The Patent Bubble, worse than the subprime mortgage bubble?

Back in September 2008 Brian Kahin wrote on The Patent Bubble in the Huffington Post.

Will the financial meltdown caused by the discovery that no amount of paper can create value if there isn’t any cause a re-examination of the way in which patents are granted, and enforced? There are millions invested in what corporations refer to as “patent portfolios”, patents are sometimes described as a “currency”, these terms suggest that merely holding a piece of paper, in this case a patent grant, or a patent application (giving priority) is the equivalent of holding an asset.

However as one commentator on Kahin’s post put it “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.”

In early 2009 the question is more pertinent than ever. Lacking capital to invest in new business the temptation to use patents to cripple rival corporations will become increasingly irresistible. During a boom, the doctrine of “Mutually Assured Destruction” in which corporations would be deterred from patent litigation by the threat of counterclaims may have had some validity. However even those who advanced this idea during the boom time must admit that corporations facing bankruptcy will have nothing to lose by engaging in widespread patent litigation, however frivolous.