Tesla had many patents as well, but it was Westinghouse who owned Tesla and the rights to produce. Tesla died a pauper.

Big money wins in the patent world, every time, no matter who the inventor is.

to mls:
are you seriously trying to argue that since uspo is a profit centre for the government, there is no cost to society?.

“monopoly rents” are the result of ip, what else could they be? the whole idea of ip is to secure exclusive title to the use of an idea. nobody denies that there isn’t competition among patented goods, just that the costs are higher than they otherwise would be.

I scarcely know where to begin, so I will note just a few points.

You talked about the cost of the patent system to taxpayers, and all I did was note to Mr. Holder about the PAYG structure of the USPTO. I made no mention as you did above about “society”.

The whole concept of “monopoly rents” being caused by the existence of IP is simplistic and ignores what really hapens in the marketplace. A patentee can only realize these so-called :monopoly rents” if the patent is so generic that there are for all practical purposes no other alternatives for what the patent covers. In 30 years of practice I have never seen a situation in the marketplace that even comes close. Patentees who sell products/services that embody what their patent covers are not immune to supply/demand pressures. They are still governed by “what the market will bear”.

The statement that a patent somehow provides an exclusive right to an idea is wrong, manifesting a lack of understanding of the patent system. A mere “idea” is not even eligible for protection under our patent laws. The same is equally true concerning copyright.

What is protectable if a firm, concrete and definite application of the idea into something that satisfies the tests for eligible subject matter, novelty, non-obviousness, and a complete description of what the application (i.e., invention) entails.

BTW, I am not one who believes our economic future is dependent upon patents and copyrights. But I do know this. In the absence of such a system (which to varying degrees does give some measure of predictability to our system of commerce) other legal mechanisms would invariably spring up that would make the “IP is bad” crowd long for the good old days when patents and copyrights were a part of our law. My advice is to be careful what you wish for because you may very well get it and be none too pleased.

You are correct. Neither do we know which industries would never have existed without IP. I do have a couple of recent papers that are interesting, though.

http://www.comp.nus.edu.sg/~ipng/research/patent_grwth.pdf
http://www.comp.nus.edu.sg/~ipng/research/patent_figtab.pdf

http://www.dklevine.com/papers/scalerev10.pdf

You are correct. Neither do we know which industries would never have existed without IP. I do have a couple of recent papers that are interesting, though.

http://www.comp.nus.edu.sg/~ipng/research/patent_grwth.pdf
http://www.comp.nus.edu.sg/~ipng/research/patent_figtab.pdf

http://www.dklevine.com/papers/scalerev10.pdf

nobody, b&l included, can quantify what would have been…

Read MLS’s post. It is quite accurate. I have seen studies that (depending on which one you believe) state that somewhere between 90 to 98% of all patents are either not used in a product (any product, anywhere) during the effective life of the patent (though they may well be used after the patent has expired), or they do not pay back the cost of filing for the patent.

Now, even if 90% of all patents do not earn back the money paid in filing fees, that means that the remaining 10% have the “potential” for what many people call “monopoly rents.” However, as MLS has pointed out, there are many industries where monopoly rents are not available because of competition. I have provided numerous examples of these, so repeating them again is pointless.

I believe it was Boldrin & Levine who estimated that the economic affect of patents in the U.S. was approximately $12 billion per year. Assume that is true (I think that is high, but let’s run with it).

If that is true, then compare that to the GDP of $14,280.7 billion. That means the economic impact of patents on GDP would be 0.08%, which I have also said many times before. That equates to an effect of about 8 cents on every 100 dollars. Compare that to sales taxes that run up to 800 cents per hundred dollars, or more.

Now, with respect to the government, as MLS pointed out, patents are paid for by applicants. The USPTO has generated profits to the government of more than $200 million per year. Even if you throw in the relatively small cost of the 12 member CAFC, and the costs of dealing with patent related lawsuits in federal court, which make up about 1% of all federal court cases, the U.S. government still makes money on patents rather than spending money.

As I said, infinitesimal, no matter how you look at it.

And now, Boldrin and Levine has articles on their web site Against Monopoly, objective articles, I might add, that point out the benefits of patents and optimal lengths for patents. How interesting.

you can do better than this. please explain how you arrived at this figure.

“monopoly rents” are the result of ip, what else could they be? the whole idea of ip is to secure exclusive title to the use of an idea. nobody denies that there isn’t competition among patented goods, just that the costs are higher than they otherwise would be.

Merely as a side note, the USPO went PAYG back in the early 80′s, at which time it turned into a profit center from which Congress extracted monies for funding other unrelated activities. With the inception of maintenance fees, which administration of which is virtually nil, even more monies were regularly added to the USPTO coffers. Obviously, somewhere along the way people seemed to overlook the fact that the granting of patents is meant to reflect a quid pro quo. An inventor must disclose as a precondition of receiving a grant. PAYG and maintenance fees basically stood quid pro quo on its head such that the system as presently constituted in quid no quo.

Another point that I believe bears mentioning. There seems to be a belief by some not fully immersed in the system that somehow the issuance of a patent means that “monopoly rents” are almost a given. I am not an economist, but I have been around business and the law long enough to know it is rare, if ever, that a patentee is placed in a position where “monopoly rents” are readily available and realized by a patentee. In every instance a product embodying something covered by a patent is in competition with a wide variety of similar products. One can argue that pharmaceuticals are an exception, but even in this situation there are typically many other formulations of virtually identical efficacy. Sometimes a “blockbuster” does rise to the surface, but this is infrequent.

You need to quantify the “vast government apparatus that is required to draft the laws.” Because IP laws are such an infinitesimally small portion of government, I suggest that if IP laws were completely abolished not one penny would be saved in taxes.

As for “policing the regulation,” there is no policing if non-criminal IP laws because it is up to the holder of IP to pursue such measures at their cost in court.

Any other costs are, as you said, incorporated into the prices of goods covered by intellectual property, which, as I noted before, is your choice to buy or not buy. There are far more products not covered by IP than there are covered by IP, so choices are plentiful. However, you will likely not figure that out by price, since products covered by IP are just as often cheaper than non-IP products as they are more expensive.

The Amish use natural fertilizer, and to the best of my knowledge there are no patented fertilizers. At least, none of the fertilizers I use are patented. I would need to be convinced that the turnip grower’s manual has a single penny added to it because of copyright.

even someone who grows turnips perhaps uses a fertilizer that has a patent cost, and probably consults the turnip-growers’ manual that has a copyright cost added in.

You state boldly that everyone pays for IP. I respectfully disagree. No one needs to pay for IP that chooses not to pay. Do the Amish pay for IP? In general, no. Does a person who buys a home and puts furniture into it pay for IP? No. The vast majority of people who pay for IP do so because they choose to do so. Consider this the next time you purchase something that is patented.

Of course, then there is the question of how much people pay. If IP costs $1 million, and saves $1 billion (which has happened), then what is the cost of IP? Is it negative? Does that mean that everyone who has received the benefit of that IP gets a positive benefit from that IP?

Here is a conundrum. There are people who are anti-IP who claim, without proof, of course (it is easy to assert a position without evidence) that without IP a market would have provided the same solution. What this means, of course, is that IP in fact provided a quantifiable benefit. Saying that a free market would have provided the same benefit is merely providing another route to achieve the same end, a route that, I might add, also contributed to some of the worst ills ever bestowed on mankind. I leave you to review history regarding free markets and some of the many ills that free markets led to.

I watched the video when it was originally released. The individual who followed Mr. Boldrin did not present a persuasive case, but then again neither did Mr. Boldrin.

My problem with the work he co-authored with Mr. Levine is that the data set they chose to examine is largely meaningless. Their work would most certainly benefit from their sitting down with a lawyer who truly understands the pertinent law, one who is neither pro nor anti-patents and copyrights, and working in concert to identify truly relevant data upon which their research should rely.

I do not want to be viewed as “picking” on the authors because the same criticism can be leveled at most researchers dealing in this subject matter area…both those who conclude IP is “bad” and those who conclude IP is “good”. Quite frankly, I am not at all sanguine that the “goodness” or “badness” of the IP regime can ever be answered conclusively. Based upon my experience, the only intellectually honest answer that can be given is a resounding “I/We do not know.”

i’m going to leave others to discuss the plant variety protection act, as i see is already the case on the b&l blog.

I too find issue with Boldrin & Levine’s study. The beginning of the study is absolutely atrocious in that it assumes that IP is undesirable and then sets out to “prove” it. As anyone familiar with statistics and logical proof knows, you assume the opposite of what you wish to prove, for reasons that those familiar with proofs know.

Then, once we get into the heart of the matter, they manage to ignore every piece of data that would tend to refute their position, which of course is far from objective. For example. there is a marvelous study of the value of the Plant Variety Protection Act on cotton. More recently, there is a paper on a similar act implemented by the Chinese to address an issue in their own country regarding lack of new plant development. Boldrin and Levine, on the other hand, use something like “Total Productivity Factor” or something like that. The problem with their “factor” is that it neglects underlying problems in agriculture that, without new plant development, would cause reduction in crop yields. However, their lovely little curve shows that the increase in yields was smooth before and after the act. Surprise, surprise.

They also neglect to point out that many of the plants developed after the act were flowers, which has zero affect on their “factor.”

Lastly, in their zeal for “proving” their point (which means ignoring any evidence to the contrary), they neglect the fact that new plant development increased by a factor of 20 after the act, which had dramatic and positive economic effects in several portions of agriculture.

As for the response from newson, I would point out that Albert Einstein was not known for his ability to debate, but it is well known that he knew what he was talking about. Just because Michele Boldrin is a good debater does not make him any more correct in his position, and certainly does not make up for the flaws in the study performed by him and Mr. Levine.