Against Intellectual Monopoly

chapter to document some of the more egregious problems in the case of patents. We discuss the problems of copyrights (or "copywrongs") in the next chapter.

The Cost of Patent
    The second half of the 1990s witnessed an extraordinary increase in the
number of new patents registered in the United States, and in the European
Union as well. In the United States, the yearly number of patent applications
reached about 345,000 by the end of the 1990s, rising more than threefold
from a value that had oscillated at around 90,000 during the 1960s. In
just four years, between 1997 and 2001, patent applications exploded by a
spectacular 50 percent. Part of the radioactive fallout from this explosion in
patent applications was the increase in the membership of the "intellectual
property" section of the American Bar Association, which went from 5,500
to almost 22,000.3
    If patents beget prosperity and innovation, we might expect that this
explosion in patenting coincided with a vast technological improvement.
Of course, it did not. A common measure of technological improvement is
the increase in total factor productivity (TFP) -as mentioned in the previous
chapter, this measures how much additional output can be produced from a
given combination of inputs by using those inputs better. Higher TFP means,
for example, more and better cars from the same labor and using other
factors such as metal and plastic. Rough-and-ready aggregate measures of
TFP growth do not display a strong trend during the past fifty years. They
increased during the 1950s and early 1960s, then decreased from the late
1960s until the late 1980s or even early 1990s, and then recovered, slightly,
during the 1995-2000 period. After the 2001 recession, the same measures
have kept growing at their long-term average. More sophisticated measures
of TFP show that, on the one hand, the productivity slowdown in the late
1960s to late 1980s may be nothing but poor measurement on our part, while
on the other hand, the 1990s TFP recovery either did not take place or is
almost entirely due to the widespread adoption of information technologies.
The latter, as we documented in Chapters 2 and 3, owe extremely little if
anything to the presence of patents.
    Similar findings apply to any member country of the Organization for
Economic Co-operation and Development flying in the face of the claim
that patents are a good measure of, let alone cause, true improvements in
productivity. If they were, TFP should have increased remarkably, and its
growth rate should keep increasing in proportion to the continuing increase
in the number of patents. Neither happened.

The Patent Thicket
    Part of the enormous increase in the number of patents is because patents
beget yet other patents to defend against existing patents. The following
statement is from Jerry Baker, senior vice president of Oracle Corporation:
    Our engineers and patent counsel have advised me that it may be virtually impossible to develop a complicated software product today without infringing numerous
broad existing patents.... As a defensive strategy, Oracle has expended substantial money and effort to protect itself by selectively applying for patents which
will present the best opportunities for cross-licensing between Oracle and other
companies who may allege patent infringement. If such a claimant is also a software developer and marketer, we would hope to be able to use our pending patent
applications to cross-license and leave our business unchanged.'
    Pundits and lawyers call this navigating the patent thickets, and a whole
literature, not to speak of a lucrative new profession, has sprung up around
it in the past fifteen years. The underlying idea is simple, and frightening
at the same time. Thanks to the U.S. Patent and Trademark Office policy
of awarding a patent to anyone with a halfway competent lawyer - and,
as noted a moment ago, "intellectual property" lawyers have quadrupled -
thousands of individuals and firms hold patents on the most disparate kinds
of software-writing techniques and lines of code.5 The numbers are mindblowing, particularly in the information technology and software sectors:
Nokia sits on twelve thousand patents, while Microsoft is adding at least one
thousand a month to a mountain that is already more than twenty thousand
patents strong, and so on and so forth.6 As a consequence, it has become
almost impossible to develop new software