do neither.

    The problem is Intellectual Ventures. They have no products. They just have patents. They can nuke, but they cannot be nuked. This model is spreading...honestly, just like nukes themselves.

    The detente is over. It's just a question of what now.
  • The fundamental flaw here is assuming that the benefits of holding a patent are easily measured.

    Patents are sought as much to prevent copying and defensively to ensure your right to sell your product as to seek royalties from others. Any real evaluation would have to guestimate those values, and it would be very inexact.

    In my crude estimation, many or most companies overinvest in patent protection versus other forms of protection such as pre-emptive public disclosure. But even looking at a single inv

  • by MobyDisk (75490) on Monday July 16, 2007 @07:53AM (#19875201) Homepage
    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.

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