STEVE LOHR gee-whizes in an aint-it-grand tone, about the wonders of an auction market in patents link here. He has several examples of inventors who can market ideas to others who develop, manufacture, and sell the product--after paying the patent holder a goodly licensing fee. His examples all involve patents with questionable justification. Are they really new innovations or obvious applications of ideas that have already been developed? Is a phone with a preprogrammed emergency number and a GPS truly innovative or an obvious variant for something which is already patented by someone else.

What Lohr fails to mention is that a patent is a government granted monopoly, constitutionally granted for the purpose of encouraging innovation. We are now into encouraging trade in legally granted but questionably innovative patents, as if that justifies the original grant.

"Wrangling over patents is beginning to move out of the courtroom and into the marketplace," he writes. "A flurry of new companies and investment groups has sprung up to buy, sell, broker, license and auction patents. And venture capital and private equity is starting to pour into the field." If you look at the court records, there is no let up in court wrangling--rather there is more than ever. Indeed, patent suits have become the great Relief for Lawyers Act.

Another example Lohr cites is a company with cell phone patents. The company has made a good deal of money from licensing but has not gone after the large companies who are presumed to have infringed their patents. Instead one may assume they will just get along by selling licenses on an exchange, with the implicit threat of suing little guys who usually find it advantageous to pay off rather than fight the case in court. Be safe, not sorry.

We've seen this before. They are called patent trolls.

N. GREGORY MANKIW writes on health care reform, asking the question can we afford it link here. He builds his case on a hypothetical pill that costs $150,000 a year. He doesn't really answer the question because he doesn't say how many people will require that pill. But he strongly implies that clearly we can't afford it. So we ration care. A short think piece in the Sunday paper doesn't allow him to expand and he asks a valid question until you start thinking about it.

If he had, he would need to look at why we have insurance. So long as a finite proportion of the covered require the pill and other diseases don't cost comparably high amounts, we can afford it because the premiums are sufficient. That is the point of insurance.

He also kisses off the gains from removing waste in the health system. They are conjectural at this point, but there is too much evidence. Why does that pill cost $150,000 a year? One must doubt it is because it contains a rare chemical or that its marginal cost of production is so high. Rather one comes back to monopolies, like those on patents on pills and medical devices. Then we have the issues of waste that occur because of the irrational organization of medical care. Hospitals with machines that are grossly underused because the hospital has to have them in order to advertise end up creating enormous excess capacity. Doctor services are often required when nurses or practitioners could do it at much less cost. Failure of different specialists to compare notes on the particulars of a case and find the best way forward add enormous amounts to the bill.

There is a lot more. One place to see it spelled out is a book, Money Driven Medicine; The Real Reason Health Care Costs So Much by Maggie Mahar. Have a look.

Dean Baker writes frequently about patents and copyrights but his blog is billed as "Beat the Press" because he picks up on factual errors in discussions of public policy, mainly in the main stream media. Today he writes about Corruption in Drug Research: The Fruits of Patent Protection link here. Most of us agree with him (or vice versa), but it is nice to find good company.

This is particularly timely now as we struggle to get a decent health care reform bill.

Oh Boy. You can see and hear it here: link here

Does it scare you or make you mad?

The Economist asks whether health care reform in America could stop innovation in pharmaceuticals link here. The danger posited would be from price controls. It suggests no, based on a study that finds that price controls have actually promoted European drug innovation and that it has more innovation than the US and is drawing farther ahead of us.

This challenges the Phrma contention that US price controls would kill innovation link here. Its study identified the nationality of new drugs based on the head office of the developing company. But The Economist points out that companies have research facilities and markets in several countries so that the location of the head office of the innovating company should not matter.

The article also notes that Britain and Germany are exploring reimbursing companies based on drugs' effectiveness but doesn't address the issue of patents as a contributor to the cost of health care, instead suggesting price controls based on effectiveness would be a strong incentive for innovation and might help control the enormous increases in the cost of health care. That assumes the government agency administering the regulation isn't captured by the industry.

It is worth asking how the contemplated reforms in health care are going to control health spending and then to consider the role of monopoly, based on patents for drugs and on other measures, many under state or local control. The certification and pay scales of medical specialties which have limited the supply of primary care doctors as contrasted with specialists and the permissions to establish hospitals and other medical facilities comes to mind. Can anyone think of other monopolies prevalent in medicine?

For example, one was noted by Dean Baker who cites NPR's Planet Money piece on A Medical Mystery: Why Health Care Is So Expensive which focuses on the cost of medical devices like stents and instruments used in cardiac and blood vessel operations link here and transcript here. Baker then adds that NPR failed to mention the role of patents in making the cost of medical devices exorbitant.

It seems to me one of the most effective criticisms of our monopolistic system of health care and intellectual property is that until that system is reformed, we will not be able to control escalating health costs. That should be part of the current debate.

The long arm of Google is now reaching out to Europe to get changes in the treatment of out-of-print and orphan books in connection with its plan to digitize all books and sell them link here. The European Commission is proposing draft rules to make access easier and a single digital copyright to cover all of the EU rather than many, each with one of the member states. A hearing will be held next month in Brussels on Google's efforts to digitize major collections of books and the company's proposed settlement with book publishers in the United States. Public comment will be open until mid-November. So far, the proposal sounds like that in the United States, to create registries of orphan and out of print works so that companies like Google could reproduce works contained in the registry in exchange for paying money to a central authority that would redistribute the proceeds.

The news article implies that the European commissioner views the US settlement favorably. That would make the work of dissenters from the US deal more difficult. Nothing in the news story suggests that Google's lock on the sale of the digitized copies of books would be diminished so the problem of getting competition remains.

Mike Masnick at Techdirt has put together a nice reading list on "intellectual property. link here. For those of us who were brought up brain washed on the constitutional sanctity of patents and copyrights, and have since learned better, it is cheering to know that there is this much available in print.

His site also has a nice quote from one of the great critics and professors of English literature. In a word, memorable:

During the course of this long volume I have undoubtedly plagiarized from many sources--to use the ugly term that did not bother Shakespeare's age. I doubt whether any criticism or cultural history has ever been written without such plagiary, which inevitably results from assimilating the contributions of your countless fellow-workers, past and present. The true function of scholarship as a society is not to stake out claims on which others must not trespass, but to provide a community of knowledge in which others may share." -F.O. Matthiessen, American Renaissance 1941 link here

The problem of unauthorized book sequels have been with us since the beginning of copyright. Charles McGrath brings us up to date on it link here. By his account, if the originator doesn't object, the sequel writer can get away with it. If not, he can be made to pay or be banned completely. The problem seems to be showing that the sequel is transformative. That obviously is in the eye of the beholder and judges don't seem to be very sympathetic and may not recognize the point. It is clear that the sequel writer wants to capitalize on the popularity of the original but is also paying a form of homage and sends readers back to the original. Unfortunately, author ego gets heavily engaged and appears to prevail in the courts.

It would be hard to write a clarification of copyright that might serve the public interest as well as the originator's. To me it seems that the possible net harm of a sequel, even a bad one, is so small as to warrant allowing them all.

It would be a good move, short of drastically shortening the validity of copyright or abolishing it entirely.

Rob Pegoraro writes, "Over the past two days, two different commercial DVD-copying programs have gotten shot down by court rulings link here. " The judge found that copying DVDs for backup was perfectly legal, but Congress in its wisdom and under the spell of Hollywood, forbade making machines to do so.

After explaining the ins-and-outs, Pegararo notes that this is a pyrrhic vistory since anyone wishing to copy DVDs can use two free downloadable programs, Hand Brake (http://handbrake.fr/) and DVD43 (http://dvd43.com/) for a Mac and 32-bit Windows. He offers another free way for 64-bit Windows.

A victory for freedom.

Arlene Weintraub writes that the drug companies are lobbying to get expanded protection for new generic biologic drugs link here.

First a definition. According to the Sino-American Biomedical and Pharmaceutical Professionals Association (SABPA) in a 2006 pdf, biologics are protein or carbohydrate based, extracted from a living entity, posessing a complex physicochemical structure, and are defined by the manufacturing process link here. In 2005, it reports the five leading drugs sold under Part B of Medicare were biologics, valued at more than $4 billion.

In what follows, I am uncertain that I have matters right, but here goes. According to SABPA, biologics cannot be regulated as generics since they can't be shown to be chemically identical to previous approved drugs--the chemicals may be the same, but their structure differs. They must therefore have efficacy and safety data submitted separately, an expensive and time-consuming process. This is the Pharmas justification for asking that a patent's life be extended.

The SABPA definition is notable in that it seems to open the way for defining and patenting such a drug according to one or more of these terms, an almost infinite set of possible patents. The big Pharmas mouths must be watering.

The issue according to Weintraub is whether TEVA and other generic makers, can limit the patent extension beyond the initial monopoly or whether the extension is granted for 10 or more years as the big Pharmas would like. "Right now, the U.S. Food & Drug Administration has no mechanism for reviewing or approving these complex medicines. But several bills introduced this year seek to clear the way and Teva Pharmaceuticals, the world's largest generic-drug manufacturer, is working like mad to make it happen."

Mike Masnick fails to see any justification for a longer patent. He has written on the subject several times, most recently here link here.

Given the amounts of money and the importance of controlling health care costs, we are sure to hear more on this.