Negative Effects of the Patent System
1) it is difficultg for honest technology creators to discover patents that might be relevant to the technology in development
2) the system gives inventors the perverse incentive not to search for relevant patents to avoid treble damages
3) the holder of an undiscovered patent can lie in wait until other companies make significant investments based on their patents and then exort large sums of money from the hapless inventor.
Summarized in the paper at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=902646
Copyrights, patents, and similar government-granted rights serve only to reinforce monopoly control, with its attendant damages of inefficiently high prices, low quantities, and stifled future innovation, they write in "Perfectly Competitive Innovation," a report published by the Federal Reserve Bank of Minneapolis.
The empirical evidence shows that:
1) Innovation, they argue, has occurred in the past without substantial protection of intellectual property. Contemporary examples are also plentiful. The fashion world -- highly competitive, with designs largely unprotected -- innovates constantly and profitably. The financial securities industry makes millions by developing and selling complex securities and options without benefit of intellectual property protection.
2) "some of the most innovative industries today -- software, computers and semiconductors -- have historically had weak patent protection and have experienced rapid imitation of their products."
3) U.S. court decisions in the 1980s that strengthened patent protection for software led to less innovation. "Far from unleashing a flurry of new innovative activity," Maskin and Bessen write, "these stronger property rights ushered in a period of stagnant, if not declining, R&D among those industries and firms that patented most."
Reviewed at http://www.reason.com/news/show/28703.html