Aug 13, 2013

The Case Against Patents

I just read "The Case Against Patents" by Boldrin & Levine (Journal of Economic Perspectives, Winter 2013). Pretty good! Some quotes from it: 
[TRIPS] often focused on how to prevent ideas from high-income countries from being used in low-income countries. 
The rent of the monopolist is a lot higher than an individual consumer’s deadweight loss. 

[Patents] the main driving force was the rent-seeking efforts of large ... companies unable to keep up with new and creative competitors. 
In 2010, according to the US Patent Offifice, 244,341 patents were issued, which would imply roughly $3 billion in legal fees per year.
. . . legal fees for filling a patent run upwards of $7,000 and roughly half are rejected. 
Patents: “regulatory capture”!
This political economy logic brings us to advocate dismantlement of the patent system. 
. . . first-mover advantage in pharmaceuticals is larger than is ordinarily imagined. 
. . . if government intervention is indeed needed in this market, a system of prizes might be superior to the existing system of monopolies. 
The total cost of developing a new drug, including failures, is quickly approaching the $1 billion mark. 
Texas Instruments is such an important source of litigation that empirical work on patent litigation usually uses a dummy variable for TI . . .  
. . . less than 35 percent of managers indicate that patents are important. 
US Patent 6,025,810 was granted for moving information through the fififth dimension. 
. . . if you wish to innovate, you must acquire an expensive patent portfolio to avoid trolls. 
[Patents] weapons in an arms race . . .  

. . . strengthening the patent regime increases patenting!

Patents as a rent-seeking tool.

Innovation = competition + first mover incentives.

When should patents be awarded? 1) high innovation costs, 2) low imitation costs, and 3) high inelasticity of demand.


[Patents] case in which partial equilibrium and general equilibrium "move" in different directions.

And finally, a great Fritz Machlup's reflection: 
If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.
On the same topic see the paper by my colleague Julio Cole.  

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