Patent Rent-Seeking

When I worked in Cato’s DC offices a couple of years ago, I always found it kind of depressing to go to lunch on K Street and see thousands of smart, attractive young men and women crowded around me, the vast majority of whom worked as lobbyists. They were people who otherwise might have been entrepreneurs, journalists, accountants, or doctors, creating wealth and improving society. But instead, they were enticed by the fat paychecks to come to Washington, where their talents are devoted to finding clever ways to enrich their clients at the expense of taxpayers and consumers.

I had a similar sinking feeling when i read this article (via Techdirt) about the flood of young scientists and engineers who are leaving the lab for careers as patent lawyers:

Demand for these specialists is being driven by an explosion in patent applications in recent years and a growing need for lawyers to protect old patents or challenge new ones. The U.S. Patent Office estimates 450,000 patent applications will be filed this year, up from about 350,000 five years ago.

Law professors say they’re seeing more students with strong science backgrounds make the leap to law, where recruiters are snapping them up.

For at least some students who might otherwise gravitate toward a science career, the promise of much bigger paydays is a powerful lure. Others say the opportunities in academia are not as certain as they once were.

“It’s an exciting area of legal practice right now,” said University of Pennsylvania law professor R. Polk Wagner. “Every year I see more and more people coming into law school with technical backgrounds.”

“It almost scares me,” said Wagner, whose proteges include Weathers. “Who’s left in the lab?”

Who indeed?

Now, I believe that some degree of patent protection is beneficial, especially for capital-intensive fields like pharmaceuticals. But we are now far past the point where the marginal patent, or patent lawyer, spurs economic growth. Quite the contrary, in recent years, the patent office has lowered patent standards so much that for the most part, obtaining and litigating over patents has become little more than a form of rent-seeking. A company obtains a patent that covers a broad category of innovation and then uses it to blackmail other companies that have succeeded in the marketplace.How else do we explain a company with no products winning a $612 million settlement from the company that pioneered wireless email? Or the company that pioneered Internet telephony fighting for its life against Verizon, a company that’s not exactly known for its innovative Internet applications? I could bore you to tears with examples of attempts to extort money from productive companies using the patent system. Every single one of those controversies was carried out by bright, ambitious individuals like those in the USA Today article, being paid six-figure salaries to find ways to obtain advantages in the courtroom where they weren’t able to prevail in the marketplace.

The Supreme Court’s recent Teleflex decision should reduce this problem somewhat by raising the bar for patent obviousness. But more fundamental reforms are needed as well. For a start, we should be asking whether certain categories of innovation require patent protection at all. Software and business methods are two obvious choices. Neither category was eligible for patent protection before the late 1980s, and there was certainly no shortage of innovative new software or business models during that time period.