≡ Menu

A “Patent Stimulus” to End the Recession?

From the Mises blog. Archived comments below.

It’s bad enough to have mainstream economists tell us we need to “stimulate” the economy by printing money, to get us out of the recession. Now we have some calling for the printing of patents to do the same, by patent attorney Gene Quinn, about whom I’ve blogged before.1 You remember Quinn–he’s the guy who ridiculously argued that we need a state-granted monopoly system … so that Albert Einstein could have had a job in the Swiss patent office.2

In Patent Stimulus to Solve Great Depression II, Quinn writes:

If we really want to get out of this economic downturn we need a Patent Stimulus Plan.  Yes, that is a PSP, not of the Sony variety though, a PSP of the get us the heck out of this miserable recession/depression variety.

… The nice thing about this Patent Stimulus Plan is that it will cost only a small fraction of the amount of money we have already wasted on failed economic stimulus.  What we need to do is have President Obama issue an Executive Order directing the Patent Office to start allowing patents.  A 42% allowance rate during the first quarter of 2009 is wholly unacceptable. … So while you are at it President Obama, order the Patent Office to issue a patent UNLESS there is a reason to deny it.

The sheer ignorance and stupidity of this argument is breathtaking. How in the world would issuing more paper certificates that entitle people to sue others in federal court stimulate the economy? And what would it even mean for the President to “order” the PTO to start allowing patents? Which ones? All of them? How does he know a 42% allowance rate is “unacceptable”? What’s the “optimal” rate? This reminds of the hubris of Obama transition team member Reed Hundt, formerly Bill Clinton’s FCC Chair from 1993 through 1997, who had a patent reform proposal to reduce the number of patents granted, increase fees, and increase funding of the USPTO, in connection with which he wrote: “First, we should slash the number of patents granted each year by 90%. In 2004 the U.S. Patent &Trademark Office issued 165,000 patents. Sixteen thousand is more like an optimal number.”3

Such ridiculous arguments are not restricted to hacks like Quinn–whom Kevin Carson accurately described as arguing “in the tone of a belligerent drunk announcing he can lick anyone in the bar.” None other than Paul R. Michel, former chief judge of the United States Court of Appeals for the Federal Circuit (CAFC), which handles patent appeals, co-authored a piece in The New York Times, “Inventing Our Way Out of Joblessness,” earlier this year, with Tessera CEO Henry R. Nothhaft (Michel appeared on a recent Federalist Society IP panel, as mentioned in my post Federalist Society’s Intellectual Property Practice Group National Lawyers Convention Panel Online). Michel and Nothhaft argue that we need the USPTO to get through its backlog of patents to jump-start the economy and create jobs:

To revitalize America’s engine of entrepreneurship — and create as many as 2.5 million jobs in the next three years — Congress should, first, give the patent office a $1 billion surge to restore it to proper functioning.  …  according to our analysis of the data in the Berkeley Patent Survey, each issued patent is associated with 3 to 10 new jobs.

So our guess is that restoring the patent office to full functionality would create, over the next three years, at least 675,000 and as many as 2.25 million jobs. Assuming a mid-range figure of 1.5 million, the price would be roughly $660 per job — and that would be 525 times more cost effective than the 2.5 million jobs created by the government’s $787 billion stimulus plan.

… Taken together, fully financing the patent office and creating an innovation tax credit could mean as many as 2.5 million new jobs over three years, and add up to 600,000 more jobs every year thereafter.

The Wall Street Journal published a devastating, smart, withering reply, “Want to Create Jobs? Certainly Don’t Rely on the USPTO” (2), which was written by “venture capitalists Jason Mendelson and Brad Feld, who are managing directors at Boulder, Colo.-based Foundry Group, and Paul Kedrosky, a senior fellow at the Kauffman Foundation and author of the financial blog Infectious Greed.” As Mendelson et al. write:

A patent myth is loose in the land about their importance to innovators and those that finance them. In, fact, recently the New York Times published an op-ed titled “Inventing Our Way Out of Joblessness.” The authors, Paul R. Michel and Henry R. Nothhaft, argued that the best way to jump-start our moribund economy was for the United States Patent and Trademark Office to get through its backlog of patents.  Their premise is that the more patents are granted, the more jobs will be created in the U.S.  Unfortunately, their logic is flawed and biased.

… the authors advocate a tax-incentive for small businesses who receive patents. This is based on their “guess” that letting loose the USPTO will create at least 675,000 new jobs and offset their estimation of $570 million in tax revenue. There is absolutely no support for their job creation claims. …

Also, plenty of scholars believe that patents (especially in the fields of software and business methods) are a net negative for job creation and innovation in this country. [They are right. See my post Yet Another Study Finds Patents Do Not Encourage Innovation. –SK] These expanded patents fail the classic patenting criteria of being novel, useful, and non-obvious. They aren’t innovations, rather vague concepts that allow patent collectors to sue the real innovative companies in our society. Even Microsoft co-founder Paul Allen is in the patent troll and tax game.

Finally, while Mr. Nothhaft describes himself as the CEO of a “technology miniaturization firm,” his company, Tessera, makes almost all of its revenue from patent-related licensing and royalties.  While we know and respect Mr. Nothhaft, we believe his current company has a material and undisclosed interest in the USPTO granting more patents. …

Our interests are this: We believe that innovation and real, sustainable, job creation are good.  As venture capitalists, we acknowledge that our industry will do well if both of these things happen, but this will also be good for our country, not just for the interests of a particular company or a subset of the economic ecosystem that scavenges for dollars by suing real innovative companies.

What should be done about patents? The answer needs to be based on what drives entrepreneurs to create companies, and what approach will lead to the clearest and highest quality patents.  The U.S. innovation economy has been harmed by low-quality software and business method patents, as well as a legal system that biases process and lawsuits over real invention.  Speeding up this flawed process would be negligent.

Archived comments:

{ 19 comments… read them below or add one }

Seattle December 10, 2010 at 8:50 am

You remember Quinn–he’s the guy who ridiculously argued that we need a state-granted monopoly system … so that Albert Einstein could have had a job in the Swiss patent office.

Woah woah woah woah woah woah woah woah WOAH! Hold on for a second there, cowboy! I refuse to believe anything alive could possibly seriously endorse that argument. Are you sure Quinn isn’t a cleverly painted rock of some sort?


Ohhh Henry December 10, 2010 at 10:23 am

But you have to admit that this is the kind of intellectual argument that can be stretched to fit into any trendy societal goal that comes along.

End the economic depression … allow more patents.

Fight CO2 and global warming … allow more patents.

Unless you want the terrists to win … allow more patents.

To combat the decline in public schools … allow more patents.

Stop oil pollution in the Gulf of Mexico … allow more patents.


J. Murray December 10, 2010 at 5:43 pm

If you want the World Cup to be hosted in America in 2022 … allow more patents.


Gene Quinn December 10, 2010 at 10:53 am

Thanks so much for reading IPWatchdog.com. I am truly grateful. My only regret is that you don’t seem to have learned anything.

You say my positions are ignorant and stupid, but over and over again you either misrepresent what I say or you play stupid yourself. You pick things out of context and then manipulate them to change the meaning. When you do pick things in proper context you obviously don’t have the requisite knowledge to understand or offer meaningful insights.

For example, you ask how I know a 42% allowance rate is unacceptable. If you look at the historical allowance rate prior to the second term of the Bush Administration when Jon Dudas was PTO Director you find that the allowance rate hovers between 60% to 70% year after year. If you were knowledgeable at all about patents, innovation or what happened in about 2004-2005 to change the allowance rate you would know that the Office decided to push the allowance rate down for wholly subjective reasons. Patent examiners were rewarded for not issuing patents, and entire Art Units in the Patent Office didn’t issue a single patent for years.

So go ahead and pick on my if you like, it is good for my readership. It also exposes you for what you are, which is someone who knows very little about what you write.



Beefcake the Mighty December 10, 2010 at 11:04 am

“For example, you ask how I know a 42% allowance rate is unacceptable. If you look at the historical allowance rate prior to the second term of the Bush Administration when Jon Dudas was PTO Director you find that the allowance rate hovers between 60% to 70% year after year. ”

So your position is that, what is “acceptable” is that which is in line with historical patterns? What does this have to do with being acceptable, to say nothing of addressing Kinsella’s question about what rate is optimal? Please tell.


Stephan Kinsella December 10, 2010 at 11:22 am

He’s not serious, I don’t think. As I noted on this comment on Carson’s post,

I don’t mean to be cruel. But poor Quinn’s post on his site about this is so appallingly inept, it displays such a lack of intellectual acumen and facility in the rudiments of intelligent discourse, that one can only feel embarrassed for him. I’m going to be charitable and assume that his strength lies in patent law. It seems to me that Quinn is doing this all as a schtick for getting clients. It’s just heat and noise to him, a way to flash and make casual onlookers think he’s involved and knows what he’s talking about. It’s a way to make clients think he’s passionate about their cause, in some political sense. But it’s not serious argumentation.

He basically admits this when he writes above, “So go ahead and pick on my if you like, it is good for my readership.”His answer here about allowance rates is typical. I’ve been a registered patent attorney since 1994, a lot longer than Quinn, and have prosecuted hundreds of patents. I am well aware that allowance rates fluctuate. So what? (BTW Quinn still illiterately claims to hold an “L.L.M.” degree–too dull to realize he has an “LL.M.” (LL means laws)–even though I explained this to him over a year ago.)

As for Quinn’s “arguments”:

the Office decided to push the allowance rate down for wholly subjective reasons. Patent examiners were rewarded for not issuing patents, and entire Art Units in the Patent Office didn’t issue a single patent for years.

As if the allowance rates that existed previously don’t exist “for subjective reasons”–the entire obviousness inquiry is subjective, as are the grounds given by courts in changing legal standards daily–not to mention the arbitrary and vacuous, contradictory and unjust “reasoning” of Congress in enacting patent law in the first place. Yet Quinn knows that reducing the allowance rate is “unacceptable”!

With friends like this, the patent system doesn’t need enemies!


Peter Surda December 10, 2010 at 11:26 am

Dear Gene,

I don’t know if you remember, but we briefly debated on your blog last year. At that time you showed no interest in understanding your opponents’ arguments. You just made a bunch of assumptions, which you neither explained nor justified, and starting from that, you proceeded to defend your position. It looks like that unscholarly approach is still prevailing.

Anyway, notwithstanding the problems with the assumptions, you won’t get much support for utilitarian arguments here. As a demonstration of why it’s not a popular methodology with Austrians, let me ask you what rate of rape would you consider consider as “optimal”?


J. Murray December 10, 2010 at 5:56 pm

So, what, if the Patent Office is short on its quota, go out and ask for someone to “invent” something ridiculous like a hanging microwave bacon rack? Throw out cash prizes to hit the optimal level?

Or, if the optimal number of patents are filled, turn away potentially amazing inventions because, hey, we’re done for the year?

This just illustrates the insanity that is the concept of a patent.


Mike in MI December 11, 2010 at 9:08 pm

Hanging microwave bacon rack?

Yes, please.


Alex Barnes December 13, 2010 at 2:08 am

That already exists. My parents own one.


J. Murray December 13, 2010 at 2:26 pm

I picked that one intentionally because I remember the outrage of the day back in the early 1990s when some kid patented that and one of those television infomercials made one and sold it for $19.95 plus shipping and handling.


Wildberry December 13, 2010 at 4:20 pm

J. Murray,

I get that this is a totally insane proposal, but pecisely because it has nothing to do with “the concept of a patent”.

Is that like saying that fractional reserve banking “just illustrates the insanity that is the concept of a bank”?

Or saying of an ambulance chasing attorney how that “just illustrates the insanity of traffic laws”?

Or saying of hanging microwave bacon racks, that just shows the “insanity of microwave ovens?”


David Koepsell December 10, 2010 at 11:34 am

Wow, Quinn begging the question? Go figure, never saw that coming. Seriously, I use his posts to demonstrate fallacies in my logic classes. Give him a couple more comments before he launches into ad hominems.


Stephan Kinsella December 10, 2010 at 11:39 am

Well, if he starts that, I’ll ban him. Would only be fair–he banned me from his site, and not for ad hominem: but for daring to question his authoritative pronouncements. This may be why his readership seems way down since he began serially alienating any who dare question his statements or ideology, and he has had space for rent on his page more frequently.


Kevin Carson December 10, 2010 at 1:17 pm

I suppose in a cartelized, state-capitalist economy, any artificial property rent that can be passed onto consumers as a cost-plus markup is a “stimulus” insofar as it shows up as an increase in the GDP. But then breaking windows and forcing people to replace them would add to the GDP, too. Woo-hoo!

A pretty wide range of areas of our life are governed by accounting mechanisms that treat the expenditure of money on inputs as an output. This includes not only the calculation of GDP, but the practice of “overhead absorption” under the standard corporate management accounting system.

So I guess if your goal is an economy where the government’s main goal is to prevent deflation of anything, to keep everyone running as fast as they can on the treadmill doing the moral equivalent of digging holes and filling them back in, and to maximize the number of people working 40-hour weeks just to pay artificial scarcity markups on everything, Quinn’s your man.


Silas Barta December 10, 2010 at 2:23 pm

Good points, but IP isn’t an “artifical scarcity markup” if the idea only exists because it was produced predicated on having exclusivity in it.

GDP is accounting is indeed stupid, and I don’t know how it persists they way the use it for policy recommendations. Basically, we have:

Good times –> more exchanges involving money –> higher GDP

Therefore, high GDP indicates good times. So far, so good.

But then some genius comes along and says, “if we jack up GDP with pointless expenditures, that will cause good times”. Um, no.


Wildberry December 10, 2010 at 3:24 pm

“IP isn’t an “artifical scarcity markup” if the idea only exists because it was produced predicated on having exclusivity in it.

“GDP is accounting is indeed stupid”

Two, too true statements. And short too.

Well done.


anon December 10, 2010 at 2:05 pm

It’s for the fees silly. They can just take money from hoards of duller inventors who would ordinarily by turned down.


J.E.C. December 12, 2010 at 5:59 am

A patent attorney thinks that boosting patents would be good for the economy, eh?

I am completely shocked. What an utterly unexpected argument. Next you’ll tell me that engineer and construction lobbies are behind all the hullabaloo about infrastructure, aren’t you?

  1. See Gene Quinn the Patent Watchdog; Gene Quinn, Joke; Gene Patent Absurdity; Shughart’s Defense of IP; IPWatchDog Patent Lawyer Sued by Invention Submission Corporation; Gene Quinn: Patent Twit of the Week; Koepsell – Quinn “Debate” on Gene Patents; Is It So Crazy For A Patent Attorney To Think Patents Harm Innovation?; Patent Lawyers Who Don’t Toe the Line Should Be Punished!. []
  2. See Absurd Arguments for IP. []
  3. This is discussed in my post Obama Transition Team Member on “Optimizing” the Patent System. []
{ 2 comments… add one }

To the extent possible under law, Stephan Kinsella has waived all copyright and related or neighboring rights to C4SIF. This work is published from: United States. In the event the CC0 license is unenforceable a  Creative Commons License Creative Commons Attribution 3.0 License is hereby granted.