Comparing The Mortgage Bubble To The Patent Bubble

from the a-sign-of-things-to-come? dept

Bessen and Meurer have a brief, but interesting post noting at least some similarities between the "mortgage bubble" that resulted in the current financial crisis with the ongoing "patent bubble." In both cases, as they note, you're dealing with products where its not clear at all what the "rights" actually cover:

What happens when you give out lots of property rights, but nobody exactly knows what those rights cover? Yes, that might describe software/business-method patents and the result is costly litigation, disputes and a net disincentive for innovation.

But that also describes recent markets in collateralized debt obligations and credit default swaps. And with these markets, as anyone who has read a newspaper (some people still do that) during the last month knows, the result is a bit more ominous.

I'm not convinced the analogy holds, but it's something to think about in terms of recognizing how we've been seeing an ongoing patent bubble inflating pretty rapidly over the past few years. It's certainly nowhere near as big as the mortgage bubble, but it's still a pretty decent sized bubble, at this point.

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