Friday, March 21, 2008

Forbes pushing the Bessen/Meurer book

A March 10 piece in Forbes titled They Call This Intellectual Property? trots out the usual parade of horribles but neglects to mention the current status of things.

Thus we have the Smuckers patent, but no mention that the patent is gone:

Blame part of the pile-up on pesky filers of overly obvious patents. Remember that crustless PB&J? There's a patent for it--No. 6,004,596 to be exact (meaning some six million patents came on the books before it).

Issued in December 1999, the patent covers any peanut butter and jelly sandwich missing a crust because it had been removed with a circular cylinder with a crimped edge that supposedly locks in the peanut butter and jelly. (The language suggests putting the peanut butter on the bread and the jelly in between.) J.M. Smucker (nyse: SJM - news - people ) later bought the company of the inventors, who had branded the sandwiches "Uncrustables," and landed the patent too. When Gaylord, Mich.-based Albie's Foods began selling similar sandwiches, the jelly-maker tried to sue for patent infringement and applied for broader protection on crustless products, which a judge later denied. The USPTO is currently reexamining this one to see if it still passes the too-obvious test. (Albie's can still go crustless.)

In fact, the patent died in re-exam, but Forbes doesn't mention that.

Forbes brings up the swing patent, but doesn't mention that this one is gone:

If you don't think you can secure rights to the laws of physics, look no further than patent No. 5,413,298, which outlines a new method of "swinging." To wit: A person, positioned on a standard swing suspended by two chains from a horizontal tree branch, swings from side to side by pulling on one string and then the other. Many, many children at playgrounds have likely infringed on this one.

And Forbes mentions the book by Meurer:

One potential concern: defending patents already on the books. "Small firms have reason to worry that their patents are now invalid [because of the KSR ruling]," says Michael J. Meurer, a professor of patent law at the Boston University School of Law and author of the forthcoming book, Patent Failure: How Judges, Bureaucrats and Lawyers Put Innovation at Risk. Meurer figures that software and "business-method" patents are most likely to be challenged, whereas standards for biotech and pharmaceutical patents will largely remain unchanged.

For good measure, Forbes had ANOTHER article on March 19, titled Roadblocks To Innovation, which again advertises Meurer's book:

Michael Meurer, a professor at the Boston University School of Law, concurs that the U.S. needs patent reform. He contends, however, that neither the piecemeal decisions of the Supreme Court nor Congress' proposed fixes will lighten what he sees as the patent system's drag on innovation.

In a new book, Patent Failure: How Judges, Bureaucrats and Lawyers Put Innovators at Risk, Meurer and his co-author, Boston University law professor James Bessen, conducted the first large-scale empirical study of the costs and benefits of holding patents. Meurer and Bessen concluded that in every industry, except pharmaceuticals and biotech, publicly traded companies spend more money litigating to protect existing patents and paying fees to the U.S. Patent and Trademark Office than they earn from the same patents. (Bessen and Meurer evaluated patents issued by all publicly traded companies between 1984 and 1999.)

A bit of methodology:

Next, we looked at the value as determined by the stock market. We use a statistical technique to figure out what share of the wealth or the value of a company can be attributed to its patent profits. We also looked at how the announcement of a patent lawsuit affected share prices. We used ways of estimating legal fees too.

How is the patent system limiting innovation right now?

These two techniques gave us answers that were pretty consistent. In 1984, on balance, the patent system was working, and it's been working for the pharmaceutical industry. In 1984, the patent system provided a subsidy to firms that did R&D, but things have deteriorated steadily since then. By 1999 the patent system imposed a tax on the average publicly traded firm acting as an innovator.

We made an important assumption in our research: We thought that the people bearing most of the cost defending patent lawsuits are people who have inadvertently infringed on some patent. Independent innovators get in trouble because they innovate. The very act of innovating makes you vulnerable to a patent lawsuit. It also makes it possible to get a patent.

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