Against Intellectual Monopoly

counterfact: How many new firms would enter and innovate if patents were
not around, that is, if the dominant firms did not prevent entry by holding
patents on pretty much everything that is reasonably doable? For one small
firm finding an empty niche in the patent forest, how many have been kept
out by the fact that everything they wanted to use or produce was already
patented but not licensed?
    Second, people who argue that patents are good for small firms do not
realize that, because of the patent system, most small firms in these sectors
are forced to set themselves up as one-idea companies, aiming only at being
purchased by the big incumbent. In other words, the presence of a patent
thicket creates an incentive not to compete with the monopolist, but to
simply find something valuable to feed it, via a new patent, at the highest
possible price, and then get out of the way. Although this may be quite
advantageous to the few lucky entrepreneurs who manage to be bought out
by the monopolist at a good price, it is not the economic system that we,
as a society, should want. It is not beneficial either to consumers, who keep
living in a monopolized world paying high prices for crummy products, or
to the average potential entrepreneur who, plain and simple, cannot enter
and compete. This is IP-inefficiency at work.
    If it were not for preventing even the minimum chance of competitive
entry in its industry and for keeping all small firms at bay, why would
Microsoft waste money applying every year for thousands of patents like No.
20,050,160,457, Annotating Programs for Automatic Summary Generation?
Oh, sorry, we did not tell you what this great invention is about; here is the
official abstract:14
    Audio/video programming content is made available to a receiver from a content
provider, and meta data is made available to the receiver from a meta data provider.
The meta data corresponds to the programming content, and identifies, for each
of multiple portions of the programming content, an indicator of a likelihood that
the portion is an exciting portion of the content. In one implementation, the meta
data includes probabilities that segments of a baseball program are exciting, and
is generated by analyzing the audio data of the baseball program for both excited
speech and baseball hits. The meta data can then be used to generate a summary
for the baseball program.

    Unfortunately, political and judiciary attitudes have shifted toward the
use ofpatents as monopolist's tools. Oscillations in popularity are somewhat
recurrent in the history of patents, but never before have the proponents of
intellectual monopoly been so powerful in the political and judicial arena
and in public discourse. By way of contrast, in the late 1970s, antitrust
suits were fought and won against monopolists, and as late as 1997, the
Justice Department spoke of the possible role of "intellectual property" in
antitrust violations. Private companies also sued large monopolies sitting
upon piles of unused inventions, such as in Xerox v. 3Com.15 Today, sadly,
the three branches of government have given up the fight against appropriating the fruits of other people's labor and the defensive patenting it
begets.16
    In addition to asking about the incentive to innovate, which we discussed
in the previous chapter, the Carnegie Survey also examined why firms do
and do not choose to patent, as the subsequent table shows." The use of
patents in negotiations and horse-trading among firms is higher (but not
overwhelmingly higher) in complex industries than in simple ones.

    Examining the table, we see an average rating of 88 percent to prevent
copying or to block competitors, which may be loosely translated as "being
a monopolist." We see an average rating of 53 percent for patents being
used for negotiations or to prevent suits, which may be loosely translated as
"wasteful rent seeking." This effort is not directed at innovation but is used
as a legal and bargaining tool. The economically valuable uses of patents
according to standard pro-intellectual property theories - that is, measuring
performances and obtaining licensing revenues - are a meager 17 percent.
If one recognizes, as we argue, that revenues from licenses are in large part
due to wasteful monopoly power, the Carnegie Survey tells us that patents
are employed for economically valuable uses only about 6 percent of the
time.

    There are other