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

Advertisements

February 15, 2012 Posted by | -History, -Law, Patents | , , , , , | 2 Comments

Flawed Study by Boston University Used to Justify Infringement

The Private and Social Costs of Patent Trolls, Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford.

Patrick Anderson at GametimeIP wrote and excellent analysis of this paper entitled,  Did Serial Infringers Commission “Academic” Patent Study To Support Widespread Infringement? He notes that the authors’ thank the “Coalition for Patent Fairness”, which is the group of large companies like Cisco, Microsoft, Dell, etc. who have been pushing to weaken our patent laws for years.  He believes it is unlikely that their support was limited to “atta boys.”

Next Patrick shows that the methodology used by the authors is flawed.  He points out three major flaws:

First, and perhaps even more importantly, the basis for the conclusion rests on the laughable assertion that “reaction of the [accused infringer] firm’s share price during the days following the filing of [a patent infringement] lawsuit” is by any means a valid proxy for estimating the “private losses” of companies so accused.  Second, the authors imply that monies paid by infringers but not reaching “small inventors” has somehow been entirely wasted, without benefit.  Finally, the researcher’s objectivity is compromised–not only by the apparent close relationship with companies routinely accused of appropriating inventions belonging to others–but by the way they present their findings to the reader. In particular, the authors disparage an entire class of patent owners based on reasons entirely beyond the patent owner’s control.

Please read the full article.

 

The Private and Social Costs of Patent Trolls , Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford.

 

September 21, 2011 Posted by | News, Patents | , , , | Leave a comment

Edison was a Patent Troll

The excellent book Great Again by Henry R. Nothhaft with David Kline points out that in the middle 19th century:

Foreign observers attributed much of the country’s (U.S.) rapid technological progress to its distinctive patent system.  Quite revolutionary  in design at inception, the U.S.patent system came to be much admired for providing broad access to property rights in new technological knowledge and for facilitating trade in patented technologies.  These features attracted the technologically creative, even those who lacked the capital to directly exploit their invention  . . . and also fostered a division of labor between the conduct of inventive activity and the application of technical discoveries to actual production.  It is no coincidence that Britain and many other European countries [later] began to modify their patent institutions to make them more like those of the Americans. (emphasis added)

They point out that in the U.S 85% of all patents were licensed by their inventors, while only 30% of patents in Britain were licensed.  In the late 19th centuryU.S. inventors were increasingly operating as independent inventors who extracted returns from their discoveries by licensing or selling their patent rights.  Among these inventors were Edison, Bell, Tesla, etc.  “An astonishing two thirds of all America’s great inventors in the nineteenth century were actually NPEs” (Non-Practicing Entities).  But today’s modern Luddites would call these great inventors trolls.  They claim all value is created by production and marketing or if they are economists they claim all value is create by manipulating monetary instruments and deny the source of all human values, the mind.  They denigrate inventors who demand a return on their efforts as imposing a tax on innovation.  Invention is the only source of per capita increases in wealth.

The book asks:

 Does it really make sense to consider Edison a “patent troll” just because he licensed most of his inventions rather than commercializing them himself?  As the inventor of electric light and power, the phonograph, and many other world-changing new technologies, his contributions toAmerica’s economic progress are beyond dispute.

Is there any evidence of a patent litigation (troll) explosion?

Judge Michel former head of the CAFC, the court which hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based economy with over 300 million people and 1 million active patents this is trivial.

The reality is the Patent troll/ litigation crises is a very clever marketing ploy by large multinational companies that want to be able to steal U.S.inventors’ technology.  The America Invents Act will put the final nail in the coffin of U.S.innovation if it passes, by making it even easier to steal U.S. innovation.  It is a product of these same multinational companies that are not interested in vitality of the U.S.economy, but in their short term profits.

May 8, 2011 Posted by | Patents | , , , , , , , , , | 3 Comments

In Defense of Patent Trolls

The term patent trolls is usually applied to companies that enforce patents that they are not practicing.  These Non-Practicing Entities (NPEs) include companies specifically organized for this purpose such as Intellectual Ventures.  However, it also includes Universities and divisions of most large corporations such as IBM.  Many of these corporations complain about NPEs.  However, any consistent definition of a NPE (troll) would include these hypocrites. Continue reading

September 18, 2009 Posted by | Uncategorized | , , , , , , , | 1 Comment