From Mises Blog:
In my 2007 post What Are the Costs of the Patent System? (discussed in “Reducing the Cost of IP Law“) I tried to estimate the cost of the patent system (see also my reply to David Friedman in the thread to “Volokh’s David Post: The High Cost of Copyright”; Yet Another Study Finds Patents Do Not Encourage Innovation; and There’s No Such Thing as a Free Patent).
I concluded there is at least a $31 billion a year net loss to the US economy from the patent system. Take a look a this fascinating graphic from Anatomy of a Patent Litigation. It estimates about $31 billion a year as the cost of patent litigation in the US. These cost estimates are not astounding. What is astounding is that anyone thinks this mercantilist statist monstrosity is libertarian or free market.
Update: Note, my previous estimate was based on a conservative assumption that patent litigation costs $20B a year. The more recent statistics as indicated in the chart is $11B higher. That means my original estimate of $31B net loss should be more in the $42B net loss per year range.
Silas, LNS weep (but in their own original, independently-created tunes, to avoid theft).
“What is astounding is that anyone thinks this mercantilist statist monstrosity is libertarian or free market.”
Is that the reason for the flood of comments when IP is the issue? It seems obvious that the invisible realm where ideas come from cannot be designated as exclusive which means that ideas are destined to be put into the service of humankind in the quickest way possible.
Well, I guess you’ve basically conceded the utilitarian side. If the cost of the patent system is only $31 billion, that’s probably a lot less than the total consumer surplus resulting from goods that were created specifically to patent and put into use. Or is there a line in your calculation where you netted this out?
Thanks for the evidence.
Gee, if there were no real property rights there would be no real property rights disputes either.
Having worked in a number of high tech start-ups, the liability costs of patents are annoying, but they are small compared to other costs.
The real big one, IMHO, is having a staff of high paid high talent engineers invent something that has already been invented, but that they can’t use because of copyright or patent. Even worse, instead of these engineers aiming to make the optimum design, they aim for the kludge design that has all this odd unnatural ancillary crap in it which may not be optimal, but serves to get around some patent or copyright restriction. Even having things that look like a competitors, or engineers who have seen a glimpse of the competitor code can be a liability. So instead, many places just invent a poorer version of the wheel from scratch all over again. Not to mention, this talent could be used on something so much more productive otherwise, so the opportunity costs are huge.
Also, there are scale costs. IMHO, every vendor having incompatible, non standard, and unworkable parts with every other vendor is not a normal part of a free market. IMHO, in a normal free market, companies would gravitate to standardized interchangeable parts that would be easy to migrate and upgrade. Imagine that there are 100 million cars, and non competitive parts adds $3000 to the price of the car, and non standard parts adds $3000 to the costs of repairs over the cars lifetime, that’s 600 bln with cars alone. Not to mention that planned obsolescence won’t work without patent, because some 3rd party vendor could always come in and undercut. Also, not to mention the disposal and waste costs from the inability to upgrade or repair older models.
There is also a lot of time wasted just making patents that are not needed to provide a service or a product, but to get into a cross license agreement or to use as lawsuit insurance.
Silas, has someone ever answered you wave question? Someone would have had to, can you do a bullet list of the responses you’ve been given (like we often do about the pro-ip arguments we’ve heard from you etc)?
Someone would have had to of covered homesteading (likely would have covered it every time they’ve responded to your “iron clad” objection) similar to the post above. Are waves physical and cna you control them and “occupy” them? Are wave different than particles that can be controlled and occupied? The right to pollute your own property can be homesteaded, the right to pollute someone else’s property cannot be homesteaded it can only be permitted by the owner. I’m sure theoreticians other than us comment posters have already covered the homesteading of radio waves. Because you have emitted a wave in a particular frequency are you really concluding that no one can ever do that again? My farts vibrate at a particular frequency (actually a range of frequencies), am I stealing from you if my farts are too similar to yours?
The patents are different than homesteading and this is why everyone keeps bringing it up, I’m sure you understand this; you do right? It it that you disagree with homesteading as a means to legitimately appropriate property?
Patents are not homesteading, a patent involves you doing something on your own property (or in your mind) and then filing a paper with the gov to declare that no one in the country to do what you have just done. Even in cases where the other person thought of the idea on their own. I believe it was the telephone that was a perfect case of this happening and software programming yields many more examples where “obvious solutions” are now illegal because someone divined the solution first making the act of solving any programming problem illegal unless you’ve cross checked the full patent portfolio of every other software programmer in the country. Anything less puts every programmer at risk of being a dirty thief without even knowing it (by your definition of IP). You mention you don’t necessarily agree with the current system, is this what you mean? If so then we may have some things in common. Let’s talk about those for a while, then we can put smilies in our posts and avoid name calling
and seriously, that whole mousetrap thing? Are you honestly telling me that mouse infestations were impossible to solve until someone invented the patent system? Then, and only then, did trapping begin? I’m so glad the British brought with them patents to North America. I’m baffled that the Natives were able to catch any food at all without patents to let them invent trapping. What skills they must have had to be capable of doing everything by hand using patent free techniques. But how could they even do this by hand? Wouldn’t they have been thieving the hand use technique?
And further, how many “ideas” are you thieving (by your definition) every time you mention something on this board that a person (live or dead ) has already mentioned? By our moral philosophy this is permitted, by yours it is frobidden.
haha “forbidden” not “frobidden”…I don;’t really proof read these things
“It estimates about $31 billion a year as the cost of patent litigation in the US.”
After prohibition was ended, organized crime moved into gambling, prostitution and drugs.
If patents were abolished, the patent attorneys would not disappear. The tick will find another host. The cost will be imposed on another part of the economy.
I have to go now. Silyas it’s been great. We’ll chit chat again next time. Enjoy the weekend