State of Innovation

Patents and Innovation Economics

Bilski Case Reveals Supremes Ignorance

Based on the reports in the post “Bilski Case Provokes Skepticism from Justices” it is clear that the Supremes do not understand patent laws or innovation economics.

It is unfortunate that the Supreme Court justices are so ignorant of patent law and innovation economics.  Justice Sotomayor’s comment that patents in fact “limit the free flow of information” is complete nonsense.  First, the information in the patent would not exist if the inventor had not created it.  Second, patents trade the disclosure of information for a limited term property right.  As a result, patents foster the creation and dissemination of information.  Justice Breyer’s comment if everything that “helps a businessman succeed” is patent-eligible, it would “stop the wheels of progress” shows a complete ignorance of the history of patents and technological progress.  Before the advent of the modern patent system in the US, technological progress was so slow that per capita incomes had not changed in over 2000 years.  Since the advent of the modern patent system, we have had an unprecedented explosion in technological innovation.

The three major economic slowdowns in the US in the last 100 years, the 1930, 1970s, and this decade, can all trace there roots to the weakening of our patent system.  In the 1930s and 1970s antitrust law was used to emasculate patents.  For more information on the link between patents and economic growth see Foreigners Receive More Patents than US.  In this decade the approach has been more subtle and includes the absurdly low patent allowance rates created by the inane patent quality measures under Jon Dudas.  The Supreme Court’s decisions have weakened our patent laws in number of decisions including ebay and KSR.  Finally, the legislature has broken the basic social contract involved in a patent.  For more information see Intellectual Property Socialism.

Detractors of the Bilski patent application suggest that it is a business method patent.  These people suggest that patents should not be allowed for business methods.  However, the opponents never define what they mean by a “business method patent” and I would suggest that it is impossible to come up with a consistent definition of a business method patent.  All patents are related to how a business operates.  For instance, Edison’s patent on the light bulb was related to how his business was going to manufacture light bulbs.  For more information on why the opponents of business method patents have failed to provide a logically consistent argument see “Bilski, Software Patents, and Business Method Patents.

November 10, 2009 - Posted by dbhalling | Uncategorized | , , , , , , | 2 Comments


  1. “The three major economic slowdowns in the US in the last 100 years, the 1930, 1970s, and this decade, can all trace there roots to the weakening of our patent system.”


    The world is a complicated place.

    Not everything revolves around patents.
    Correlation does not mean cause and effect.

    The 1970’s downturn was due to a major crude oil crisis.

    The 1930’s was the end of a Wall Street casino party and so is/was 2009.

    Comment by step back | November 12, 2009 | Reply

  2. Hi Stepback,

    Innovation is the only way to grow the economy on a per capita basis – this has been shown by numerous economists, one of which won a Noble Prize in Economics for his work in this area. Patents are the free market method of encouraging innovation. Generally anti-free market attitudes accompany anti-patent attitudes. Clearly, these other anti-free market attitudes contribute to the slowing of the economy

    Despite the oil crisis both Japan and Germany continued to grow in the 1970s – so you incorrect that this was the cause of US economic slowdown.

    The stock market correction of 1929 & 1930 was a normal correction. It took the absurd economic policies of Hoover and Roosevelt to convert this crisis into a catastrophe. For more information see the book “FDR’s Folly”. While this is an excellent book, it does not take into account our modern economic understanding of innovations effect on the economy.

    Because the US has generally been a leader in technology, it does not have the ability to grow economically by just adopting other countries technology. The world is understandable stepback and patent policy’s effect on the economy has been underappreciated.

    Comment by dbhalling | November 12, 2009 | Reply

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