Quote of the Day: Don’t Just Reform Patents, Get Rid of Them

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In 1958, the Austrian economist Fritz Machlup concluded that the patent system was essentially useless. Half a century later, Michele Boldrin and David Levine say that nothing has changed:

One might hope that if it is indeed worth preserving such a large government intrusion into private activity that during the intervening six decades evidence would emerge that patents do indeed serve the desired purpose of encouraging innovation. Sadly the story of the past six decades is the opposite. In new industries such as biotechnology and software where innovation was thriving in the absence of patents — patents have been introduced. Given this continued extension has there been a substantial increase in innovation in recent years? On the contrary, it is apparent that the recent explosion of patents in the U.S., the E.U. and Japan, has not brought about anything comparable in terms of useful innovations and aggregate productivity.

Boldrin and Levine don’t just go after software patents in this paper. They claim that pretty much all patents are useless, serving more to allow big companies to inhibit competition than to protect small companies with bright ideas. And while they admit that getting rid of patents altogether is pretty unlikely, a couple of their suggestions seem like they could form the basis for some worthwhile reforms:

  • Cross industry variation in the importance of patents suggests we may want to start tailoring patents length and breadth to different sectorial needs. Substantial empirical work needs to be done to implement this properly, even if there already exists a vast legal literature pointing in this direction.
  • Reversing the burden of proof: patents should be allowed only when monopoly power is justified by evidence about fixed costs and actual lack of appropriability. The operational model should be that of “regulated utilities”: patents to be awarded only when strictly needed on economic grounds. This requires reforming the USPO, which is urgently needed in any case.

The full paper is here. Brad Plumer has a very good summary here.

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Thank you!

We didn't know what to expect when we told you we needed to raise $400,000 before our fiscal year closed on June 30, and we're thrilled to report that our incredible community of readers contributed some $415,000 to help us keep charging as hard as we can during this crazy year.

You just sent an incredible message: that quality journalism doesn't have to answer to advertisers, billionaires, or hedge funds; that newsrooms can eke out an existence thanks primarily to the generosity of its readers. That's so powerful. Especially during what's been called a "media extinction event" when those looking to make a profit from the news pull back, the Mother Jones community steps in.

The months and years ahead won't be easy. Far from it. But there's no one we'd rather face the big challenges with than you, our committed and passionate readers, and our team of fearless reporters who show up every day.

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