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July 15, 2007

Patents and Value [5:26 pm]

A look at the patent debate; what’s broken, what might be fixed, and what else to consider: A Patent Is Worth Having, Right? Well, Maybe Not

“Today, over all, patents don’t work; for the information technology industry especially, they don’t work,” said James Bessen, who became a lecturer at Boston University’s law school after a career in business. In 1983, he created the first computer publishing software with Wysiwyg (an acronym for “what you see is what you get”) printing abilities. He also founded a desktop publishing company, Bestinfo, later acquired by Intergraph.

Neither Mr. Bessen nor his company patented anything, in part because his lawyers told him that software couldn’t be patented at the time. He ultimately became interested in whether patents spurred innovation, since the software industry for years innovated steadily without using many patents. He and a colleague, Michael J. Meurer, are readying a book on the topic, “Do Patents Work?,” due in 2008. (A synopsis and sample chapters are at researchoninnovation.org/dopatentswork/.)

The two researchers have analyzed data from 1976 to 1999, the most recent year with complete data. They found that starting in the late 1990s, publicly traded companies saw patent litigation costs outstrip patent profits. Specifically, they estimate that about $8.4 billion in global profits came directly from patents held by publicly traded United States companies in 1997, rising to about $9.3 billion in 1999, with two-thirds of the profits going to chemical and pharmaceutical companies. Domestic litigation costs alone, meanwhile, soared to $16 billion in 1999 from $8 billion in 1997.

Things have probably become worse since then. [...]

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