Fundamentally, patents facilitate access to VC financing, market entry and job creation. Without patents and an effective IP environment, the process stalls and, in some cases, firms may never emerge. Without adequate IP protection, innovators are unable to attract investments, business creation is slowed and jobs lost. Evidence suggests that this same story plays out, albeit with differing dynamics, across all sorts of firms and all nations. Economic prosperity relies on job growth, and it is clear that strong, effective IP rights have a role to play in creating both.
If a weak patent system were the answer you would expect countries that have a weak patent system, or no patent system at all, to have run away innovation. What you see, however, is the exact opposite. Those that want to dismantle the patent system or further weaken patent rights should bear a heavy burden to demonstrate the veracity of their claims. They should be required to prove that innovation at current levels will at a minimum be guaranteed to maintain at current levels if we are to take a leap of faith and disregard what history, common sense and the law of economics predicts will happen.
While all job creation is valuable to continued economic growth and development, high-skilled, well-paying jobs are the most impactful for sustained economic progress. Evidence suggests that intellectual property (IP) intensive industries are critical to economic growth and vital to national well-being and global competitiveness. Pham (2010) analyzes the role of innovation and the impact of intellectual property rights on U.S. productivity, competitiveness, jobs, wages and exports. His results clearly point to the importance of IP-intensive industries to economic prosperity.
The legal costs of the IP system should be measured against the value of intellectual capital in the U.S. economy, estimated in a study by Kevin Hassett and Robert Shapiro to equal between $8.1 trillion to $9.2 trillion… Weakening the US patent system harms economic prospects for middle income earners because it will stifle innovation, discourage patenting, reduce private investments in new technologies protected by patents, slow economic growth, increase unemployment, and harm consumers. The proposed reforms will reduce prospects for economic advancement for middle income earners because they damage entrepreneurship and small business and favor large incumbent firms over inventors and innovators.
How tragic if the United States of America turns its patent system into a tool that rich and powerful companies use to suppress innovation that challenges their comfortable status quo. But Just because there are sharks doesn’t mean you stay out of the ocean. We need to get ahead of the curve and aggressively publicize what we’re doing to protect the public interest. That means showing how Bayh-Dole and the patent system advance human well-being and wealth creation not just here but around the world.
The sensible response to all these new and evolving circumstances is not a rush to pass a bill, but a pause to evaluate the rapidly changing situation. Many expert leaders, including the former PTO Director David Kappos, have so suggested. So far Congress does not seem to be listening, but they should. The future of our economy and present job creation depend on a well functioning patent enforcement regime. Let’s make it more efficient, not eviscerate or hobble it.
LITAN: ”But let’s go back to the main point again from our paper, which is that we need to switch the national conversation about patents to doing a better job of exploiting what we have as opposed to arguing so much about what the standards should be going forward. If we did that, maybe we’d get some greater bang for the buck our of our innovation system. Because there are a lot of unexploited patents out there that could be commercialized. Of course, your point that a lot of patents will drop off because the maintenance fee won’t be paid in the four year period. That’s true for some patents, but certainly not all. In our paper we call the unexploited patents singles and doubles. Our current patent system is set up really only to reward home runs. It’s because of the costs and risks of commercializing the singles and doubles that we don’t see enough of them.”
LITAN: ”Cross industry variation in the use of patents shouldn’t mean that we should just junk the patent system. As I said, the alternatives to go to a system of trade secrets which has very, I think, suboptimal social implications relative to patents. Indeed I think when people object to patents they don’t think about well what else would firms rely on for protecting their hard-earned IP. Indeed, even companies that are heavily involved in the open source world are using patents as a ‘currency’ through which they can achieve collaboration with other firms. That’s why you see big firms like Microsoft and IBM cross license. They do it not only to insulate themselves from infringements against them but because patents are the tickets through which can collaborate with other parties to innovate, make better products and so on.”
Most patent owners and users cannot bear the costs or risks associated with enforcing and licensing their patents. The potential cost of this waste to the American economy has been estimated to be as large as $1 trillion annually, representing a five percent reduction in potential GDP… using conservative assumptions of the impact on the economy of increased innovation, could generate social benefits ranging between $100 and $200 billion per year. This estimated range easily could be surpassed if the U.S. can achieve enhanced licensing of existing patents, and if any market solutions also enable the dissemination of more knowledge that could increase the numbers of patented innovations themselves.
Speaking without notes, Walker was in rare form. He spoke about everything from job creation to the need to allow innovators to benefit from the fruits of their labors… If you want an engine to create jobs you have to have inventors who bring value. “Make no mistake, at the core is invention and innovation, pick your term, they are one in the same,” Walker said. Without customers we don’t have jobs, and you cannot get customers without solving a problem and having some kind of competitive advantage. “If we don’t have a strong ecosystem that supports innovation we are going to have less of it. This isn’t rocket science,” he exclaimed. If we make something complicated we will have less of it.
Debates over economic fairness, the appropriate role of government in the economy and the value of the patent system spill over into our world. One factor that made the enactment of Bayh-Dole so difficult was the feeling in the 60’s and 70’s that patents were inherently bad. Intellectual property used to fall under the Senate Subcommittee on Antitrust and Monopolies when I joined the Judiciary Committee staff– which says much on how patents were viewed. It took the wakeup call of losing our traditional lead in innovation to Japan and Germany to start reversing this trend.
Without a competitive advantage sane people do not invest money in even simple gadgets, which is why it is extraordinarily difficult to get a licensing deal without a patent, and why the first question investors ask is about your patent position. As celebrated inventor Dean Kamen has said, “[t]he first thing the bank or that venture capitalist will say is, ‘Do you have a patent?’” This is the common experiences shared by everyone in the industry. Those who say it isn’t so are simply not credible.
We have thoroughly destroyed the manufacturing capabilities of the United States and in the process decimated middle class America. The Supreme Court is forcing an anti-patent agenda on the courts, which makes it increasingly difficult climate for those in the biotechnology and software industries, two industries that employ large number of Americans and provide extremely high paying jobs. Companies are also simultaneously fleeing the U.S. for corporate tax purposes and/or refusing to repatriate trillions of dollars earned over seas else it would be taxed once again by the IRS. In short, we are shooting ourselves in the foot over and over again, then taking the time to thoughtfully reload and recommence shooting in said foot. There is no real reason for optimism given the political climate in DC and the reality that innovative advances that are now stalled in the patent system have historically carried us out of recessions and onward to prosperity; something that just won’t happen given the current manufacturing, patent and tax policies and laws.
Simply stated, strong patent rights are an absolute prerequisite for a high tech economy…. With a steep and significant erosion of patent rights and a horribly uncompetitive corporate tax structure the future for high tech companies in the United States is bleak… The world’s best and strongest patent system combined with good tax policies made the U.S. the dominant force in the world. Now we have an antiquated tax system that ranks us at or near the bottom and many biotechnology and software innovations aren’t patentable, while others are declared obvious de novo. Say it out loud. It makes even less sense when you speak the words.
On the very same day that the U.S. jobs report shows unexpectedly weak growth, the Federal Court of Australia issued a ruling directly opposite to the ruling rendered by the United States Supreme Court relative to gene patents. In Yvonne D’Arcy v. Myriad Genetics, Inc., the Federal Court of Australia ruled that Myriad’s claims to isolated DNA are patentable under the laws of Australia. That is the correct ruling, and it is the ruling the U.S. Supreme Court should have reached in Association of Molecular Pathology v. Myriad Genetics. As the patent eligibility laws of the U.S. become increasingly inhospitable to high-tech innovative businesses we can expect more job losses and worse news for the U.S. economy on the horizon.