Paul F. Prestia
With the U.S. Supreme Court's grant last week of certiorari in the Myriad Genetics case (to answer the question whether human genes isolated from the body are patentable) and the antipathy of the court, perceived by many, to patents generally, we are reminded to consider what may be the underpinnings of such antipathy.
For those of us invested in the patent system, it is an article of faith that the system promotes innovation. No less a document than the U.S. Constitution tells us so. But an increasingly evident crescendo of criticism attacks that proposition head-on. Congress, the Supreme Court, the U.S. Court of Appeals for the Federal Circuit and the U.S. Patent and Trademark Office have responded in ways that should blunt the criticism to a significant degree. This has not dissuaded critics of the system. For example, these responses are largely ignored in the September publication, "The Case Against Patents," by researchers at the Federal Reserve Bank of St. Louis.
Those researchers conclude, "The aim of policy, in general, should be that of slowly but surely decreasing the strength of intellectual property interventions, but the final goal cannot be anything short of abolition." With similar views expressed increasingly in other media, ignoring the criticism endangers the health of the patent system.
Seventh Circuit Judge Richard A. Posner and other critics of the system have not gone so far, but many are headed in the same direction, however far out and unlikely that ultimate objective may be.
As a basic premise, these critics of the patent system argue that the effectiveness of patents to promote innovation has never been proven and the negative value of patents as impediments to innovation and impediments to competition outweighs their unproven innovation-promoting value. Therefore, the system cannot justify itself. A complete response to these criticisms would include a study of what motivates research and the extent to which patents play a part in that motivation. Such a study would likely conclude, as even some critics admit, that the value of patents, as a motivating factor, varies greatly from industry to industry or, even more importantly, across the spectrum of business models of individual players in any industry.
At one extreme, in a business model where price is the only competitive factor, innovation and patents are irrelevant. In fact, patents may be a negative factor in that innovative products will be more expensive. If the business model is to compete in an environment with short product life cycles, patents may also be less valuable and therefore less of an incentive to innovate. But in many other business models, innovation and the need to innovate play a much greater role. Patents then become important, particularly so if the innovation can be easily copied. A prospective investor in an innovation-generating endeavor would necessarily weigh the prospective cost and probability of success of the innovation against the commercial value of successful innovation in light of the ease with which its value can be usurped by a copier.
While the pharmaceutical industry has done a good job of educating critics on the huge investment and long lead time associated with innovative products and thus the necessity of strong patents in that industry, other industries have been much less effective in that educational process.
These observations are not new, but what has been lacking, at least according to my modest research, are competent, objective studies of the motivational value of patents to incentivize investments in research in all industries, particularly those where incremental innovation is the norm. Such studies would permit a more fact-based analysis of the value of the patent system versus its costs, i.e., the impediments to innovation and the impediments to competition perceived to be inherent in patents.
Those perceived impediments, however, also bear discussion, because critics rely on these impediments to justify their criticisms.
Although now eight years old, the National Academies' National Research Council's report titled "A Patent System for the 21st Century" provided what is probably the best and most comprehensive study of the patent system. With the background of a series of academic and technical reports of nine groups of technical and economic scholars, published separately, the National Academies' report acknowledged questions regarding the value of the patent system and also acknowledged that the role of patents varied in different industries. As an overall conclusion, however, its executive summary began with the statement, "The U.S. patent system has played an important role in stimulating technological innovation by providing legal protection to inventions of every description and by disseminating useful technical information about them."
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