Software Industry Needs 6 Million Patent Attorneys and $2.7 trillion per year to avoid infringing software patents

A new paper by Yale law professor Christina Mulligan and Timothy B. Lee, Scaling the Patent System, conservatively estimates that if US software industry companies wanted to stay abreast of US software patents to avoid infringing them, it would take roughly 2 million patent attorneys working full time to examine all the software patents. And this assumes these patent attorneys would only need 10 minutes per patent, which “is an unrealistically low amount of time.” And at $100 per hour, this would be $400 billion per year. In an industry that is valued at about $224 billion. (See pp. 15-16 of their paper.) And in a country where there are only about 40,000 patent attorneys. Not two million. Given that $100 is way too low—it’s more like $300 or more; and that 10 minutes is way too low—let’s say, 30 minutes at a minimum. That means it would really cost at least about 9 times more, or $2.7 trillion per year, and maybe about 6 million patent attorneys. That is about 18% of the entire $15 trillion US economy. Just for the software industry alone. And note: spending this money does not give a company freedom to operate. It only allows it to be aware of patents it needs to avoid infringing—by refraining from using certain techniques, even ones the company independently invented on its own.¹

I guess I see why patent shills say that if we made the patent system even stronger it would be a jobs program and “stimulate” the economy.² We’d have a lot more lawyers employed, that’s for sure!

In any case, keep in mind that this multi-trillion dollar annual cost would be on top of the hundred billion dollars-plus the patent system already imposes on the economy every year (Costs of the Patent System Revisited).

And all this is still a conservative estimate since it takes more than 30 minutes to review a patent, and because this is only for the software industry and software patents. If all companies in all industries had to review all relevant patents, the cost would likely be in the hundreds of trillions of dollars per year—multiples of the annual US GDP. Hmm. Maybe I’m wrong. Maybe patent is worse than copyright after all. (Patent vs. Copyright: Which is Worse?)

See also “Patent lawsuits aimed at big and small operators threaten web freedoms,” Charles Arthur, The Guardian (18 April 2012), which discusses Mulligan’s paper:

“Patents definitely threaten the open web,” [Mulligan] said. “Patent owners have sued other companies for such banalities as using jpeg files and transmitting data typed into websites. By locking up the basic building blocks of the internet and obvious software processes, patents hamper the free flow of information and increase the financial risks associated with simple activities, such as having a website. As we discuss in our paper Scaling the Patent System, software writers and web developers couldn’t discover all the patents relevant to their projects if they tried, so they are left at risk of crippling patent lawsuits for any project they do.”

The money spent on patents – either acquiring them or litigating them – distracts from more productive effort, she says. “Resources that could have gone into research and development go into purchasing patents. Google acquired Motorola Mobility for $12.5bn, after Microsoft and Apple spent $4.5bn to purchase 6,000 patents from Nortel Networks. These billions could have been used to develop new products and inventions.”

Mulligan also discusses her paper with Jerry Brito on the Surprisingly Free podcast:

1. Tabarrok: Defending Independent Invention; Common Misconceptions about Plagiarism and Patents: A Call for an Independent Inventor Defense. [↩]
2. See A “Patent Stimulus” to End the Recession?; Patent Shills want to make patents “incontestable”. [↩]