Patents, Prosperity and Political Systems

businessman-globe-hand-lightWhile he was addressing a larger problem, several points in Victor Davis Hanson’s article Is the West Dead Yet? resonate in the context of the assaults on our intellectual property system:

But as in mid-fifth-century Athens and late-republican Rome, there are signs that the West is eroding — and fast. The common Western malady is age-old and cyclical…In the case of modern America, Britain, and Europe, the sheer material bounty spawned by free-market capitalism and legally protected private property, combined with the freedom of the individual, creates a sort of ennui. Boredom is the logical result of that lethal mix of affluence and leisure (emphasis added)

The first casualty in a bored and would-be-revolutionary society is legality. And certainly in the West the law — whose sanctity built Western civilization — has become a joke.

It would be interesting to ask today’s patent owners how many of them feel that their property rights are secure or if our system is becoming a cruel joke on inventors.

Many have forgotten that our prosperity is the result of inventions that in just a few decades created a standard of living previously unimaginable in human history. A recent documentary showed life on a farm a few miles from my house in Ohio that was still using oil lanterns in the 1930’s. That was common in most of rural America which still didn’t have electricity. Walk through any graveyard that’s more than 100 years old and see how many of those buried there died in childhood. It’s not an accident that most of the discoveries that lifted humanity out of widespread darkness, poverty and disease were made in the United States of America.

It’s hard now to appreciate how revolutionary the concept of the secure ownership of property by average people was in the 18th century. In Europe most commoners were treated as serfs and one’s status at birth determined how far you could advance. The idea that anyone could own their own land and determine their own future without permission from their “bettors” was a stunning concept. The belief that government is the servant of its citizens– not their master– is still rejected in much of the world.


The Founding Fathers knew what they were doing when they made the ownership of intellectual property available to average folks. South American economist Hernando de Soto credits the secure ownership of property—real and intellectual—as the fundamental underpinning for the creation of wealth and political freedom.

De Soto cites the inability to own reliable title to property as the reason why so much of the planet remains mired in poverty, misery and violence. Hanson makes a similar point:

But note that no elite Westerner wants to face the cause of the malady: namely, that the failure in the Third World to adopt Western ideas of consensual government, equality between the sexes, free-market capitalism, individual liberty, and transparent meritocracy logically leads to mayhem and poverty.

Many of our political leaders and citizens seem unaware on what a fragile basis our prosperity rests. We go through cycles where the ownership of intellectual property is considered a bad thing, harming the public interest. When I joined the Senate Judiciary Committee staff in the 1970’s intellectual property was under the jurisdiction of the Antitrust and Monopoly Subcommittee (you can imagine how that went). The U.S. had destroyed the incentives of patent ownership for inventions that received federal support, enforcement of patent rights varied according to which federal district court a lawsuit was filed, and many inventors feared that the dominant industry of the time (automakers) could infringe their patents with impunity. It didn’t take long for this lethal mix– coupled with international competitors determined to eclipse our economic leadership– to create the “Misery Index” where we suffered double digit inflation with double digit unemployment.

The U.S. faced a fork in the road. Many saw the Japan, Inc. model where government bureaucracy and favored corporate giants steered the economy as the wave of the future. That seemed a credible approach in 1979 when experts predicted that Japan would soon dominate the world economy and we should resign ourselves to secondary status.

Fortunately, we chose a different path. In quick succession the Bayh-Dole Act restored the incentives of the patent system to federally funded research, decentralizing the management of technology from the Washington bureaucracy to the actual creators of inventions. We also established the Court of Appeals for the Federal Circuit which restored confidence in the value of a United States patent. The resulting American Renaissance ignited the economy, restored our leadership in every field of technology and created the dominant companies of today.

Unfortunately, we are going through another period where many see the triumvirate of big government, big business and big labor guiding an economy stuck at a 2% growth rate as preferable to the messy “creative destruction” of free enterprise capitalism. The emphasis on making sure the existing economic pie is fairly distributed rather than grown leads to increased hostility to the intellectual property system. We see arguments that patents harm rather than stimulate innovation and hear how much better it would be if they were placed in the public domain or licensed non-exclusively to be more fair.

Congress is weighing “patent reform” measures largely designed by a few prominent corporations to protect them from infringement suits by patent owners. The result would be another weakening of an already badly shaken intellectual property system. The pending bills also undermine the ability of universities to commercialize federally-funded research through their loser pays and joinder provisions. They seem determined to return us to the bad old days of the 1970’s.

Two new studies put in stark focus what the restoration of patent incentives to academic technology transfer has accomplished—and what’s jeopardized if the pending bills pass. Thomson Reuters just released its listing of the world’s most innovative universities which is dominated by the United States. The criteria for the selection reflects the importance of intellectual property protection:

  • Patent volume “an indication of research output that has a potential for commercial value.”
  • Patent success “the ratio of patent applications to grants” and the number of global patents as international filing “is an indication that the invention is considered to be nontrivial and has commercial value.”
  • Patent citations “an indication of how much impact the patent has had” and “the proportion of patents that have been cited by other patents one or more times.”
  • Other criteria include how often academic articles are cited in industry publications, how many university articles include industry co-authors, and how many scientific journal articles were published by the university.

The Washington Post reported the findings in a story titled U.S. universities still at top in scientific innovation but Asia catching up. American universities occupy 9 of the top 10 ratings. Twenty of the thirty most innovative universities are in the U.S.

Interestingly, the study came out just as the Association of University Technology Managers (AUTM) released their U.S. Licensing Survey: FY 2014 documenting the impact of academic patent licensing under Bayh-Dole. Here are the highlights:

  • 5,435 licenses executed (up 4.5% over prior year)
  • 1,461 options executed (up 7.7%)
  • 549 executed licenses containing equity (up 17%)
  • 914 startup companies formed (up 11.7%)
  • 4,688 startups still operating as of the end of FY2014 (up 11.4%)
  • 965 new commercial products created (up 34.2%)
  • 6,363 U.S. patents issued (up 11%)

That’s more than two new companies formed– and two new commercial products introduced– every day of the year in the United States based on academic inventions.

This is the 35th anniversary of the enactment of the Bayh-Dole Act. Let’s keep our fingers crossed that it isn’t the year Congress pulls the plug on one of the most successful drivers of our economy through poorly conceived patent reform. If so, there are plenty of other countries which will be more than happy to take over our lead in technology development. Unfortunately, some are not overly concerned with individual liberty, the secure ownership of property, the rule of law, or other niceties that we take for granted.

However, losing our prosperity is a sure cure for “the lethal mix of affluence and leisure” leading to boredom which Mr. Hanson says afflicts us. But it’s a remedy with severe side effects that last a long, long time.


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Join the Discussion

8 comments so far.

  • [Avatar for Edward Heller]
    Edward Heller
    September 30, 2015 08:41 am

    Mr. Allen, good point about “property.” lf one’s land or patent can be administratively taken from him, he has no security and will not invest in it. This is a truism.

    So, I wonder why in your encomiums about the pro-patent reforms of the early ’80 that you failed to mention the most harmful reform of them all: reexaminations. That nightmare for patent owners had now been extended to IPRs, a rigged procedure specifically designed to revoke patents administratively.

    I can only hope there are some left in congress that truly believe that patents are property and deserve the same treatment as other property.

    Administrative revocation must end.

  • [Avatar for step back]
    step back
    September 29, 2015 05:42 am

    nat scientist,

    Good point.
    There’s always someone who wants something for nothing.
    There’s always someone ready to rewrite history in exchange for a few silver coins.
    Guess it was not Thomas Edison who was behind so many advancements in the useful arts but rather it was the inevitability of the “free” (works) market place that made it all happen. We simply do not need individuals with a vision or a system for rewarding them for their work product and recognizing them for their contributions. Indeed all the Congresspersons now in favor of patent reform and deform are going to do the inventing for the rest of us and they’ll all gladly do it free of charge because they are not hypocrites.
    /sarcasm off

  • [Avatar for nat scientist]
    nat scientist
    September 29, 2015 12:39 am

    “I think it was the Nazis who first coined the idea of Working (for free) making you free,”
    Pharaoh Khufu left a large pyramid-shaped object that he had built for free with the generous help of the chosen peoples. Some Americans were schooled that it was simply a Great Wonder of the World as if by a miracle it was deposited it in the desert without oceans of sweat and lash. Freedom for the lash is indeed sweet.

  • [Avatar for step back]
    step back
    September 28, 2015 07:43 pm

    nat sci @4

    I think it was the Nazis who first coined the idea of Working (for free) making you free
    Arbeit macht frei

    Now it is the turn for USA inventors to work for free because data wants to be free and Congressmen like free stuff too.

  • [Avatar for nat scientist]
    nat scientist
    September 28, 2015 03:31 pm

    ‘…combined with the freedom of the individual, creates a sort of ennui.’

    If the author were to reflect on the Regulatory apparatus that ensures that no individual or independent thought can be expressed in the current economy without ridiculous EPAxpense. That Un-accompanied individuals can only be up to no good tinkering with science or health is the abiding FBIreality and certainly those that aren’t white enough. You could call it the advent of Vapidalism Today. Oh, and and forget those new ‘sets of instructions’ called Algorithms, they’re there for the taking from you. Shoemakers have all the freedom to invent however.

    ‘Obedience to the Law is Freedom’. Thus declared a sign hung over a barbed wire covered gate at a US Army Base, Fort Dix, in 1969.

  • [Avatar for Eric Berend]
    Eric Berend
    September 28, 2015 03:12 pm

    Correction, above (#2.):
    for “…and utterly reprehensible.”,

    please read instead:
    “…describes conduct that is utterly reprehensible.”.

    (apology for hastily releasing a first draft of a comment)

  • [Avatar for Eric Berend]
    Eric Berend
    September 28, 2015 03:06 pm

    It is this general economic system view, that now seems to have become incompetently or willfully abandoned by our esteemed legislatures. The few individual legislators who do perceive this enormous systemic risk, are drowned out in a flood of legal and illicit influences.

    The various mouthings of career bureaucrats reciting their assigned ‘talking points’ about so-called “patent quality” reflects concerns of purely political and bureaucratic contention which roots stretch back at least a generation (see; and which produced some 63 comments, including some quite revealing entries by USPTO Examiners).

    From an inventor’s point of view, this information, appearing to be as factual as it seems, is deplorable and utterly reprehensible. Some of these selfsame politicians and legal and academic authorities spew volumes about the sanctity of other, particular conservative practices and principles; yet, abandon all semblance of integrity when it comes to this area of U.S. laws.

  • [Avatar for Anon2]
    September 28, 2015 12:11 pm

    Excellent article.

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