Law in Contemporary Society

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MatthewZornSecondPaper 11 - 28 May 2010 - Main.MatthewZorn
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What is a Patent?

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Why do we have Patents?

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Patents give their owners rights to future profits. In doing so, patents create incentives to research, to develop, to invent, to produce, to expend resources in order to bring the patented item into being. Patents may also encourage disclosure. But our patent system, indeed the concept of a patent, may be a relic of the past. Patents originated in a different time when inventions consisted of tangible goods: think telephone or light bulb. Now, a substantial portion of patented inventions consist of the intangible: think genes and software. This author finds it unlikely that such intangible things were originally intended to fall under patent protection. So it goes.

There are many historical and emerging arguments against patent systems. For one, patents can be quite obstructive and create gridlock. Michael Heller calls this effect the “anti-commons”: too many people have too many rights. An “anti-commons” prevents the holders of these rights from assembling them, which decreases social-welfare. His most contemporarily relevant example is in biotechnology. To develop new drugs, companies often require the license of patents that belong to other companies. However, as more and more licenses are required, the bargaining and transaction costs may become excessive and outweigh the future financial expected value of a marketable drug. Here, Heller argues, the patent system works backwards and consequently produces the opposite goal of what it is designed to do: increase social welfare. Accordingly, the latest and greatest Viagra may be stuck in the labs because the costs of developing it are too prohibitive.

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Patents give their owners rights to future profits. In doing so, patents create incentives to research, to develop, to invent, to produce, to expend resources in order to bring the patented item into being. Patents may also encourage disclosure. But the patent system may be a relic of the past. Patents originated in a different time when inventions consisted of tangible goods: think telephone or light bulb. Now, a substantial portion of patented inventions consist of the intangible: think genes and software. This author finds it unlikely that the founding fathers intended to grant patent protection to algorithms and chemical formulas. In other words, the modern umbrella of patent stretches too far. So it goes.
 
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“Patent thickets” are a major problem preventing innovation in industries that require the coordinated use technologies owned by competing market participants. These problems are especially urgent in software and pharmaceuticals, but that is because those are the areas in which patents are most prominent. Patents are the problem. Also, perhaps mentioning a drug other than Viagra might do more justice to the gravity of the situation.
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The purported benefit of a patent may be over-matched by accompanying harms. Patents can be quite obstructive and create gridlock when rights are fractured among too many parties, creating an "anti-commons." Bargaining and transaction costs may become prohibitive when patent owners each individually own their own stop signs with the power to halt development. Here, the patent system works backwards. The latest and greatest Viagra may be stuck in a lab somewhere because the costs associated with its development are too prohibitive. Even more fundamental and less theoretical are systemic costs required to maintain an intricate patent system. These costs include the cost of maintaining of a regulatory agency, litigation costs, and other legal costs.
 
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"Latest and greatest" Viagra was a stab at some sardonic humor. I still like it.

You could talk about the (recent) impossibility of bringing to market a second test for breast cancer, because patents on the BRCA-1 and 2 genes prevented it. The ACLU and PubPat? overturned the patent in court, but that solution was not so much an overcoming of a patent thicket as an elimination of the patent itself.

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How are we fixing the the System?


Revision 11r11 - 28 May 2010 - 17:04:06 - MatthewZorn
Revision 10r10 - 28 May 2010 - 01:29:16 - MatthewZorn
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