State of Innovation

Here is another article , “The Case for Market Based Patent Reform” pushing patent reform.  This article repeats many of the myths of those people who want to weaken our patent system.  For instance, it repeats the myth that there is a patent quality problem.  All the studies that purport to scientifically show that there is a patent quality problem have flawed methodologies.  For more information see Patent Quality Myth .  What we have in this country is a small number of large companies that have made a business out of infringing (stealing) other peoples’ patents.

Another myth this article repeats is that NPEs (Non-Practicing Entities) are a anomaly and distort the patent system.  Every company that licenses out its technology is a NPE including all our major research universities.  NPEs are practicing “division of labor” between research and production.  As Adam Smith would have pointed out this is a good thing as is a secondary market in patents.

The bigger problem in the US is the dearth of patents being issued to US based inventors.  The number of patents issued to foreigners from the US Patent Office, exceeded the number of patents issued to US inventors in 2008.  The number of patents issued to US inventors has not increased since 1998.  Not coincidentally, the median household income in the US has not increased since 1998.  The last time the US attempted to emasculate the patent system was in the 1970s, which lead to worst decade economically since the great depression.  For more information see Foreigners Receive More Patents Than US.