Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk.

• Author: Cole, Julio H.

* Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk By James Bessen and Michael J. Meurer Princeton, N.J.: Princeton University Press, 2008. Pp. xi, 331. $29.95 cloth.

Patent Failure by James Bessen and Michael J. Meurer, professors at the Boston University School of Law, provides a useful and highly informative antidote to the "faith-based" reasoning that usually dominates discussions of the patent system.

Patents are special forms of "intellectual property" that grant to their owners the exclusive right to control the production or use of a specified product or productive process. The notion behind such "property rights over ideas" is that without such control, these ideas would be reproduced freely, would therefore cease to be scarce, and hence would lack any market value. The purpose of patents is to create a scarcity, thereby generating a monopoly rent for the holders of these rights. (Note that the law itself creates the "scarcity"--the source of the monopoly rents that make the rights valuable.) Thus, these rights are really nothing more than legal monopoly privileges granted by state flat, which suggests why a dissenting tradition in free-market economics has always viewed patents with suspicion.

Like any other monopoly privilege, patents can obviously be very valuable for their owners, although that value is not in itself a good reason to justify concessions of this sort. Here the relevant questions are: Why would society want to award such privileges to some of its members, and how does society at large benefit from the existence of patents? The conventional answer is that the existence of patents stimulates invention and innovation, which are the ultimate sources of increased productivity, rising incomes, and increasing standards of living. Indeed, modern defenders of the patent system, dazzled by the wonders of modern technology, never cease to stress the need to stimulate further technological development. An implicit assumption, of course, is that patents cause (or at least are one important cause of) all these good things. Oddly enough, this assumption has been so much taken for granted that evidence is hardly ever offered to support it. Moreover, when the issue has been examined empirically, the evidence almost uniformly fails to confirm the assumption. (The authors provide an excellent survey of this research on pages 73-94). In fact, patented inventions account for only a small fraction of...