Interesting paper by Hall and Ziedonis: my summary - firms can produce products or patent litigation, but not both. From a social point of view, it might be better if they focused on the former.

Stephen Spear previously posted on the invalidation of (most of the claims of) the infamous one-click patent. Credit goes to Peter Calveley, whose effort we previously mentioned (and I at least contributed to) here. Mainly though this flies in the face of what I was told was the "conventional wisdom among experts" that in fact this was a good patent.

There was a fascinating panel of pharmaceutical patents yesterday evening. It was hard to walk away with the idea that they are a terribly good idea. It really seems that patents are not a subsidy for innovation, but rather a subsidy for marketing effort. I learned some interesting things I hadn't about how Hatch-Waxman works: there is five years protection independent of patent following successful clinical trials. After that firms face patent challenges - and it seems that generic producers have begun to very aggressively and successfully challenge patents after the five year period is over. The patent holders of course have various legal tricks they use to delay things, but basically I think this is good news. However, Hatch-Waxman applies only to chemical entities, not to biotech. Apparently there is a move in Congress to extend Hatch-Waxman to biotech - needless to say big pharam is aggressively opposing this, but it seems it may actually come off.

Basically five years monopoly is the reward for carrying out clinical trials that everyone can use for free. Left open is why other users of the clinical trials should get them for free; and why on earth we have the pharmaceutical companies carrying out the clinical trials in the first place.

Perhaps also not surprising, but still a very nicely done paper by Petra Moser: inventors patent things when they can't keep them secret. Not stunning support for the idea that patent systems are good because they get inventors to reveal their secrets.

FDI = foreign direct investment

This afternoon we learned that if you give monopolies to foreign investors they will invest more in your country. Historically this was widely used to lure skilled artisans from one country to another. Of course another widely used method was to kidnap them...perhaps as an alternative to developing countries introducing patents under the TRIPS, they should just kidnap foreign investors.

On the bus on the way to the conference we were talking about what Microsoft is up to with the waving of patents and signing of licensing agreements with open source companies. The lunch keynote talk was by Brad Smith senior vice president and general counsel for Microsoft. I'm still catching my breath - at least as I read between the lines Microsoft's plan is to impose a tax on the commercial open source market. Historically the Microsoft model has been one of a broad-based tax - deals with computer manufacturers to pay a fee on every computer sold. Although the short-term revenue from Vista is good Microsoft I believe rightfully fears commoditization of the operating system market. A tax on all operating systems seems like a sure bet for long-term revenues. I'm not at all convinced it will work, but I can understand why they think it is worth a shot.

I am in Berkeley for a conference on the economics of competition and innovation - mostly about patents. It's a good conference, organized by Richard Gilbert, so I thought I'd try my hand at live-blogging. You can access information about the conference, including the papers here. I was a discussant at the morning session, which was quite lively. There were two papers, one a nice clean paper by Carl Shapiro showing how giving stays of injunctions to allow the redesign of products can substantially reduce the hold up problem, and a second paper by Anne Layne-Farrar attacking the Shapiro paper - mostly pointing out that the analysis doesn't apply in many cases. Since Carl didn't argue that it did in those cases, I'm not sure why this was an issue.

The discussion was quite lively. Strangely, I was the quiet one - Carl's model of downstream innovation is one in which patents are completely neutral, which I found useful for pointing out what we should be looking for to determine whether patent systems are a good idea or a bad idea. The wild discussant turned out to be Aaron Edlin who I hadn't met before, but is highly entertaining. He also appears to have no higher regard for the patent system than I do - and said so in no uncertain terms. Interestingly he comes at this from a business perspective - he runs a successful publishing business, BEPress. I think he is part of the majority of the R&D surveys in which they say that patents are only a hindrance to business.

Slashdot is on a roll today pointing to also to this Ars Technical article

The International Trade Commission (ITC) has announced that it plans to begin an investigation into several companies that either make or use certain hard drives. In a statement issued yesterday, the ITC said that the hard drives in question are alleged to infringe on patents owned by California residents Steven and Mary Reiber. The two filed a complaint with the ITC in September, saying that the importation of the hard drives violates section 337 of the Tariff Act of 1930.

But the good news is that if not for the prospect of being able to halt all imports of hard drives, we wouldn't have had this great invention in the first place.

Can't we just get rid of the patent system?

I have some vague recollection of a top Microsoft executive leaving to join an IP firm...this appears to have some details. The next move in the ballet was predictable

Patent Infringement Lawsuit Filed Against Red Hat & Novell - Just Like Ballmer Predicted

I don't suppose it requires a conspiracy theorist to see Microsoft as spinning off a subsidiary to spread legal FUD against competitors. Of course you might think the patent has some merit. Ars Technica has a rather nice summary the last time the patent was used in a lawsuit

The language of the patent is interminably vague and could apply to any one of a dozen different user interface elements that are found in all modern operating systems, but seems to be most closely related to the idea of "tabbed" dialog boxes, like the ones seen in both Windows and Mac OS X. Ironically, the company to first release a modern-looking tabbed dialog box was none other than Microsoft with early versions of Office, although Apple had a Control Panel with similar functionality as early as Mac OS System 4.2, circa 1987. It remains to be seen whether or not IP Innovations will go after Microsoft and other system vendors after they are finished with Apple.

The dead hand of Xerox reaches out from the grave...

Common sense suggests that file sharing should have a fairly substantial negative impact on music sales. A paper by Felix Oberholzer-Gee and Koleman Strumpf published in The Journal of Political Economy argues that any such effect is negligible. On the grounds that wishing for ponies does not make actual ponies appear, I have been personally skeptical of this result. Stan Liebowitz - with whom I disagree on many things copyright, but who is a meticulous and honest researcher - has gone through the paper carefully. You can find the fruit of his labor here. He examines the data that is available and finds little merit in the Oberholzer-Gee and Strumpf conclusions. "File sharing has no impact on sales" is not a terribly good argument against copyright because the evidence suggests it isn't true.