Alex Tabarrok’s Patent Policy napkin

Alex Tabarrok's Patent Policy napkin

Alex Tabarrok’s pictorial commentary on patent policy, drawn on a napkin, posits that the current patent system is somewhat too strong and thereby decreases innovation (the link to his original post is below). I have to say, however, that I don’t think patent strength is the problem. The problem is that the growth in patent applications over the last two decades has vastly exceeded the growth in resources available to the patent office, resulting in 1) long delays between patent application and granting (which can render patents completely pointless in fast moving industries), and 2) inadequate ability to examine the patent applications for novelty, usefulness and non-obviousness. This lowers the value of good patents (because they aren’t granted quick enough or may be fallaciously challenged) and increases the likelihood of bad patents being granted. As a result, for many individuals and firms, the expected net gains from manipulating the patent system for the purposes of extortion (hostage taking, patent trolling) now exceeds the expected net gains from using the patent system to actually innovate.

It’s difficult to assess how patent strength affects innovation without first making sure that patents are being granted and used the way the system had originally intended.

Alex Tabarrok’s original post can be found here:

5 Comments on “Alex Tabarrok’s Patent Policy napkin”

  1. stevepostrel says:

    From the comment thread to the post Peter cited, a good review article:

    Click to access HallHarhoff12_NBER_w17773.pdf

  2. Richard Makadok says:

    A cute imitation of the classic napkin on which Art Laffer drew the original “Laffer curve” in 1974, a photo of which can be seen here:

    In my humble opinion, business process patents, in particular, must die. Here is exhibit A:

    — RJM

  3. stevepostrel says:

    I’m surprised nobody’s tried to patent instrumental variables estimation or the like. What with the advent of “big data” analytics as a VC gold rush and the increasing importance of software and business process patents, it seems like only a matter of time until some basic econometric stuff (suitably disguised) gets patented by some start-up or other.

  4. We’re not seeking the peak in the napkin chart. We value not just innovation, but use of it as well. Best is to be to the left of the peak, to cut the cost of monopoly pricing during the patent period.

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