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A case to abolish patents

Two authors from the Federal Reserve lay bare the patent myths

Two distinguished professors who also happen to be research fellows at the Federal Reserve Bank of St. Louis have published a paper which lays bare the truth behind many of the traditional reasons we need patents. Particularly in the tech sector, patents, patent lawsuits and patent trolls have become a big story, but an even bigger pain in the rear. Does anyone really think Samsung should be able to stop Apple from selling iPhones because the icons have rounded corners or vice-versa? Should companies be spending billions and billions of dollars on the corpses of dead companies simply to acquire their patent portfolios?

Michele Boldrin, a Joseph Gibson Hoyt Distinguished University Professor of Economics, and David K. Levine, a John H. Biggs Distinguished University Professor of Economics, both at Washington University in St. Louis, Missouri, make one of the best cases yet to convey why the patent system does not do what it is supposed to do, and why we should just do away with it altogether.

More than being a pain, the whole patent mess has become a hemorrhaging gash, bleeding out tens of millions of dollars to legal fees, court costs and marketing, billions of dollars in acquisitions, all the while sapping the vitality and innovation of our entrepreneurs and industries.

All the while, we have been told that the patent system serves to increase innovation and productivity. The paper by Boldrin and Levine show that this is a myth. In fact, in terms of fostering new industries the report says:

"The initial eruption of innovations leading to the creation of a new industry - from chemicals to cars, from radio and television to personal computers and investment  banking - is seldom, if ever, born out of patent protection and is instead the fruit competitive environment. It is only after the initial stage of rampant growth ends that mature industries turn toward the legal protection of patents, usually because their internal growth potential diminishes and they become more concentrated."

All the numbers and facts are there in the report for you to read, as well as citations, so I won't rehash them here. But, suffice to say that, after reading the report, I think anyone would be hard-pressed to disagree with the authors' conclusions that our patent system has perhaps outlived its usefulness.

Another factor to consider is that our attempts to fix this problem have done little if anything to make it better. By making it easier and faster to file a patent, we now have more bad patents. By making it easier to enforce a patent, we now have more patent trolls trying to enforce bad patents. No, this is not a problem that we can band-aid or that thepoliticians can make better.

This is not just a tech issue, either. The same patent system is holding back pharmaceutical and medical research as well. According to the report, many of the same arguments behind patents were used for years in the area of international trade. Over time, these same arguments have been shown to be wrong.

How patents are enforced internationally is another issue as well. Forcing domestic companies to toe the line while international competitors flaunt their disregard for patents weakens our economy, costs us jobs and makes us less competitive. Yes, we can try to close down factories in China from selling pirated software, grey-market pocketbooks or even fake NFL jerseys, but we will never effectively stop them cold. In a real-politic analysis, if we can't make the rest of the world respect our patents, how fair is it to ask our domestic companies to be hauled off into court at the drop of a hat or the whiff of a patent issued for some overly broad generality?

The fact that these two authors are also fellows at the Federal Reserve Board will, I hope, force some folks to step up and take notice. We need to stop trying to fix the patent problem and just do away with it.

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