WASHINGTON (Nov. 30, 2022)––In a new report published today, the policy director for R Street’s Technology and Innovation team, Wayne Brough, examines both the origins and economics of patents in the context of finding the correct balance between monopoly and innovation.

Patents have been debated for as long as they have existed. While the market exclusivity provided by a patent creates incentives for inventors, there are legitimate concerns surrounding the potential for them to become a tool for collecting monopoly rents. Patent reform, then, should focus on improving the quality of patents as well as improving the process that allows for the removal of low-quality patents from the system. Such reforms will reduce the possibility of patent abuse while also ensuring that patents reward real innovation.

Despite calls for reform, Brough acknowledges that the patent system is a vital component of innovation policy derived directly from the Constitution. It’s long been established that clear rules and processes for securing and enforcing patents can spur research and development throughout the economy. But patent laws do have a cost and are susceptible to political pressure and rent-seeking behavior.

Important sectors of the economy currently face significant challenges under the U.S. patent system, and this is largely due to poor-quality and overly broad patents that should never have been granted. This is especially the case with invalid patents in the technology sector. It is also the case that the overall patent system is vulnerable to strategic behavior by those more interested in securing monopolies for themselves than increasing innovation. This can be seen, for example, with strategically deployed patent thickets, which raise costs and limit entry into the pharmaceutical industry.

Because poor-quality patents are a significant obstacle to competition and a threat to innovation, it is important that an institutional framework exist to assess the quality of patents issued while providing a cost-effective means for voiding patents that do not support or incentivize invention. Brough examines these issues and delves into the history that brought us to the point of needing reform. As he concludes, “Aligning patent law in a way that promotes invention and spurs economic growth is something with broad appeal, just as a system that merely protects monopolists should draw widespread disapprobation.”