Ignoring Patents

Abstract:     
More than 2.5 million United States patents have been issued in the last twenty years. While these patents are spread across all industries, a large percentage are concentrated in the information technology (IT) industries, and others in biotechnology. The prevalence of patents in these industries has caused a number of people to worry about an "anticommons" in patent law. Given these problems, it's a wonder companies make products in patent-intensive industries at all.

And yet make products they do. Both my own experience and what limited empirical evidence there is suggest that companies do not seem much deterred by the threat of all this patent litigation from making products.

What's going on here? The answer, I think, is quite simple: both researchers and companies in component industries simply ignore patents. Virtually everyone does it. They do it at all stages of endeavor. From the perspective of an outsider to the patent system, this is a remarkable fact. And yet it may be what prevents the patent system from crushing innovation in component industries like IT. Ignoring patents, then, may be a "workaround" that allows the innovation system to function in the face of overbroad patent protection.

At the same time, ignoring patents is hardly the optimal solution. I suggest some ways we might move towards a compromise - a robust patent market in which inventors could get paid without the problems of holdup and the anticommons.

Working Paper Series