Albert Hu and Ivan P'ng say yes link here figures here. My own reservation about this study: patent strength has a large positive impact on foreign direct investment; we might expect this to increase growth rates in patent intensive industries. The paper also has a good summary of the literature that examines the impact of patents on patenting (!!) and R&D. By-the-way Michele and I redid the Kanwar and Evenson regressions (using their data which they kindly provided us with) link here: when you account for the size of a country - obviously an important determinant of per capita R&D when domestic markets matter - the results are reversed.

Dan McCurdy's article on Patent Trolls spawned supportive comments from CATO's Timothy Lee, which in turn attracted the approving notice of Ramesh Ponnuru and Jim Manzi over at National Review.

The Association of Government Accountants (formerly the "Federal Government Accountants Association") has awarded the US Patent and Trademark Office its "Fiscal Year 2007 Performance and Accountability Report Award" (which looks oddly similar to the USPTO's own "red ribbon" patent grant) one of 17 federal agencies to get this award that year.

Not only does the USPTO prepare "a well structured, logically organized and easy-to-navigate report" it's very "productive" too. As it boasts on its website,

Highlights of USPTO accomplishments for the past year include ... Increased patent production by an additional 14 percent over 2007 by examining 448,003 applications the highest number in our history. Production has increased by 38.6 percent over the past four years, compared to a 21.3 percent increase in application filings during the same period.

It's sobering to think how much worse off the US would be in this recession without all this productivity.

For some more interesting patent statistics, see the World Patent Report: A Statistical Review (2008) for example, as of about 2006, there were about two million patent applications filed per years worldwide; about 750,000 patents issued (granted) every year; and about 6.1 million patents in force around the world.

(cross-posted at Mises.org)

In Global Online Effort To Ascertain Validity of Patents, Eric Sinrod notes the effort of startup Article One Partners to improve the quality of issued patents. (See also Online startup aims to improve patent quality.) The company seeks to do this by offering substantial payments to people who submit relevant prior art that helps to determine whether a given patent is valid or not. The resulting prior art can help to show a patent is invalid--or enhance the validity of others. Now I'm suspicious of the idea of trying to "legitimize the validity of patents"--but this is probably just PR. I suspect that on balance more patents will be sunk than strengthened by this type of crowdsourcing. Sunshine makes a good disinfectant!

As noted here here, one of Obama's transition "team members is Reed Hundt, who was Bill Clinton's FCC Chair from 1993 through 1997. Hundt is slated to work on the agency review team in charge of international trade and economics agencies." In a 2006 Forbes op-ed, Hundt had various suggestions for patent reform. They are not all terrible, but they continue to miss the point by struggling to find some way to make the system work better. Part of his proposal is to reduce the number of patents granted, increase fees, and increase funding of the USPTO. Writes Hundt: "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." He proposes a $500k fee companies can pay for a "fast-track" one-year patent application review.

Typical bureaucratic hubris to think he knows the "optimal" number of patents--though technically he is right that 16,000 is "more like" an optimal number than is 165,000, since the optimal number is zero. This is not dissimilar to another recent proposal to improve patent quality and reduce the number of patents granted by radically increasing filing fees from the $1000 level to about $50,000. As Manuel Lora noted to me, this is like the Laffer Curve of Patents (see Rothbard's evisceration of the Laffer Curve). Such high fees would of course reduce the number of patents, but would also tend to benefit large corporations.

These guys ought to give up trying to fine-tune an inherently unjust system and just admit it ought to be scrapped. Hundt writes, "We have a horribly expensive system, with huge backlogs and a daunting litigation risk. No wonder the Chinese don't want to adopt it. Let's get rid of it and start from scratch." Well, he's half-right.

***

A few more responses to selected comments by Hundt:

Second, we need to spend more money on the system. The budget of the U.S. Patent & Trademark Office is $1.5 billion. That ought to be tripled to $4.5 billion . . .

Who do you mean, "we," kemosabe? Not if it requires taxpayer funding.

We don't want grossly overworked professionals trying to figure out whether specific algorithms used to refresh the pixels on a computer monitor screen ought to be patented.

No, we want bright young Clintonite master bureaucrats!

Fourth, all patent case awards should be forward looking and linked to lost sales. In other words, plaintiffs who win patent-infringement challenges should be able to enjoin only future competition.

I thought he was onto something with his first sentence, but then he shys away from radical reform by not urging the abolution of all patent injunctions.

The November 2008 Intellectual Property Colloquium discusses the recent In re Bilski patent decision by the CAFC. In that case, the court abandoned State Street's "useful, concrete and tangible result" test for the patentability of methods, and reaffirmed the "machine-or-transformation" test. Under this test, a method or process claim in a patent is patentable subject matter only if (a) it is tied to a particular machine or apparatus, or (b) it transforms a particular article into a different state or thing. (For further details, see Appeals Court Smacks Down Software And Business Method Patents without Apparatus or Transformative Powers, Patent Baristas; In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article, Patently-O.)

Now this is mostly gobbledygook, of course, as you'd expect when a court attempts to find an objective or just rule when interpreting an unjust, non-objective, legislated scheme (on the problems with use of legislation to "make" law, see my Legislation and the Discovery of Law in a Free Society). A nice illustration of this can be found in the interchange between one of the lawyers and the CAFC judges during oral argument, which is excerpted in the podcast. See, e.g., 2:33 to 6:15 or so.

The attorney argues that "useful, concrete and tangible result" The judge asks the attorney what is the basis for this tripartite test, and what "concrete" and "tangible" mean, exactly. The attorney struggles to define these terms objectively--he says "concrete" means "reduced to a practical," "useful" "result"; and that "tangible" means "being in the real world, doing something physical, active". The judge notes that this is redundant with the "useful" part; so you really have "concrete" and "tangible"--he asks the lawyer, "and what does 'concrete' add"? "I don't know," replies the lawyer, exasperated, to much laughter in the courtroom. "I don't either!" says the judge (around 6:00-6:15).

So much for objective law. Legislators introduce squishy terms with no objective meaning, no mooring in objective property boundaries and genuine justice, as the result of political compromise. Of course there is no way for courts to eke out just and objective rules that are based on such legal abominations.

In Bessen & Meurer latest patent study ("Do patents perform like property?," Academy of Management Perspectives, pp. 8-20 (August 2008)), the authors conclude: "intellectual property rights have at best only a weak and indirect effect on economic growth" and "The direct comparison of estimated net incentives suggests that for public firms in most industries today, patents may actually discourage investment in innovation."

The entire conclusion is below. See also Keith Sawyer's post, Do Patents Increase Innovation?, who note: "In 1999, for example, the total profits from patents in all U.S. public firms (excluding pharma) was about $3 billion, but their litigation costs associated with those patents were a whopping $12 billion!"

The historical evidence, the cross-country evidence, the evidence from economic experiments and estimates of the net benefits of patents all point to a marked difference between the economic importance of general property rights and the economic importance of patents or intellectual property rights more generally. With the cross-country studies in particular, the quality of general property rights institutions has a substantial direct effect on economic growth. Using the *same* methodology and in the *same* studies, intellectual property rights have at best only a weak and indirect effect on economic growth.

The research also suggests a reason why patents differ from general property rights in motivating economic growth overall: the positive effects of patents appear to be highly contingent. Differences in technology and industry seem to matter a lot for twentieth century R&D managers and also for the innovative performance of nineteenth century world's fair exhibitors. Some results from the cross-country studies suggest that less developed countries have a harder time realizing benefits from patents or that countries that participate actively in international trade may benefit more.

Some of these differences arise because of differences in the relative costs and effectiveness of alternatives to patents. Patents may contribute more to economic growth in the pharmaceutical industry than they contribute in electronics industries because the latter can more effectively earn returns on innovation through lead time advantage, sales of complementary products and services, etc. Other differences may arise because of subtle differences in patent institutions. During the nineteenth century, the US patent institutions performed differently (and perhaps better) than their British counterparts. Patents are likely to work better in the pharmaceutical industry because patents on chemical entities have much sharper boundaries than, for example, patents on software.

Of course, the economic effectiveness of all forms of property depends on details of the supporting institutions this is evident from the disparate growth paths of Soviet Bloc economies. But the economic effectiveness of patents may be much more sensitive to the details of the relevant institutions than are general property rights. Perhaps this is because patent law may be much more specialized, complex and sophisticated than, say, real property law and, so, effective institutions may be more difficult to develop and maintain.

In any case, the empirical economic evidence strongly rejects simplistic arguments that patents universally spur innovation and economic growth. The direct comparison of estimated net incentives suggests that for public firms in most industries today, patents may actually discourage investment in innovation.

Slashdot reports that Microsoft has received a patent for the Automatic Censorship of Audio Data for Broadcast link here. It sends us to the patent itself which describes "methods for muting offensive words" or making them unintelligible or replacing them with "less offensive words." A word or syllable is rejected when there is a probability above a threshold that it meets of test of "offensiveness" link here.

I ask myself if MS is serious with this patent. The probability of false positives or altering meaning is high so that I can see damage suits arising. I also read the patent as being a hunting license rather than an existing device and ask myself why it was granted. The patent itself notes that a delay in transmission with humans reviewing the speech to determine offense has generally worked. Is this MS in its latest guise as patent troll?

The Patent Office seems to have lost all sense.

From Patently-O:

Does the Piracy Paradox apply for Patents?

"A 2006 paper by Kal Raustiala (UCLA) and Chris Sprigman (UVA) titled the Piracy Paradox discusses intellectual property and the fashion industry. The authors conclude that the legal ability of manufacturers to create knock-off versions of fashion designs actually promotes innovation and investment in that industry. Similar phenomena have been explained in other industries. In music, for instance, some studies have shown that peer-to-peer file sharing of copyrighted work actually increases sales because of the increased popularity of the artist. Since the dawn of radio, record companies have paid stations to broadcast their music - even though the broadcast would be considered infringement.

"My question is whether there are patent specific examples of this process going on? Are there times when 'piracy' of a technology actually encourages further R&D?"

Interesting post by Alex Iskold, Patent Crisis and The Age of Open Source Ideas.