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:
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.