Summary

In recent years, business leaders, policymakers, and inventors have complained to the media and to Congress that today's patent system stifles innovation instead of fostering it. But like the infamous patent on the peanut butter and jelly sandwich, much of the cited evidence about the patent system is pure anecdote--making realistic policy formation difficult. Is the patent system fundamentally broken, or can it be fixed with a few modest reforms? Moving beyond rhetoric, Patent Failure provides the first authoritative and comprehensive look at the economic performance of patents in forty years. James Bessen and Michael Meurer ask whether patents work well as property rights, and, if not, what institutional and legal reforms are necessary to make the patent system more effective.

Patent Failure presents a wide range of empirical evidence from history, law, and economics. The book's findings are stark and conclusive. While patents do provide incentives to invest in research, development, and commercialization, for most businesses today, patents fail to provide predictable property rights. Instead, they produce costly disputes and excessive litigation that outweigh positive incentives. Only in some sectors, such as the pharmaceutical industry, do patents act as advertised, with their benefits outweighing the related costs.

By showing how the patent system has fallen short in providing predictable legal boundaries, Patent Failure serves as a call for change in institutions and laws. There are no simple solutions, but Bessen and Meurer's reform proposals need to be heard. The health and competitiveness of the nation's economy depend on it.

Choice Review

Bessen (Boston Univ. School of Law) and Meurer (law, Boston Univ.) provide the first comprehensive review of the patent system in more than a generation, bringing together a survey of the available empirical data and a clear statement of the usefulness of and limits to the patents as property model. They find that, whatever its other merits, the patent system does not perform well outside the pharmaceutical and chemical industries, and in the important sector of software development the patent system is especially ineffective. Nor are these inefficiencies compensated for by a healthy bias in favor of the small inventor. The survey of empirical research around which the argument is built suggests that the costs of patent litigation, which exploded in the 1990s, now outweigh the incentives to innovate and invest in most industries. The central problem seems to be that of patent notice. Because it is often unclear what a patent covers and does not cover, patents are not like most forms of property. And since the boundaries of patents are established by litigation, and litigation outcomes are increasingly uncertain, failure of the notice function means failure of the system as a whole. The authors conclude with proposals for reform. Summing Up: Essential. All readership levels. T. L. Craig Michigan State University