Ladies and gentlemen, this season's post-graduate farce: James Bessen and Michael Meurer, collectively known as BM, authors of Patent Failure. Joff Wild of IAM put their beef on the griddle and watched it sizzle.

Wild went at BM this past weekend:

One thing that caught my eye was the graphs at the bottom, in which the authors attribute global profits derived from patents held by non-pharmaceutical or chemical, publicly-quoted US companies in 1999 to be around $3 billion. It would be interesting to know how they got to such a figure given that one company - IBM - was generating over $1 billion a year from licensing its patents in that year. When you throw in the activities of other aggressive patent licensors of that time, the likes of Texas Instruments and Lucent Technologies, say, $3 billion does seem an awfully low number.

BM fart back:

First, Joff asserts that our estimates of profits from patents are too low "given that one company - IBM - was generating over $1 billion a year from licensing its patents." As we discuss in the book, p. 117, our estimates correspond well with IBM's actual performance. In fact, the "over $1 billion a year from licensing its patents" is an "urban legend" promoted by patent boosters; the actual figure is between $100 and $200 million and that is gross of the costs of IBM's several hundred lawyers.

IBM's 2007 Annual Report:

The company's investments in R&D also result in intellectual property (IP) income of approximately $1 billion annually. [p. 21]

Earlier BM spreads in The Patent Prospector: March 13, 2008; March 20, 2008