[A2k] Quantifying the Cost of Substandard Patents

[Ian Brown]

http://www.phoenix-center.org/pcpp/PCPP30Final.pdf

Quantifying the Cost of Substandard Patents: Some Preliminary
Evidence (PDF; 279 KB)

Source: Phoenix Center for Advanced Legal & Economic Public Policy
Studies

The purpose of patent policy is to balance the incentive to invent
against the ability of the economy to utilize and incorporate new
inventions and innovations. Substandard patents that upset this
balance impose deadweight losses and other costs on the economy. In
this policy paper, we examine some of the deadweight losses that
result from granting substandard patents in the United States. Under
plausible assumptions, we find that the economic losses resulting
from the grant of substandard patents can reach $21 billion per year
by deterring valid research with an additional deadweight loss from
litigation and administrative costs of $4.5 billion annually. This
brings the total deadweight loss created by our =93dented=94 patent
system to be at least $25.5 billion annually. These estimates may be
viewed as conservative because they do not take into account other
economic costs from our existing patent system, such as the consumer
welfare losses from granting monopoly rents to patent holders that
have not, in the end, invented a novel product, or the full social
value of the innovations lost.