How The US Patent System Crushes Innovation
Forbes Magazine recently interviewed Michael Meurer and James Besson, authors of Patent Failure: How Judges, Bureaucrats and Lawyers Put Innovators at Risk, a massive study on the costs and benefits of holding patents. Their chilling conclusion:
Meurer and Bessen concluded that in every industry, except pharmaceuticals and biotech, publicly traded companies spend more money litigating to protect existing patents and paying fees to the U.S. Patent and Trademark Office than they earn from the same patents. (Bessen and Meurer evaluated patents issued by all publicly traded companies between 1984 and 1999.)
The article examines the reality that innovation is two-edged sword - you can either develop something you can patent, or infringe on someone else’s patent. But why is the pharmaceutical industry immuned to this kind of risk?
Pharmaceutical patents work because they function like property, in the sense that they have clear boundaries. It’s much easier to spot the patents and stay clear of them. In the pharmaceutical industry, either I stay outside of your property rights or I talk to you and I negotiate permission to use your patent.
We’ve heard stories about semiconductor inventions covered by hundreds of patents and Internet-related products that are covered by thousands of patents. If it costs $20,000 to get an opinion about whether or not you’re infringing on a patent, then multiply that by the costs of clearing the rights for so many patents. It then doesn’t make business sense to do that examination. In business methods and software method patents, the language is more difficult to evaluate and more difficult to understand whether you’re inside or outside of the property rights.
So if you’re looking for a politician to help clean up this mess, who you gonna call?
[Barack] Obama. He had announcements in favor of patent reform. Obama also has Mark Lemley on his team, a patent law scholar that thinks about a lot of these issues the same way that I do. I have no real read on where [Sens.] Clinton and McCain stand. It’s not a real priority for most candidates.
It’s hard to connect traditional politics to patent reform. At least in the legal community, there are lots of conservative Republicans who favor patent reform. They see [the current system as] a regulatory scheme that can hinder business–much like a regulation that imposes a tax on innovation. At the other side of the political spectrum, liberal Democrats fret about patents in the context of pharmaceuticals and the high price of medicine.
With these things working against you, it’s a wonder any new products get created. But on the other hand, this gives us more incentive to focus innovation on business models, customer experience, branding, enabling processes, and networking.
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