‘Economic competitiveness’ doesn’t always mean stronger intellectual property laws

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The following piece was co-authored by R Street Tech Policy Joe Kane. 


In a recent letter, several dozen conservative leaders joined together to call on Republican policymakers to strengthen U.S. intellectual property laws. They lament the loss of U.S. manufacturing jobs that has turned “American communities into ghost towns” (about that) and warn this trend also will overtake the innovation sector as inventors move overseas.

In fact, patent applications are up from both U.S. and foreign applicants. Nonetheless, the letter’s authors contend that bolstering U.S. intellectual property laws must be just as core to the conservative agenda as deregulation and tax reform, lest we sacrifice our constitutional principles and global economic competitiveness.

The authors are correct to note that “patent protection was enshrined in our Constitution.” Where they are wrong is in their attempt to frame intellectual property as something the founders saw as an unfailing good or absolute right. Article 1, Section 8 of the U.S. Constitution gives Congress the power to create intellectual property protections like patents “[t]o promote the progress of science and the useful arts.” It is an enumerated power of the legislature, just like the power to regulate currency, to establish post offices and to tax. In other words, patents are something Congress may employ, specifically with the goal to foster innovation. The patent system is worth defending or even strengthening to the extent that doing so supports that goal. Insofar as it undermines innovation, it should be scaled back.

It would, for example, be false to assume that because innovation is desirable, we should always endeavor to grant more patents, irrespective of their quality, or that we should go to extreme lengths to enforce them or protect them from future challenge. An improperly structured patent system will stifle innovation, rather than encourage it, as the framers intended. Granting exclusive rights to an inventor always poses the risk of delaying when a particular innovation becomes widespread and making it costlier for others to build upon it. These costs are typically worthwhile where they serve as incentives for innovations that wouldn’t otherwise see the light of day. Patents are the means we use to create those incentives. But when low-quality or overly broad patents are issued, future innovation is stalled without countervailing benefits.

Patent examiners are fallible. The U.S. Patent and Trademark Office has issued numerous low-quality patents and the Government Accountability Office has cited the USPTO for inconsistent standards of quality and clarity. This uncertainty leads to litigation, which imposes greater costs on innovators. Indeed, patents have been granted for “inventions” that already exist or that were completely obvious, such as podcasts, swinging on a swing, cats chasing laser pointers and artificial sticks, to name a few.

Because challenging dubious patents through litigation is expensive, Congress moved in 2011 to create new avenues for the expedient review of granted patents that may not meet the requirements of novelty and nonobviousness. One of these proceedings—inter partes review (IPR)—has proved highly successful in accomplishing this goal. As we argue in a recent R Street paper, this process offers a mechanism to challenge dubious patents that is much quicker and cheaper than traditional litigation. The median inter partes review challenge costs about $350,000 through the appeal phase, as compared to $3.1 million in the district court.

The letter’s signatories, however, characterize the Patent Trial and Appeal Board, which conducts IPR, as a “patent death squad” that exists “for the sole purpose of invalidating patents.” They don’t appear even to consider the possibility that some improperly granted patents should be invalidated. They also do not posit what proportion of patents – or name even a single specific patent – invalidated by IPR they think should have remained in force.

No system is perfect, but we should discuss the benefits and costs of IPR, rather than assume it is an attack on intellectual property simply because it invalidates patents. Just as procedures to invalidate counterfeit or flawed titles in real estate are not an attack on real property rights, procedures to weed out bad patents are not an attack on innovation or on patents, in general. Supporters of strong patent laws should be especially interested in the quality and clarity of patents issued.

Of course, the reality that some patent abuse exists does not mean that we should abandon patents, but it does mean that we should carefully examine the system’s trade-offs and the externalities it creates. We should not assume that simply having more patents or stronger enforcement tools means more innovation. A world with 100-year patent terms or severe criminal penalties for infringement would inevitably be one with less innovation.

We all want an innovative society, and the patent system is an important means to further that goal. But we shouldn’t shut down conversations about patent reform or other improvements to the current system that could create more efficient ways to invalidate bad patents or otherwise lower transaction costs in litigation. To keep America on top, we must recognize and embrace the artful balance our founders intended. In other words, patents are a tool and an incentive that can be quantified and measured to inform our policymaking. They’re not an end in themselves.


Image by garagestock

 

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