State of Innovation

Patents and Innovation Economics

Forbes: Patent Litigation Debate Exposed

Forbes magazine has an excellent article that provides the real facts behind the so called patent litigation explosion entitled “No, the Patent System Is Not Broken.”   The article explains:

“The truth is that today’s patent litigation rate is less than half what it was in the mid-nineteenth century, a period widely recognized as the golden age of American innovation.”

The article puts today’s patent litigation rates in context.

According to Lex Machina’s authoritative “Database of U.S. Patent Litigation 2011,” the number of patent suits filed between 2001 and 2010 has held steady at less than 3,000 per year. Only about a hundred of these cases actually went to trial each year

To put it in even broader historical context, the estimated 100 patent suits currently filed in the smartphone industry is actually less than one-fifth the number of suits filed during the first “Telephone Wars” of Alexander Graham Bell’s time. Back then, the American Bell Telephone Company and its successor, AT&T, litigated a whopping 587 patent cases alone.

Perhaps even more importantly the article explains that a strong patent system creates a division of labor between inventors and manufacturers.  According to Adam Smith the division of labor is key to increasing our wealth.

“The growth of market trade in patents raised the returns to invention and encouraged a division of labor whereby technologically-creative individuals increasingly specialized in their comparative advantage—invention,” observed Lamoreaux and Sokoloff. “It was the expanded opportunities to trade in patented technologies that enabled the independent inventors of this golden age to flourish—and that stimulated the growth of inventive activity more generally.”

By 1865 the per capita patenting rate in the U.S. was triple that of Britain, and the vast majority of those citizen-inventors were what we now call “non-practicing entities,” or NPEs, who licensed their patents to others to commercialize into new products.  Indeed, patent and legal records from the nineteenth century indicate that more than two-thirds of the 160 so-called “great inventors” of the Industrial Revolution, including Thomas Edison, were NPEs.

 

Please check out the full article at:

No, the Patent System Is Not Broken

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February 15, 2012 - Posted by | -History, -Law, Patents | , , , , ,

2 Comments »

  1. One interesting development is the recent rise of patent aggregators like RPX. Whether or not one agrees with their business model, as more large conglomerates profit from patent acquisition and enforcement, at least it will likely change the tone and focus of the “patent troll” debate — which was, after all, getting rather tiresome.

    Comment by patent litigation | March 18, 2012 | Reply

  2. so true

    Comment by dbhalling | March 19, 2012 | Reply


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