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Home Publications Blogs Beat the Press Very Good Account of Patent Abuse in High Tech

Very Good Account of Patent Abuse in High Tech

Monday, 08 October 2012 07:48

The NYT has an excellent piece on how patents can obstruct innovation in high tech. The sector has wasted tens of billions of dollars in lawsuits in recent years and now takes out patents routinely as a legal weapon. The one major error is that the piece implies at one point that the story with prescription drugs is better, if anything it is almost certainly much worse. The enormous patent rents that drug companies are able to earn (drugs that can be profitably sold for $5 are instead sold for 100 or even 1000 times this much with patent protection) give them a huge incentive to misrepresent their effectiveness and safety and to market them for inappropriate uses. As the NYT has frequently documented in news stories, the drug companies respond to these incentives as economic theory predicts.

Comments (9)Add Comment
written by David M, October 08, 2012 8:37
The line in the NYT about tech patent legal fees alone costing five times more than the Mars rover was a nice little chestnut. I may have to steal that, if I can do it without getting sued.
Obvious that patent system is out of control
written by Brett, October 08, 2012 8:56
The question is what do we do about it? Do we have to wait for a politician to take up the patent reform cause?

Apple is printing money with the iPhone -- the reason is largely because they were first to market with an innovative device, they have a great brand with adoring fans, and their products in general usually function well (Apple Maps the exception). The patents are just being used as a cudgel to beat up their competitors and raise their costs. It's very anti-competitive.

I don't see how you could even think of starting a technology company when you have to fight the likes of Apple and other big-pocket companies who patent ideas of which they don't even plan on making the product. It seems like the system is rigged to destroy any potential competitors. When Samsung, a deep-resource company, is getting beaten up in this game, what chance does a small start up have?
written by Ron Alley, October 08, 2012 10:21
The NYT article make one wonder why the banksters have not gotten around to patenting Credit Default Swaps as software and how such patents might be used to frustrate regulation of the too big to fail banks.
pharma patents
written by Jennifer Reft, October 08, 2012 10:45
Yes it is unfortunate that they suggested that pharmaceutical patents aren't a problem, but the article seemed to suggest that is because the process "runs smoothly" i.e. they are not suing each other constantly. Really, all that means is that unlike the tech industry which is extremely competitive and aggressive the pharmaceutical industry by comparison is complacent and lazy. The tech industry does not have the same sweet deal that the pharmaceutical industry does with the academia and the NIH which is where the actual innovation occurs. Big pharma is like the mafia guys in Godfather II where they divide the cake to represent what parts of Cuba they are going to control, so everybody gets along.
Patenting CDSs
written by David, October 08, 2012 2:08

written by Ron Alley, October 08, 2012 10:21
The NYT article make one wonder why the banksters have not gotten around to patenting Credit Default Swaps ...

They already have. Here's one, amongs many::

@ David
written by Leroy Dumonde, October 08, 2012 5:35
Awesome, now we know why the 787 turned into such a debacle. Boeing wasn't minding the store.
Who Keeps The Courts Clogged?
written by FoonTheElder, October 09, 2012 12:07
Contrary to the right wing babble, it is the corporations who file the most lawsuits and are constantly trying to gouge money from others, not individuals.
patents ok for drugs
written by tew, October 09, 2012 8:16
The rail against the pharma industry boils down to a denouncement of the profit motive.

I think the patent system works fairly close to the constitution's original, wise intent for pharma. Not perfect, but those incentives to inflate claims and minimize safety issues would be there without patents and can be handled better outside of the patent system.

As the NYT points out the patent system is really crazy with software. And then there's been the huge extension in the duration of protection for artistic works beyond any reasonable time frame. It's been pure lobbying by the entertainment industry. Great grandchildren receive economic rents for songs and books and other works written before their parents were born.
Patents not OK for drugs
written by David, October 09, 2012 8:51
Needed drugs aren't developed, but we have three+ solutions to erectile dysfunction. Hardly an efficient system.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.