In their articles, Posner and Becker discuss the current patent situation in America. Patents exist as a way of ensuring that the inventor of a product has sufficient ability to profit from their investment in the product. Posner makes the argument that as the difference between the cost to invent and the cost to copy becomes greater, patent protection becomes increasingly more necessary. He uses the example of pharmaceutical drugs. Due to extreme R&D costs and the relatively low cost of copying a new drug, pharmaceuticals require a greater degree of patent protection. Patents assist in creating a necessary monopoly power for the inventor. Without this protection, there would be very little incentive to develop new medications.
Both Becker and Posner agree that the area of patent law that has become excessive is the software industry. Increasingly, companies have been filing patents for software code in the hopes of coercing other companies into licensing their software. When licensing offers are rejected, the patent holders then seek damages for patent infringement through expensive legal action. For example, Microsoft has made more money from licensing deals for Android phones than from their own Windows Phone line. The difference between the cost of development of software code and the cost to copy it is very low. This difference signifies that the need for patent protection is very minimal.
Usually, prior art has been a useful tool in invalidating patents that should not have been granted; however, due to the rapid changes in technology and generally uninformed patent officials, many companies have been awarded patents that give them an unnecessary edge over their competitors. Companies are being awarded patents for rectangles with rounded corners. Posner argues that when patent protection is excessive, the market prices increase to levels that are inefficient. This also has the effect of decreasing the efficiency of resource allocation. When taken as a whole, this has the effect of stifling innovation and creating unnecessary barriers to entry.