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Patents Don't Pay

kdawson posted more than 6 years ago | from the crunching-the-numbers dept.

Patents 210

tarball_tinkerbell sends us to the NY Times for word on a book due out next year that claims that beginning in the late 1990s, on average patents cost companies more than they earned them. A big exception was pharmaceuticals, which accounted for 2/3 of the revenues attributable to patents. The authors of the book Do Patents Work? (synopsis and sample chapters), James Bessen and Michael J. Meurer of the Boston University School of Law, have crunched the numbers and say that, especially in the IT industry, patents no longer make economic sense. Their views are less radical than those of a pair of Washington University at St. Louis economists who argue that the patent system should be abolished outright.

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210 comments

Patent Business Model (5, Insightful)

UncleWilly (1128141) | more than 6 years ago | (#19870511)

It doesn't surprise me that patents tend to be expensive & useless. The only place they are of any real use is in court. Any business model that has "time in court" from the get-go is probably not such a great model.

Re:Patent Business Model (5, Funny)

click2005 (921437) | more than 6 years ago | (#19870961)

Any business model that has "time in court" from the get-go is probably not such a great model.

Except for a law firm.

Re:Patent Business Model (0, Offtopic)

Opportunist (166417) | more than 6 years ago | (#19871669)

Even for them. An out of court settlement costs way less in terms of time and money while you can charge almost the same.

Why do you think lawyers usually prod you to settle out of court? Because it is invariably better for you?

Re:Patent Business Model (0, Offtopic)

TekPolitik (147802) | more than 6 years ago | (#19871903)

Why do you think lawyers usually prod you to settle out of court? Because it is invariably better for you?

It depends. If you are the plaintiff in a case prosecuted on a contingency basis in the US model it may be better for the law firm to settle early, but if you pay an hourly rate (as you will as the defendant or if you opt for the hourly rate) it is better for them to take the case to trial.

Of course the best long term plan for a law firm is to build up a reputation for success that brings clients in the door.

Re:Patent Business Model (4, Insightful)

NewYorkCountryLawyer (912032) | more than 6 years ago | (#19871831)

Any business model that has "time in court" from the get-go is probably not such a great model.

Except for a law firm.
Most law firms are lousy business models too.

Re:Patent Business Model (3, Insightful)

sorak (246725) | more than 6 years ago | (#19871493)

The only place they are of any real use is in court.

It also has use in keeping competitors out of the market, by (dishonestly) telling competitors that they must pay to overcome some ridiculous and undeserved government-mandated monopoly. That isn't to say that all patents are ridiculous, or even that we should get rid of them, but it would be difficult to measure the value of intimidating would-be competitors out of the business.

Re:Patent Business Model (2, Insightful)

mh1997 (1065630) | more than 6 years ago | (#19871713)

I'd guess that patents are not useless. They may not earn money, but they probably generate a high return in cost avoidance due to lack of competition.

Patent this! (-1, Troll)

doublecuffs (914081) | more than 6 years ago | (#19870521)

I am a newbie. What does this button do?

Easy (0)

Anonymous Coward | more than 6 years ago | (#19870569)

That is the "killswitch". Engage it and it will kill you. Please engage the killswitch so the world become a better place (ie, with you no longer in it).

Patents don't pay *for commie linsux/open-sores* (-1, Troll)

Anonymous Coward | more than 6 years ago | (#19870531)

That is why you fucktarded shitdot sheeple are against patents. You are for communism. Communism is the only way you fuckatrds will get anything free.

GO AHEAD, FUCKING FLAME AWAY
OR WASTE YOUR GODDAMNED MODPOINTS
FUCKTARDED SHITDOT SHEEPLE!

Not really surprising (4, Insightful)

Iphtashu Fitz (263795) | more than 6 years ago | (#19870539)

Especially in the world of computers it seems that so many of the patents are of questionable validity. A lot of software-related patents end up getting invalidated due to prior art when the patent holder tries to enforce it. Why do you think Microsoft isn't publicizing the list of patents that it claims linux infringes on? Tons of people will try to dig up prior art as soon as they know what patents MS claims are being infringed upon.

Re:Not really surprising (1)

AndyAndyAndyAndy (967043) | more than 6 years ago | (#19870727)

Now that you mention it, do you think that this could be the start of a gradual easing up between the big software makers?
Even if patents aren't done away with outright, as the WU economists say should occur, maybe at least in the field of software engineering they will become a moot point.

Heh, imagine that- Microsoft with nothing to complain about.

Re:Not really surprising (4, Insightful)

Iphtashu Fitz (263795) | more than 6 years ago | (#19870847)

It's a nice thought but I wouldn't expect to see any significant changes in a long time. Companies like Microsoft that have huge investments in proprietary software are going to use the threats of patents to try to combat the growth of linux and open source software in general. I'm sure they'll continue to do that for as long as they possibly can. Even companies like Amazon, with their dubious one-click patent, use them as weapons in going after the competition. Unless/until something significant happens that puts an end to the abuse of dubious software patents I have a feeling they'll be around for quite some time.

Evidence? (1)

Infonaut (96956) | more than 6 years ago | (#19870891)

A lot of software-related patents end up getting invalidated due to prior art when the patent holder tries to enforce it.

Inside the Slashdot Bubble this may seem true, but do you have any empirical evidence to support this assertion?

Re:Not really surprising (2, Interesting)

kg261 (990379) | more than 6 years ago | (#19871043)

In the corporate world, from what I have seen, many patents are just applied for on behalf of someone who is looking for the purposes of self-promotion: sometimes at the individual level, or a group level. I am not making any comments on the patent system here, just that it does not surprise me that many patents do not make sense economically.

This is also the Pirate Party's stance (4, Informative)

CrystalFalcon (233559) | more than 6 years ago | (#19870545)

The Pirate Party also claims [piratpartiet.se], with good justification (although a bit less of it in English), that patents should be abolished outright. Good to see some others chime in.

Re:This is also the Pirate Party's stance (3, Insightful)

senatorpjt (709879) | more than 6 years ago | (#19871425)

What about pharmaceuticals (mentioned in the article)? That is actually my line of work - any commercially viable synthetic pharmaceutical can be made by a trained chemist in a couple weeks. All of the actual cost is in deciding what molecule to make, not in making the molecule itself. It may be feasible in the Libertarian circumstance where (1) chemical intermediates are available to the general public and (2) drugs are not subject to regulatory approval.

Hell, even if the general public were allowed to buy chemicals and lab equipment, they could make their own pharmaceuticals, since patents only apply to commercial use. Another "good" (bad) reason for the war on drugs.

Re:This is also the Pirate Party's stance (4, Interesting)

dex22 (239643) | more than 6 years ago | (#19871561)

Does this mean a non-profit can circumvent a patent simply by making and giving a drug away away?

Re:This is also the Pirate Party's stance (4, Interesting)

Bios_Hakr (68586) | more than 6 years ago | (#19871655)

>>What about pharmaceuticals

Since you work in the industry, you are probably a bit biased. But here's my $.02:

Pharmaceuticals should be developed by government grants and the IP turned over to Public Domain. A list of the 20 worst ailments that *could* be treated with drugs should be created. Then, funding would go from the Federal Government to Universities willing to work on those problems.

Patents Be Gone! (0)

Anonymous Coward | more than 6 years ago | (#19870553)

Nobody should make money off of an idea. Patents slow the progress of mankind.

Re:Patents Be Gone! (5, Insightful)

ScrewMaster (602015) | more than 6 years ago | (#19871149)

Patents weren't supposed to be about ideas. They were supposed to be about implementations, specific ways of making ideas work in the real world. The Founders were pretty clear about that. The problems came in (as so many do) when we stopped listening to them.

Re:Patents Be Gone! (1)

Alchemar (720449) | more than 6 years ago | (#19872103)

I actually think that making money off an idea is a good thing. Making money off of ideas will keep the ideas coming, and allow technology and methods to get better. The problem that I have with patents, is when they are used to prevent someone from using an idea. When people start issuing lawsuits for an "idea" that they own, but are not using just to rake in the cash, then something is wrong.

The fundementals behind patents and copyrights have lasted a long time and worked for hundereds of years, corporations have just pushed to change the laws so they can use them to make money without having to create new works or make new ideas. They need to go back to a sensible time frame. Anything so long that the people living today will not be able to enjoy it is indefinite. They need to go back having to invent something instead of just thinking ideas to patent in case someone else actually figures out how to make it work.

Even if you eliminate patents and copyrights, you can still make money on an idea when you have to compete in a free market. Look at Dell, he had an idea of selling computers without using a store. I think it is fair to say that he made money off that idea. That doesn't mean it should be patented so that everyone else is forced to use a brick and morter store. I think that Amazon should be allowed to make money off of using their "one click" idea. It is a good idea, and should make using their website easier, and attrack more customers. What I don't think is that is should suddenly be unlawfull for someone else to use this very obvious idea to make money. Amazon should have to compete on their customer service, not use their idea to force any wouldbe competition into legal oblivion.

Companies are making money off of patents. They just don't do it directly. All they have to do is lock their customers into that one area that their competition is not allowed to compete, and they can persuade them into making sure they have the rest of their business. In the plastic industry, it is common to license a patent for a particular structure. As part of the license you stipulate that they are not allowed to use that structure unless they purchase the base material from you. Suddenly the value of that patent increase exponentially to what the actual licensing fee was. In the control and automation industry, they will patent a connector where you plug in a laptop. To get that cable you have to buy the complete setup of software, cable, connector and sometimes even a support aggrement. Price of $0.15 connector with licensing fee -> $50.00, amount company made off of single use of patent -> $4000.00

Opportunity Costs (3, Interesting)

Belacgod (1103921) | more than 6 years ago | (#19870559)

Are they counting opportunity costs? If having a patent allows you to get into patent detente with other patentholders, then the patent saves you the license fees/amount you'd be sued by that you'd accrue if you tried to operate without it. That's where the value of patents truly lies.

That's still a negative sum game (0)

Anonymous Coward | more than 6 years ago | (#19870687)

Except for the lawyers.

Re:Opportunity Costs (2, Insightful)

Anonymous Coward | more than 6 years ago | (#19870747)

You're claiming that the true value of patents is to nullify patents? But not having patents at all would save all that, plus the cost of the patents themselves.

Re:Opportunity Costs (2, Insightful)

bhmit1 (2270) | more than 6 years ago | (#19870819)

I was thinking of putting this slightly differently: getting a patent may not recover its own cost in the long run, however, not having a patent may very well cost more. You're better off losing $1 than you are losing $5.

Re:Opportunity Costs (1)

SmokedS (973779) | more than 6 years ago | (#19871025)

So what you are saying is that the value of patents truly lies in the ability to disarm other patent holders?

What a beautiful example of the fallacy of a circular argument [fallacyfiles.org] ;)

It reminds me of reading about a famous case of two inventors racing to the patent office on a pro patent website some time ago. The site specifically mentioned that independent invention and races to the patent office was a rather common occurrence. It proposed patenting everything the minute you came up with it, so that it wasn't patented by anyone else first, as the way to avoid such problems. Amazingly, to me at least, the site found nothing wrong with a system "working" that way.

Patents (-1, Flamebait)

Anonymous Coward | more than 6 years ago | (#19870583)

Patents, online rights, copyright, privacy, piracy.... who the fuck cares what you report any more?

http://www.fsdaily.com/Opposition/Misleading_Infor mationWeek_GPLv3_article/ [fsdaily.com]

It doesn't matter what the subject is, trust Slashdot to spread a whole bunch of FUD and lies.

There is simply no way to mistake this for consistent ineptitude any more, it is malicious disinformation and rabble rousing. This site has become one of the most blatent sources of disinformation on the internet.

Re:Patents (0)

Anonymous Coward | more than 6 years ago | (#19871293)

Yet, you keep coming back for more.

Its about raising the barrier of entry (4, Insightful)

jorghis (1000092) | more than 6 years ago | (#19870597)

If the big companies all file for a bunch of patents it raises the barrier of entry very high for would be competitors. They may not get any revenue from these patents but they save a lot from not having to deal with smaller companies taking their business.

I mean the whole point of the patent is to give its inventor exclusive license to be free from competition, the author of this piece doesnt take that into account at all. Im not saying that this is good or bad for innovation, just that there is significant financial incentive that the writer fails to account for.

Re:Its about raising the barrier of entry (1)

Original Replica (908688) | more than 6 years ago | (#19870655)

If the big companies all file for a bunch of patents it raises the barrier of entry very high for would be competitors.

Are you suggesting that we add patent spamming to the list of illegal monopolistic practices?

Re:Its about raising the barrier of entry (1)

jorghis (1000092) | more than 6 years ago | (#19870725)

I'm not suggesting anything either way, just making the observation that there is real financial incentive there which the article in question seems to claim is false. There are pros and cons to both sides. As an example, look at all the innovation that IBM produced in decades past so they could keep their patent spam going. Just because they were monopolistic and using it to lock out competitors doesnt mean that there wasnt real innovation being produced as a result.

I would agree back then, but not today. (1)

khasim (1285) | more than 6 years ago | (#19870753)

If a company is REALLY producing new ideas ... that's one thing.

But today, you don't even have to show a new idea. If you hear that a competitor is working on something, you can file a patent for "a process that ..." and then fill in whatever you want.

No real idea required. No working model. Not even a schematic or pseudo-code.

Just requiring SOMETHING more than "a process that ..." would completely revamp our patent system.

Re:I would agree back then, but not today. (1)

jorghis (1000092) | more than 6 years ago | (#19870827)

>> If you hear that a competitor is working on something, you can file a patent for "a process that ..." and then fill in whatever you want.

If a competitor has already shown the concept then you cant run out and patent it because of the prior art clause. You can lock out people who would potentially compete with you but once someone already has prior art you dont have a legal leg to stand on. Yes, I realize that there are some patents that have plenty of prior art filed by researchers under pressure to produce, but legally those patents dont really mean much. And honestly, they are in the minority.

Dont get me wrong, I am not a fan of our current patent system, but this idea that 90%+ of patents out there are for things that have already been done by someone else is a little off.

Patents do pay (5, Informative)

Anonymous Coward | more than 6 years ago | (#19870611)

From the 1990's, for publicly traded companies only. Mainly due to litigation costs.

For others patents did better:

Mr. Bessen said that besides girding the pharmaceutical industry, the system did seem to work reasonably well for small companies and individual inventors.

I know slashdot editors hate IP as much as they hate nuance, but the headline does not refect this guy's research.

MOD PARENT UP! (0)

Anonymous Coward | more than 6 years ago | (#19870903)

He seems to be the only one who's read TFA.

If you can't tell the boundries, it ain't property (1)

Original Replica (908688) | more than 6 years ago | (#19870623)

That looks like a promising chapter. It the sample it talks about the obvious problems with vague, fuzzy patents. I think one strong possible answer for the software patent problem, is to only allow patents on an exact piece of code. it's like supplying a blueprint. A program that does the same thing as you patent, but doesn't share the same code is not covered by your patent.

Re:If you can't tell the boundries, it ain't prope (4, Informative)

ardor (673957) | more than 6 years ago | (#19870645)

This has been invented already.

Its called "copyright".

Don Lancaster has been preaching this for ages (2, Insightful)

Man On Pink Corner (1089867) | more than 6 years ago | (#19870659)

He's always considered patents to be a gigantic ripoff for everyone but patent attorneys. A lot of people dismissed his anti-patent rantings in the early 90s as net.kookery, but it appears he was ahead of his time.

A tiny nitpick (1, Informative)

Anonymous Coward | more than 6 years ago | (#19870813)

He considered patents to be bad for the little guy. Some people have found a way to make patents work; NTP for instance got hundreds of millions from RIM for what turns out to be bogus patents.

People in the electronics industry are familiar with the case of Edwin Howard Armstrong who invented many of the fundamental parts of modern radio. http://en.wikipedia.org/wiki/Edwin_Armstrong [wikipedia.org] RCA stole his ideas and basically lawyered him to death. RCA, on the other hand, had patents and could afford to enforce them with great vigour.

Armstrong's would be one case that Lancaster would use as an example of why patents don't work for the individual inventor. He never, afaict, said patents didn't work for the big guys.

information vs things (3, Interesting)

drDugan (219551) | more than 6 years ago | (#19870663)

google started the trend: information is the most valuable thing in the world. a close second are the people who control and can quickly assess and manage information (as a group) are the second most valuable thing.

No longer are the widgets and doohickeys manufactured in large plants the items of value - and the concomitant world of patents to protect them. Frankly we have way too much stuff already, and mostly the need for more physical stuff is artificially manufactured by ads and more-pompous-than-thou one-upmanship insecurity. It's bags o bits, and bags o water that are the future, my boy.

In short: "Well, duh."

Re:information vs things (1)

jbengt (874751) | more than 6 years ago | (#19871889)

"google started the trend: information is the most valuable thing in the world"

This "trend" was started millenia before google existed.

Won't help (4, Insightful)

Realistic_Dragon (655151) | more than 6 years ago | (#19870667)

Everyone thinks they are special. It's a fundamental human attribute.

How else would you explain the people who play the lottery? Gamble at casinos? Think that out of all the millions of oppressed masses, _they_ are the ones who will live the American dream and become someone?

It makes life more interesting; without that drive there would be little innovation, little hard work and drive, few no obsessively hard workers spending three years of nights in a garage writing software, no interest in going for American Idol... ok, scratch that last one.

In the same way companies, which are only an aggregation of people, will think that they can be the one out of a million who will benefit from patents. Even if you can empirically and theoretically show that they are being taken up the arse by a banana. Human nature. Infuriating, isn't it?

Re:Won't help (4, Insightful)

ScentCone (795499) | more than 6 years ago | (#19870803)

How else would you explain the people who play the lottery? Gamble at casinos? Think that out of all the millions of oppressed masses, _they_ are the ones who will live the American dream and become someone?

Um, except... people DO win the lottery, some people do win at a casino and then have the brains to get up and leave, and people who don't have everything they wish they could have aren't "oppressed." People DO live the dream. Not everyone does or is equipped to.

Human nature. Infuriating, isn't it?

Why look at it that way? I'd rather just sit back and be impressed by the people who DO invent a new process or widget that hugely benefits us all when they put it to work, or marvel at the less creative people who none the less have the discipline to just work their asses off and build something of value to improve their circumstances and leave as a legacy to their kids. That plenty of less insightful or lazy people take a sloppy stab at that sort of thing and don't get anywhere with it MAY be like gambling badly in a casino, but it's mostly just less intelligent or worldly people behaving according to their nature and experience (and idle hopes). But human nature, if you can define such a thing at all, has also provided us with refridgeration, anti-biotics, incomprehensibly cool integrated technology widgets that would be considered magic not many decades ago, and so on. It's not infuriating, it's amazing. And if someone thinks they're on to something, and end up patenting something that they don't have the wherewithal to turn into a viable part of their business... well, too bad. Some airlines fly with a lot of empty seats, lots of expensive theatrical productions play to empty theatres, and plenty of great chefs have no-one to cook for because the restaurant's on the wrong side of the street during rush hour.

Re:Won't help (4, Insightful)

jez9999 (618189) | more than 6 years ago | (#19871299)

And if someone thinks they're on to something, and end up patenting something that they don't have the wherewithal to turn into a viable part of their business... well, too bad. Some airlines fly with a lot of empty seats, lots of expensive theatrical productions play to empty theatres, and plenty of great chefs have no-one to cook for because the restaurant's on the wrong side of the street during rush hour.

Erm, yeah, but the difference is that those businesses aren't prohibiting competitors (and their customers) from benefitting from their incompetence; businesses who sit on patents are.

Re:Won't help (1)

BalanceOfJudgement (962905) | more than 6 years ago | (#19871917)


Um, except... people DO win the lottery, some people do win at a casino and then have the brains to get up and leave, and people who don't have everything they wish they could have aren't "oppressed." People DO live the dream. Not everyone does or is equipped to.

And that's the grand delusion of it all, and it's exactly what the GPP meant: Some people DO live the dream; but much if not most of the American (and most of the developed world, really) way of life is predicated on the idea that YOU CAN TOO, if you're lucky enough or work hard enough.

But as you so eloquently point out, no they can't. The vast majority can't, but they try, because someone else has. It's what keeps us working, and supposedly moving forward.

It's also what keeps us blind to the many things that will never work the way we think they do - patents and copyright, for one.

We're incapable of conceptualizing in their entirety, our own inventions. It's an interesting conceptual limitation.

How is he determinig profit? (2, Interesting)

Actually, I do RTFA (1058596) | more than 6 years ago | (#19870701)

I RTFA, and I still don't know how he counted profits.

  1. A percentage of the profits from patented inventions.
  2. Licensing the patents.
  3. Engaging in a reciprocal arrangement with other companies vis-a-vie patent portfolios.
  4. Discouraging small competitors from making non-infringing competing products because of potential legal fees.
  5. Using one product to help sell another because of compatibility.

And that doesn't even factor in the fact that many IT patents last, what, 17 years. So it's also a gamble on the future needing that IP.

Re:How is he determinig profit? (0, Flamebait)

value_added (719364) | more than 6 years ago | (#19871005)

vis-a-vie patent portfolios

I think you meant vis-a-vis?

Or perhaps more correctly, vis-à-vis. Old French meaning face to face, IIRC. "Vie" is a different word altogether.

Not sure about "determinig". ;-)

Wright brothers are another good example (4, Informative)

A nonymous Coward (7548) | more than 6 years ago | (#19870711)

They first flew under barely controllable circumstances Dec 17, 1903, but then spent several years trying to keep it secret, or at least not publicize it, while they made it practical. They used wing warping which physically bent the wings to control roll, and in order to get around this patented idea, Curtis, in 1908 I think, invented ailerons, hinged sections of wing which have been in use ever since. The Wrights spent the next ten years in court over the matter, and it wasn't settled until the US government forced a settlement when it joined WW I. The Wrights never did much at all after the first few years except sue the competition in court. Everyone else made advances in the technology, but not the Wrights, and they later had to merge just to keep the name in business.

A real lesson in the relative merits of innovation to stay at the front of the pack instead of dying in court battles.

Re:Wright brothers are another good example (1)

jez9999 (618189) | more than 6 years ago | (#19871337)

A real lesson in the relative merits of innovation to stay at the front of the pack instead of dying in court battles.

You're assuming the court battles are initiated by the potential innovators.

Re:Wright brothers are another good example (0)

Anonymous Coward | more than 6 years ago | (#19871605)

You're assuming the court battles are initiated by the potential innovators.
You are presuming a system with patents. Without patents, nobody goes to court.

Re:Wright brothers are another good example (0)

Anonymous Coward | more than 6 years ago | (#19871925)

You are presuming a system with courts. Without courts, everyone just pummels each other to death.

Re:Wright brothers are another good example (0)

Anonymous Coward | more than 6 years ago | (#19872083)

You are presuming a system with courts. Without courts, everyone just pummels each other to death.
You are presuming that this entire fucking discussion is about the value of the court system when instead it is about the value of the patent system.

Re:Wright brothers are another good example (2, Informative)

Paul Jakma (2677) | more than 6 years ago | (#19871665)

They didn't invent that stuff at all. There had been several decades of experimentation in aviation with gliders, and the aerodynamics and control issues the Wright brothers used had been worked out using those already, e.g. the aileron first appeared on a glider in 1902.

The important patent the Wright brothers got didn't have anything to do with aerodynamic designs at all. They patented an engine design that was efficient enough, in terms of power/weight, to be viable for powered flight.

Go pull my other leg (1)

A nonymous Coward (7548) | more than 6 years ago | (#19871935)

The important patent the Wright brothers got didn't have anything to do with aerodynamic designs at all.

The patent squabble that lasted until forcibly resolved by the government, and which Curtis fought tooth and nail, was for wing warping.

Here [lib.oh.us] is something from a Wright Brothers website.

August, 1909 also marked the initiation of a long patent war with Glen Hammond Curtis, who earlier that year had formed the Curtis-Herring Company with Augustus Herring and built a successful airplane with a control system that the Wrights felt was an infringement on their patent.

Re:Wright brothers are another good example (1)

A nonymous Coward (7548) | more than 6 years ago | (#19871973)

Here's something from a Wright Brothers website [lib.oh.us] I found for a different reply below.

It was becoming clear, however, that the lead in flight technology had passed from the Wright Company to other manufactures, in particular the French. Wilbur felt that this was due to the enormous time they had been compelled to devote, since 1906, to protecting their patents and exploiting the commercial value of their invention. Had they been able to sell their flying machine to governments, as they originally intended, they might have had more time for the research required to improve their invention.

Mentioned before this is why they had not been able to sell to governments. They were so paranoid of their ideas being stolen that they refused to even demonstrate that they actually could fly unless the governments they wanted to sell to signed NDAs. Of course no government was willing to do that for such grandiose claims.

hmm... (1)

g0dsp33d (849253) | more than 6 years ago | (#19870799)

I'd be curious what percentage of patents were actually researched for this project and how they were selected. I'm not against the theory that patents can hurt more than help, but I find it difficult to believe that they had enough time to properly research a vast amount of patents. Especially trying to narrow it down to financial losses and gains for specific patents.

Contributing factor (5, Interesting)

cdrguru (88047) | more than 6 years ago | (#19870837)

Today, a patent can certainly be useless.

Let's say you invent some new physical item, obtain a patent and line up licensing with a manufacturer to produce the product. In the first six months you manage to line up significant interest in large retailers for this product and the money starts flowing in.

Two months later you discover your retailers are deserting you and are buying an identical product made in China. Your revenue ceases because nobody wants your overpriced product when they can buy the cheap knockoff made in China. Unless there are substantial reasons to purchase your original (which there probably aren't), nobody is interested.

You are now looking at your investors that put up the money to get the product manufactured and advertised. They would like the big returns you were promising them and looked like they were going to get. Instead, you are bankrupt and have no friends (they were all investors).

50 years ago US Customs would have blocked the import of a patent-violating product. I don't know when they stopped, but today it is common to find products made in foreign countries that violate US patents and other licensing agreements. Where do you think all those cheap DVD players come from when it is $5 per player for the license? Any player under $100 retail is unlicensed and the Customs folks know it.

Rule 1: If it is a physical product that can be duplicated, it will be.
Rule 2: International trade is a race to the bottom with the lowest cost winning, always.
Rule 3: Patents and copyrights are only as good as the enforcement behind them.

Today, enforcement is a joke. You can sue someone in the US for violating a patent, but if they are violating it from outside the US (say, from China) you can't sue them. China would laugh - they don't enforce US laws. Customs will not block imports. Do you believe you can sue Wal-Mart for selling the product? You can't prevent people from getting cheap stuff - it is almost the 11th item on the Bill of Rights these days.

What this means is that patents are only good as tokens to impress potential buyers of a company with.

So how do you keep something from being duplicated? Have some encrypted software required to operate the device. The R&D effort to duplicate the development would make copying the product too expensive. Sure, they can copy the hardware but without copying the software they have a useless piece of junk. Maybe you can license the software to them, but doing so would be suicide - it turns your company from a hardware vendor into a software supplier.

Re:Contributing factor (0)

Anonymous Coward | more than 6 years ago | (#19871625)

I am not expert on the US patent system, but how came that companies like SCO, Microsoft etc. can threaten to sue the users of product violating patent ? Can you, as a manufacturer, threaten or sue the US companies buying the unlicensed dupes from China ?

Re:Contributing factor (0)

Anonymous Coward | more than 6 years ago | (#19871745)

If you have enough money, you can throw shit at them until something sticks - like Microsoft or its proxy SCO. It has nothing to do with patent laws or laws in general.

Re:Contributing factor (2, Informative)

Jah-Wren Ryel (80510) | more than 6 years ago | (#19871683)

Where do you think all those cheap DVD players come from when it is $5 per player for the license?
Actually, the total of all licenses required for a complete DVD player is closer to $20. If I had the time, I would dig up the specifics of which licenses cost what, but here's a news article that makes the same general statement:

http://www.chinadaily.com.cn/english/doc/2005-01/2 0/content_410667.htm [chinadaily.com.cn]

Patents were never supposed to make money (5, Insightful)

kasperd (592156) | more than 6 years ago | (#19870975)

The purpose of patents were to improve inovation and make the results available to society. Before patents were introduced, people would try to protect their inventions by keeping the details as secret as possible. Patents are supposed to get them to reveal the details by getting a timelimited monopoly in return. Then others can keep inovating by building on top and eventually the inventions will become free for everybody to use. And anybody who sticked with the old habbit of keeping the details secret rather than patenting it would run the risk of somebody else being granted a patent on the intention.

That is how it was supposed to work in the theory.

In reality we see abuse such as companies patenting things they didn't really invent, companies patenting trivialities, and patents that don't include all the details which were the purpose of patents in the first place. If software patents weren't bad enough in itself, it is made even worse by them not containing the full source of a working implementation. If patent applications were really being treated within the original spirit of patents, any software patent application not comming with the full source would be rejected. And of course once the patent is granted, the source is published available for anybody to use as long as they have a licensee for the patent. Once the patent expires, the source can be used essentially the same way you can use BSD licensed source.

Somebody seems to have forgotten why patents were introduced. And some companies seems to want to not only keep, but also extent patents (and copyright as well) because they want to make money from it. If making money is the only reason for keeping those kinds of protections in place, they should be abandoned. But for gods sake, don't make the big mistake of abandoning them only for economical reasons. Rather think the system over again and adjust it to serve its original purpose, even if that means companies will make less money on average.

An argument for doing away with drug patents (3, Insightful)

Anonymous Coward | more than 6 years ago | (#19871009)

Drug companies don't do the basic research that leads to new treatments. Drug companies do research necessary to bring drugs to market. In the past they had agreements that forced university researchers to keep mum if they found adverse side effects of the drug under test. Treatments that don't result in profit for the drug companies aren't researched. Drug companies often make minor changes to a drug just so they can keep it patented for another seventeen years.

Drug companies game the patent system like crazy. We would probably be much better off without drug patents. Research could then be re-directed to non-drug (cheaper) treatments.

Re:An argument for doing away with drug patents (5, Insightful)

jorghis (1000092) | more than 6 years ago | (#19871203)

I have always wondered where people get this idea that drug companies dont do research, they just take something from universities, slap a patent on it and sell it. Yes, some of this stuff is based on things that had some basic work done in universities, but guess who funds that research! Yup, evil old big pharma! These university departments get huge sums of money from those nasty drug companies.

Pfizer spent 8 billion dollars on research and development last year.
Merck spent 5 billion.
Novartis spent 5 billion.
And so on, all the big pharma companies have R&D budgets of that size.

So my question then, is if you honestly believe that this R&D isnt producing anything meaningful, where on earth is this money going? You think they are just flushing money down a rathole since according to you they have never actually produced anything meaningful? Really, I want to know, do you seriously believe that all these billions in R&D are just wasted? Do you think that for the past century they have continued blowing all this money, never seen any results from it, and noone ever stopped to say "oh hey where are all those billions going?"

Drug companies may try to game the system some with patents, but its not like they are just sitting there not producing anything of value. There may be some validity to the complaints people have about big pharma, but you lose credibility when you claim that they dont produce anything of value.

Read the grandparent more carefully (0)

Anonymous Coward | more than 6 years ago | (#19871419)

The drug companies spend big bucks on research just like you said. What they don't do is much basic research. What they do spend money on is research that leads to drug approval, ie. drug trials.

The following link makes the case: http://righttocreate.blogspot.com/2005/12/why-drug -companies-dont-need-patents.html [blogspot.com]

# Public Funding of Drug Development. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. The assumption in the argument for patents is that no one but commercial interests will do drug research. This is nonsense. We spend billions of dollars in tax money on new drug development every year -- in many cases, these are drugs that save lives that the pharmaceuticals are uninterested in researching, because their profit margin is too low. So we already have government subsidized drug development. What this means is that we, as a society, agree that this is an important public good, and should be funded as such. Do other public goods need patent protection? And yet we give our government-funded and developed goods patent protection, and allow pharmaceuticals to pay public researchers and universities for those exclusive rights. Tell me again, how does this setup benefit anyone but monopolists?

Here are a handful of additional stunning facts with regard to private vs. public spending on drug development (from the Public Citizen report on drug R&D myths):

        * A study by a Massachusetts Institute of Technology (MIT) scholar found that publicly funded research played a part in discovering 67% of the most important drugs introduced between 1965 and 1992.

        * 90% of the top-selling drugs from 1992-1997 received government funding for some phase of development.

        * The NIH report discovered that only 14 percent of the drug industry's total R&D spending went to basic research, while 38 percent went to applied research and 48 percent was spent on product development. The report concluded, "To the extent that basic research into the underlying mechanisms of disease drive new medical advances, the R&D in industry is not performing the role played by public research funding."


The drug companies point to the numbers you quote to try to make us believe that they are pushing the progress of medicine. That isn't the case. Their research is mostly to bring other people's discoveries to market.

Re:Read the grandparent more carefully (1)

jorghis (1000092) | more than 6 years ago | (#19871559)

* A study by a Massachusetts Institute of Technology (MIT) scholar found that publicly funded research played a part in discovering 67% of the most important drugs introduced between 1965 and 1992.

                * 90% of the top-selling drugs from 1992-1997 received government funding for some phase of development.

You are twisting statistics there. The only thing those really say is that 33% of drugs between 1965 and 1992 were 100% privately funded and 10% of drugs between 1992 and 1997 were 100% privately funded. You try to imply that the rest of the group was 100% publicly funded, but that is obviously false. I would be surprised if any major drugs were 100% publicly funded or even if a significant percentage were funded more by the public than private organizations.

                * The NIH report discovered that only 14 percent of the drug industry's total R&D spending went to basic research, while 38 percent went to applied research and 48 percent was spent on product development. The report concluded, "To the extent that basic research into the underlying mechanisms of disease drive new medical advances, the R&D in industry is not performing the role played by public research funding."

And what on earth is wrong with applied research? Or even product development for that matter? You act as though they arent contributing anything, when in reality they are spending huge fortunes every year without which these drugs would not see the light of day.

Follow the link (0)

Anonymous Coward | more than 6 years ago | (#19871771)

You're arguing with the wrong person. The points you raise are a quote from somewhere else (ie. the link).

In any event, the NIH (National Institutes of Health http://en.wikipedia.org/wiki/National_Institutes_o f_Health [wikipedia.org] ) report pretty much says it all: "To the extent that basic research into the underlying mechanisms of disease drive new medical advances, the R&D in industry is not performing the role played by public research funding."

So, a branch of the federal government has studied the case and concludes that, as the great-great-grandparent pointed out, the drug industry isn't really advancing medical science.

Rather than quibbling about semantic niceties, why don't you dig up some facts to refute the NIH report.

Re:Follow the link (1)

jorghis (1000092) | more than 6 years ago | (#19871867)

"Rather than quibbling about semantic niceties"

Its not a semantic nicety, its interpreting statistics in a meaningful way.

"Rather than quibbling about semantic niceties, why don't you dig up some facts to refute the NIH report."

Great, the only thing you have to back up your arguments is a quote from a government agency where they claim they are valuable. Why dont you explain to me why you think those tens of billions spent every year by big pharma have no value?

Re:An argument for doing away with drug patents (1)

Zerth (26112) | more than 6 years ago | (#19871701)

He didn't say they don't do research, he said they don't do basic research, which is where most of the value comes from.

Just to go down your list and compare research to marketing, using their 10k/20f SEC filings:

Pfizer $7.6b : $15.6b
Merck $4.8b : $8.2b
Novartis $5.35b : $10.5b

If research was so important to pharma, why do each of those 3 companies spend much more on advertising and marketing? I think that is rather indicative of where their priorities lie.

Re:An argument for doing away with drug patents (1)

jorghis (1000092) | more than 6 years ago | (#19871823)

Thats the real world. Every company even those that rely heavily on R&D like big pharma spend less on R&D than they do other stuff. Being in business is expensive. Unless we are going to abolish all companies that rely on R&D things will always be that way. It isnt just pharma. Frankly, pharma has a better ratio than most other industries.

Since this is slashdot here are some heavy R&D companies revenues and R&D budgets for comparison over the past 12 months. (i hope this formats correctly)
                      Billions on R&D Billions in Revenue
Microsoft: 6.5 44
Google: 1 10.5
IBM: 6.1 100

At the end of the day even though these guys are all spending more money on other costs related to running a company they are still adding plenty of value.

And big pharma does do basic research, they just spend 3 times as much on applied research. Both numbers are still huge, applied is just three times as huge. Incidentally, do you really believe that those 10s of billions spent every year are producing no value? I havent heard a direct answer to that yet from anyone.

Re:An argument for doing away with drug patents (1)

Zerth (26112) | more than 6 years ago | (#19872029)

How does comparing Microsoft's research budget to their revenue have anything to do with comparing pharma research to marketing. If I cared about it as related to their revenue, I would have posted their revenues, not their marketing expenses.

However, Microsoft is a prime example of why pharma companies' priorities are skewed. Microsoft spent $6.6b on research and $9.8b on marketing in 2006. I could understand if MS spent nearly double on marketing than R&D, because marketing is what brings in the $ for Microsoft.

I'm not saying pharma companies research is valueless, even if others might, as it is a big part of making it through the FDA and I can understand why applied research(read safety testing) is a larger percentage of their R&D budget. But why do they spend more on marketing than on R&D, let alone basic research, since that is where their bread & butter comes from?

Re:An argument for doing away with drug patents (1)

jorghis (1000092) | more than 6 years ago | (#19872223)

I compare the revenue to R&D because the cost of doing business may be different between industries. For example, Pfizer markets viagra to people on their television. Google doesnt spend as much on marketing, but spends heaping gobs on salesmen to call up people to convince them to buy their trendy little text based ads. I dont understand why you want to compare marketing to R&D rather than sales+marketing+other to R&D. Personally, I count myself lucky to be working at a company that spends over 30% of revenue on R&D.

The point I am trying to make here is that every company in the world spends more on non R&D costs than they do on their "bread and butter." Personally, I would think their bread and butter was applied+basic but we can go with this. Also, the industry's basic research budget is still in the billions, its not a small number. There is only so much basic research that a pharma company can be doing. Its not like they ever cut basic research, rather they add funding to it at every opportunity. The reason it isnt higher isnt that they are shortsighted and tightfisted, its because there are only so many world class scientists to hire and only so many fields out there that they can be researching. If they just threw more money into that column blindly they wouldnt necessarily get more results.

Re:An argument for doing away with drug patents (1)

jbengt (874751) | more than 6 years ago | (#19872017)

I don't completely agree with the AC, but AC was talking about basic research, which IMO is very underfunded, and your answer was about R&D, which you would expect any company to do.
Nonetheless, patents are useful in encouraging the development of drugs, especially because trades secrets are out of the question if you want assurances of drug safety.
The drug companies do try to game the system - doesn't almost everyone?

Patents Don't Pay.... (0)

Anonymous Coward | more than 6 years ago | (#19871091)

and pimpin' ain't easy.....
Your point?

kdawson is ON TEH SPOKE today!!!

Defensive patents (1)

Dachannien (617929) | more than 6 years ago | (#19871207)

Unfortunately, it's better for you to get a patent for X than it is for you to allow company Y to patent your X and then sue your S off.

Am I the only one old enough to 'meber Lancaster? (0)

Anonymous Coward | more than 6 years ago | (#19871227)

Lancaster. Don Lancaster. The Hackintosh guy?

Don has already figured that out. Years ago.

http://www.tinaja.com/patnt01.asp [tinaja.com]

A third is that the economic breakeven needed to recover patent costs
is something between $12,000,000.00 and $40,000,000 in gross sales.

It is ludicrously absurd to try and patent a million dollar idea.

Bad math (2, Informative)

davidwr (791652) | more than 6 years ago | (#19871243)

They only counted the dollar value of having a patent vs. not having it.

They didn't count the value of the leverage of having a large portfolio when used against another company that has a large portfolio.

If a large company unilaterally stopped accumulating patents, pretty soon it would have to start paying everyone, not just the patent-holding companies, royalties on patents it needs to license. As it is, you can just horse-trade your patents and call it even.

Without a systemic fix, large software companies like MS and IBM won't totally abandon patents any time soon.

Measure of innovation (2, Insightful)

Pseudonym (62607) | more than 6 years ago | (#19871437)

The system is, unfortunately, rigged such that a modern startup needs patents. First, they need to stockpile them against existing companies who would rather litigate than compete. Secondly, they need to be able to measure, in some tangible way, how much "innovation" they've done, for the benefit of investors.

The latter point is critical. The value of a startup should be based on how valuable the products are. A patent is an asset which increases the value of the company, even if it's a loss-maker by itself. It's used as a measure of how much innovative stuff is in your product, even though the only value of the innovation is in the product itself.

I'd like to hear some suggestions as to how we could show the value of innovation without patents. I'm sure there must be a better way.

Re:Measure of innovation (1)

Opportunist (166417) | more than 6 years ago | (#19871863)

Why base company value on a patent? A company's value should be based on its product.

Turnover is incredibly fast today, especially in IT. I don't say abandon patents, but limit the time considerably. Enough to be the first on the market, but also short enough to give competing companies a chance.

You have a head start against your competition. It shouldn't be more than that. Usually, the first on the market has a serious advantage, and that should be it. Competition increases value, if the product is successful, and more successful than the competitors, the company value will increase. If not, it should perish.

Maybe some patents are money-makers (1)

brit74 (831798) | more than 6 years ago | (#19871483)

on average patents cost companies more than they earned them.

"On Average"? We are all aware of the way software companies will create patent "minefields" to entangle other companies, and I have to think that the word "on average" means that SOME patents are money-makers for companies, but a large number of patents (perhaps the ones they use to entangle competitors) might cost more money than their worth. If that's the case, then the article isn't really an argument against patents per se, but an argument against the patent-frenzy that some companies are involved in. It's an argument against excessive patenting - in contradiction to the title of this post: "Patents Don't Pay".

Re:Maybe some patents are money-makers (1)

Opportunist (166417) | more than 6 years ago | (#19871751)

So they pay indirectly. We already see how: The MS litigation FUD against Linux, the SCO vs. Linux FUD trial to keep a failing company afloat on the hopes of the investors.

Basically, such patents are a tool for big corporations to fight against what they can't buy out.

In other news... (1)

dyftm (880762) | more than 6 years ago | (#19871511)

In other news, insurance policies often cost people more than they claim from them. To my mind, patents are just a form of insurance - against other companies, that would otherwise be allowed to compete fairly with the patent holding company.

ch-ch-changes to patent law (3, Interesting)

cleandreams (755229) | more than 6 years ago | (#19871549)

I just filed for a patent and the comments here don't reflect the current situation re: software patents. Basically, the Supremes made it a lot harder to get a patent. The intent is to increase the value of good patents, filter out the copycat trash, and reduce litigation overall. A patent is a "teaching". You give up trade secret protection in return for patent protection. It's not code; that's protected by copyright. I think the premise of the NYTimes article is silly. Patents are part of a large IP 'eco-system' and judging the value of patents requires looking at the whole system. From my point of view (small company, great new idea) I think a patent will make my company more valuable in an acquisition. I absolutely have no intent or interest in defending this thing. Leave that to the stable of attorneys in the acquiring company. Thus is is absolutely a good for the small company / entrepreneur to have patent protection in that it motivates me to both innovate and then publish the innovation.

Re:ch-ch-changes to patent law (1)

Opportunist (166417) | more than 6 years ago | (#19871743)

So it's not about getting an exclusive right, or to publish an invention, it's just to increase your company value so you get more cash for it.

Re:ch-ch-changes to patent law (1)

UtilityFog (654576) | more than 6 years ago | (#19872033)

This is a nice summary of what the incentives look like to the individual inventor. (BTW, I hold a SW patent myself.)

Problem is, there are plenty of large companies that are the legal equivalent of gun nuts. They like to collect offensive armament because it makes the testosterone run. Armament has always been expensive, but they are prepared (and very well able) to pay for it. So you are essentially in the IP gunrunner business.

The IP argument ought to be about how to back down from the IP Mexican standoff, not how to make money by putting more guns to more peoples' heads.

been there, done that (1)

John Boone (1127977) | more than 6 years ago | (#19871663)

DO

There was a guy once, who had a great idea. Why not make an institution where people will submit their money making ideas, along with their cash. In return, he would guarantee that no two people would use the same idea.

He immediately patented the idea, and started making money of it. Others, however, were not that happy.

Some claimed that his patent was obvious, and that its null and void. Others claimed that it impinges on their own ideas about institutions where people submit their ideas and money. Radical voices insisted that making money out of ideas like this hurts the economy. Reasonable voices claimed that it has been done before.

Eventually, after 5 years, his patent rights expired, and everyone started making institutions who will guarantee that no two people can use the same idea if you pay them. Bitter patent battles raged between the institutions, with regards to who owes what ideas.

Eventually, someone came up with a great idea. Why not make an institution where people will submit their ideas about institutions where people will submit their money making ideas, along with their cash, in exchange for a guarantee that no two institutions will use the same idea.

UNTIL HEAD(explodes)

Justification for longer patent times (1)

Opportunist (166417) | more than 6 years ago | (#19871703)

Wanna bet that this will in certain circles not be seen as the proof that the patent law is broken, but rather that patent length is not long enough to get a return of investment, and thus it needs to be prolongued, preferably forever?

Re:Justification for longer patent times (1)

MadRat (774297) | more than 6 years ago | (#19871769)

It will not be forever, just beyond any human lifespan. And the heirs of the patentee will automatically get the rights upon the inventor's death. Unfortunately, our whole concept of laws is run by lawyers to create perpetual states of gridlock. This keeps them employed. Abolishing patents would send a quarter of the top 1% incomes in America (which coincidently own 99% of the property) into a spiral. Can't have that. If such a pillar of our society fell, total anarchy is around the corner.

What's the math (0)

Anonymous Coward | more than 6 years ago | (#19871781)

Does it include the value of locking your potential competitors out of the market/solution?

Drug patents should be outlawed (1)

r_jensen11 (598210) | more than 6 years ago | (#19871939)

I'm a big proponent of dismantelling drug patents. Now a bunch of people will cry "Bloody Mary" and claim that the patents are needed to fund additional research for new drugs. Here's a brilliant idea: They aren't!

Here's the alternative:

Rather than drug companies rolling in massive profits (which, might I add, are calculated AFTER R&D expenses), provide grants for drug research. Even better, provide purses for people who come up with cures and treatments. This will still stimulate pharmaceutical research, possibly even moreso than what it already is today. If somebody can see "Hey, I can get this much money for finding something out" as opposed to "I might be able to sell the rights for this much if I find something out," you'll probably get more people engaged in the business because a reduced risk in payout. As a side-effect, finding a cure for AIDS will probably also result in a team winning countless awards, medals, titles, et. al, which would also result in fame and, get this: more money.

Lowering the Average (1)

Doc Ruby (173196) | more than 6 years ago | (#19871965)

I wonder how the average profitability of actual patents would rise if the patent rolls were purged of all those that are created and maintained for solely "defensive" registration.

Patents that are never used to stop an infringer, but rather to protect the registrant's use of the invention. If those patents were instead published into the public domain, they would have exactly the same defensive value. But publishing them into the public domain would cost very little compared to patenting them.

The rest of the patents would have their costs deducted from their greater value in stopping infringement. Those might actually look profitable.

While that analysis might not seem good for the invention industry choked by patents, it could actually turn patenting into a much rarer case. If most patents are in fact used solely to protect an invention from being stopped on "infringement" grounds, then most inventions would just be in the public domain, not patented.

Then the rest of the patents, and their system, could actually be reformed as a much smaller process. Make them expire once 10x their investment cost (stated at registration) is recouped, or after 5-15 years (depending on the invention). Require working models of all patents again, and prohibit patenting anything but a photo/electro/mechanical device. Software and math can be only copyrighted, business processes have no protection whatsoever. If there are so many fewer patents, stopping some of their types that are unworkable will be more manageable.

Then the rest that are left can actually be patented for the promotion of science and the useful arts.

How do they figure out what a patent is worth? (1)

harlows_monkeys (106428) | more than 6 years ago | (#19872115)

It sounds like they were looking at how much patents made in licensing or in lawsuits. But what about patents that are neither licensed out nor lead to a lawsuit? The third way to make money off a patent is to be the exclusive provider of whatever is covered by the patent.

China (2, Interesting)

Duncan3 (10537) | more than 6 years ago | (#19872153)

You can't stop China (the US won't even try since they own our debt) so there is no real value to patents anymore.

That's it, the end. Make a product, China will rip it off and sell it for 1/2 the price. Make a web/software product and they will copy it. I've had one of my websites mirrored entirely, tweaked, and put up in China (for an open source product, so I don't know WTF the point was).

Patents would have some value if they were enforced, but they are not. Add to that the fact that less then 1% of patents are in any way valid to start, and the system is just silly. They do let large companies intimidate small companies, and easily put them out of business with lawyer costs, so the system lives on.

Patents (1)

Evil Cretin (1090953) | more than 6 years ago | (#19872199)

A lot of patents won't make a company that much money by themselves (i.e. through licensing and lawsuits). But they give companies leverage with which to push around other companies - the result being that there's diminished competition in that area. So they won't be losing as many potential sales of their product to other competitors.
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