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Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk

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In recent years, business leaders, policymakers, and inventors have complained to the media and to Congress that today's patent system stifles innovation instead of fostering it. But like the infamous patent on the peanut butter and jelly sandwich, much of the cited evidence about the patent system is pure anecdote--making realistic policy formation difficult. Is the paten In recent years, business leaders, policymakers, and inventors have complained to the media and to Congress that today's patent system stifles innovation instead of fostering it. But like the infamous patent on the peanut butter and jelly sandwich, much of the cited evidence about the patent system is pure anecdote--making realistic policy formation difficult. Is the patent system fundamentally broken, or can it be fixed with a few modest reforms? Moving beyond rhetoric, Patent Failure provides the first authoritative and comprehensive look at the economic performance of patents in forty years. James Bessen and Michael Meurer ask whether patents work well as property rights, and, if not, what institutional and legal reforms are necessary to make the patent system more effective. Patent Failure presents a wide range of empirical evidence from history, law, and economics. The book's findings are stark and conclusive. While patents do provide incentives to invest in research, development, and commercialization, for most businesses today, patents fail to provide predictable property rights. Instead, they produce costly disputes and excessive litigation that outweigh positive incentives. Only in some sectors, such as the pharmaceutical industry, do patents act as advertised, with their benefits outweighing the related costs. By showing how the patent system has fallen short in providing predictable legal boundaries, Patent Failure serves as a call for change in institutions and laws. There are no simple solutions, but Bessen and Meurer's reform proposals need to be heard. The health and competitiveness of the nation's economy depend on it.


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In recent years, business leaders, policymakers, and inventors have complained to the media and to Congress that today's patent system stifles innovation instead of fostering it. But like the infamous patent on the peanut butter and jelly sandwich, much of the cited evidence about the patent system is pure anecdote--making realistic policy formation difficult. Is the paten In recent years, business leaders, policymakers, and inventors have complained to the media and to Congress that today's patent system stifles innovation instead of fostering it. But like the infamous patent on the peanut butter and jelly sandwich, much of the cited evidence about the patent system is pure anecdote--making realistic policy formation difficult. Is the patent system fundamentally broken, or can it be fixed with a few modest reforms? Moving beyond rhetoric, Patent Failure provides the first authoritative and comprehensive look at the economic performance of patents in forty years. James Bessen and Michael Meurer ask whether patents work well as property rights, and, if not, what institutional and legal reforms are necessary to make the patent system more effective. Patent Failure presents a wide range of empirical evidence from history, law, and economics. The book's findings are stark and conclusive. While patents do provide incentives to invest in research, development, and commercialization, for most businesses today, patents fail to provide predictable property rights. Instead, they produce costly disputes and excessive litigation that outweigh positive incentives. Only in some sectors, such as the pharmaceutical industry, do patents act as advertised, with their benefits outweighing the related costs. By showing how the patent system has fallen short in providing predictable legal boundaries, Patent Failure serves as a call for change in institutions and laws. There are no simple solutions, but Bessen and Meurer's reform proposals need to be heard. The health and competitiveness of the nation's economy depend on it.

50 review for Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk

  1. 5 out of 5

    Eugene Kernes

    Patents are meant to support the innovators. To provide incentives for innovators to not only innovate, but also share their innovations. The author used empirical evidence to show that the current patent system is failing innovators. There are industries for which the patent system works well, but patents are hurting software innovators. Much of the book is a comparison between property rights systems which work extremely well such as tangible property rights, and those property rights which ar Patents are meant to support the innovators. To provide incentives for innovators to not only innovate, but also share their innovations. The author used empirical evidence to show that the current patent system is failing innovators. There are industries for which the patent system works well, but patents are hurting software innovators. Much of the book is a comparison between property rights systems which work extremely well such as tangible property rights, and those property rights which are failing such as intellectual property rights. There are those who purposely manipulate the patent system to gain profit such as patent trolls. People and businesses deliberately and strategically withhold patent claims for years until others have developed the technology independently. When the new entrants are found, the inventor will release the patent claim and sue entrants for infringement of the patent. Patent trolls and other problems do exist within the patent infrastructure, but most violations are not intentional. Violators of intellectual property rights did not intentionally violate the property of others, rather, they thought their innovations did not infringe on owner’s rights. Seeing patent infringers as purposeful infringers is counterintuitive as infringers would not need to spend much on R&D but those who are sued for infringement, spend a lot on R&D. Statistically, the more spent on R&D, the more likely they will be sued for infringement. Software is easy to reverse-engineer which also makes checking for infringement is easy. This should cause the infringers to hide their products but the opposite is true, that there are more lawsuits over publicly observable features. Unlike normal tangible property rights which are exclusive such as being used by a single individual at any given time, patents can have more than one inventor claimant. Inventions can be invented independently at the same time. It is the first to make the invention pubic who gets the patent rather than the first inventor. The benefit of having an effective property rights system are various ways property can be used. Property rights are a bundle of rights which can transfer some of the rights to others. Property rights fail when their validly is uncertain, have costly negotiations due to high fragmentation, public is not aware of boundary information, and when boundaries are neither clear or predictable. The authors point out that the information cost of identifying property boundaries and acquiring permission to use the property are borne by the third party. Property law reduce the informational cost by making property rights easily recognizable and facilitating the clearance of property usage. Implantation of property and patent rights differ in their notice function. Property rights have well-developed notice function to inform others of the boundary. Even with extensive research in the boundaries of patents, technology investors are still at risk of disputes and litigation because patents do not have clearly defined boundaries. Clear and easily determined rights allow third parties to avoid violating the property rights and facilitate permission to use the property when needed. Property right examination in land are routine with any discrepancies being found before the sale. Patent search in costly and inconclusive. With increasing pool of patents and vague language used in the patent description, infringers may not be aware of the prior inventions and related patent rights. Property rights such as copyrights are efficient because they enable various usage of prior art to be cleared in advance. The search for technology patents in advance is becoming more costly than litigation of any single patent. By searching through patents, the innovators take on the risk of being seen as willful infringers on the patents. Unlike tangent property rights, innovators have unreliable legal options regarding boundaries as their interpretation can be defined differently. Patent owners can prevent the public from seeing the claim language which defines patent boundaries. Possession of technology is not enforced patent law which enables patent owners’ rights over technologies which are very different and new than the technology actually developed. As the number of patents needed to be checked for possible infringement increases, so does the clearance costs. Abstract property rights have unclear property boundaries. Software is an abstract technology which makes it difficult to set precise patent boundaries to fit actual technologies. Definite boundaries become clearer with appeals court judges but their opinions are not consistent. Consistent interpretation of patent claims can mitigate problem with ambiguity, but lawyers have difficulty counseling how ambiguous claims will be interpreted during potential infringement. The problem with accepting abstract claims is not just that they cover broad range of technologies, but also technologies unknown to the inventor. As the authors claim, abstract claims reward inventors with inventions they do not invent. The risk of patent litigation reduces expected profits into potential losses of investing into innovation. The authors do not hide the research which contradicts their claim that the patent system needs reform. Patents for pharmaceuticals remains very profitable. Small investors also gain from the current system. The problem that small investors have in terms of the patent system is that it does not enable them to commercialize on their inventions. What they find is more complicated than the various individual claims, but also many patent systems problems which need to be rectified. The patent office has two problems which are being in pursuit of revenue they process patents quickly at the expense of quality, and examiners do not have the knowledge of prior innovations when facing unfamiliar new technologies. Over time the patent office did hire examiners who would be more familiar with the new technologies and learn to better process patents while evidence shows that even with these implementations, the litigation rates have not declined for software. The authors do claim that patent office tried applying rigorous standard of non-obviousness but were overruled by the Federal Circuit. Even though the patent system has problems, history does have precedents of technologies being denied patents due to abstract claims. There are also alternatives to patents which explains why patents did not play a significant role in the Industrial Revolution. Trade-secrecy protection is one such alternative. Innovators can also earn profit from their innovations without the need for patents such as having a lead-time which enables them to recoup the cost of inventions. Imitation costs limit free-riders on others inventions. Using empirical research, the authors show that patents are less effective at facilitating economic payoffs compared to property rights. It is patent implementation which limits the value of the patent system to facilitate innovations. Institutions for patents are more difficult to develop and maintain as they are more specialized and complex. The system can be made to better facilitate innovations by making sure they contain predictable information, their interpretations are clear and unambiguous, and reducing clearance searches.

  2. 4 out of 5

    Rex

    Bessen and Meurer argue that the popular portrayal of the patent system as an efficient and effective mechanism for encouraging R&D is generally inaccurate. In contrast with tangible property, today's intellectual property system is fraught with ambiguity and fragmentation that lead to increased litigation and clearance costs, stifling innovation. The final chapters offer several suggestions for reform and areas that merit increased investigation. The book opens with a remarkably succinct outlin Bessen and Meurer argue that the popular portrayal of the patent system as an efficient and effective mechanism for encouraging R&D is generally inaccurate. In contrast with tangible property, today's intellectual property system is fraught with ambiguity and fragmentation that lead to increased litigation and clearance costs, stifling innovation. The final chapters offer several suggestions for reform and areas that merit increased investigation. The book opens with a remarkably succinct outline explaining the deficiencies of the patent system. Following this introduction, intellectual property is compared and contrasted with other forms of tangible property. Here, the authors note features that either enable property rights to function efficiently or inefficiently. The patent system is plagued with uncertain rights, unreliable enforcement, substantial informational and clearance costs, and the difficulty of setting rules for technology that changes rapidly. Perhaps the most noteworthy complication with intellectual property is that it lacks clear boundaries. Claim construction can be ambiguous and unpredictable (and occasionally over-reaching). Inventors can "hide" claims for years, and due to the flood of patents in today's market, clearance can become prohibitively expensive in both time and money. Next, the book examines empirical evidence to examine the extent to which the patent system provides incentive (or disincentive) for innovation. Historical evidence, cross-country studies, and natural economic experiments, and estimates of patent value do not support the notion that strong patent rights lead to marked increases in innovation. Next, the costs of patent disputes are analyzed. Since the 1990's, the costs of litigation have increased. For most public firms (excluding chemical and pharmaceutical firms) the cost of litigation exceeds the profits derived from patents. In these situations, patents impose a net tax on innovation and R&D. Small firms do better than large public firms, but the benefits are small. Nevertheless, the chemical and pharmaceutical industries derive significant value from patents. In this realm, IP seems to function rather well. The authors then attempt to examine numerous parameters that might explain the increase in litigation, concluding that failure to provide adequate notice is most significant. One chapter is devoted to software patents. Fuzzy boundaries complicate the IP landscape and create significant uncertainty. The following are some suggestions/areas for further investigation suggested by the authors. They note, however, that crafting an effective policy is quite difficult and complicated. Hence, these should be considered as ideas for further consideration: 1) Examine other methods (non-patent) to increase R&D and innovation (e.g., rewards, subsidies, procurement) 2) Post-grant administrative procedure for third parties to challenge patent validity 3) Courts should defer to PTO for claim interpretations 4) Institute multiple appellate courts for patent cases (facilitate inter-circuit competition) 5) Demand a more strict interpretation of "enablement" to improve notice 6) Prohibit claims that could be interpreted in more than one way 7) PTO could issue infringement opinion letters which would be given significant weight in the court system 8) Restrict claim revision 9) Restrict patentability (prohibit business methods or maybe even software) 10) Increase patent fees 11) Stronger non-obvious standard 12) Lessen penalties to "good-faith infringers"/independent inventors The book concludes with a "glance forward" and notes that several of the most important IP players (pharmaceutical industry and patent lawyers) have little incentive to support patent reform. I really liked the book and found the evidence that patent reform is needed to be compelling. Given the provocative title (probably recommended by the publishers), the book's even-handed tone came as a welcome surprise.

  3. 4 out of 5

    Emil O. W. Kirkegaard

    http://emilkirkegaard.dk/en/?p=3174 http://emilkirkegaard.dk/en/?p=3174

  4. 5 out of 5

    John Chandler

    Some fascinating perspectives on actual values attributable to patents.

  5. 5 out of 5

    Dara

  6. 5 out of 5

    Robert P.

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    Ceyda

  8. 5 out of 5

    Nicholas Fried

  9. 5 out of 5

    Kite

  10. 5 out of 5

    Mark

  11. 4 out of 5

    Marcus Dooley

  12. 5 out of 5

    Namhyung Lee

  13. 5 out of 5

    Pontus

  14. 4 out of 5

    Graham Pechenik

  15. 4 out of 5

    Thatlawyercat

  16. 5 out of 5

    Teirdes

  17. 4 out of 5

    John

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    Peter Valkenburgh

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    JK

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    Peter Blok

  21. 4 out of 5

    Tucker

  22. 4 out of 5

    Sankarshan

  23. 5 out of 5

    David W. W.

  24. 4 out of 5

    Klaus

  25. 4 out of 5

    Brad

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    Surfing Moose

  27. 5 out of 5

    Navneet Bhushan

  28. 4 out of 5

    Alan Cardoso

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    Sarah

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    Chris

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    David

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    Peter

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    Gus

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    Bruce

  35. 5 out of 5

    Chance

  36. 5 out of 5

    Sepideh

  37. 4 out of 5

    Jessica

  38. 4 out of 5

    Elizabeth S

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    Matt

  40. 4 out of 5

    Piotr Szymański

  41. 5 out of 5

    Alex Ainslie

  42. 5 out of 5

    Matthew

  43. 4 out of 5

    KungFu Drafter

  44. 5 out of 5

    Jeff

  45. 5 out of 5

    Mike Ehlers

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    Chirag

  47. 4 out of 5

    Alexandra

  48. 5 out of 5

    Skostal

  49. 5 out of 5

    John

  50. 4 out of 5

    Josh Steiner

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