By Kevin E. Noonan --

One of the hopes of the members of the patent community who have been paying attention is that the passing of the current administration may result in better times for the U.S. patent system. Political appointees like Secretary of Commerce Guttierrez, USPTO Director Jon Dudas, and Undersecretary of Commerce Margaret Peterlin will certainly be packing up their desks next January. However, we can expect that the Congress will be similarly constituted as it is now, and that could result in efforts for even more dubious patent reform schemes.

This message is delivered by Professor Harold Wegner (at right) in a cover story article published in ipFrontline (see "Keys to 111th Congress Patent Reform"). The source of his concern is the patent economics tome Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk by James Bessen and Michael J. Meuer. The work has been lauded by patent academia: Professor Dennis Crouch excerpted it extensively on his Patently-O blog prior to publication, and the published work carries glowing accolades from the darling of patent academia, Professor Mark Lemley of Stanford University. While the approval of the academic patent intelligentsia is one thing, more worrisome is that Patent Failure thesis, the familiar "the patent system is broken," is gaining traction among policymakers.

The basis for this influence can be summarized in this graph (from Professor Wegner's article):

The graph purports to show not just that the patent system is broken, but calls into question the system's value to innovation and the U.S. economy. The graph is based on two statistics: the positive value of patent protection versus the negative effects of patent litigation. The message of the graph - that patents cost more than they are worth - seems simple and empirical. While acknowledging that patents seem to benefit certain industries, like biotechnology and pharmaceutical companies, the message of this analysis is that the majority of American "mainstream" industries suffer more harm than benefit from the patent system.

But as Professor Wegner notes, there are some indications that the data don't completely support the message. For example, the profits ascribed to the pharmaceutical industry are only $15 billion, citing his analysis of the data from his review of Patent Failure in The Financial Times:

The fraction of patents in the biotech/pharma and chemistry sectors may be small in terms of numbers of patents but that is where patent exclusivity is most vigorously enforced and where the bulk of all patent rent value lies. The authors estimate the global patent value for US companies in the chemicals (including pharmaceuticals) sector in 1999 was $[15 billion] compared with only $3.2 [billion] for all other sectors. In fact, the $[15 billion] figure is ridiculously low: sales of the top 10 drugs account for roughly $40 [billion] in domestic sales alone – with no patent protection, that $40[billion] would vanish