What’s Wrong With The Arguments For Patent Reform

What’s Wrong With The Arguments For Patent Reform


Introduction
 
Innovation is central to U.S. economic growth. Economists have long shown that more than one third of all the gains in per capita incomes and productivity are the result of technological innovation. Moreover, the United States has long been and remains a world leader at this activity.
 
Economic theory and empirical evidence show that an effective system of intellectual property protection is an important part of what makes the U.S. successful at generating technological innovation. The importance of an effective system of intellectual property protection to U.S, success at technological innovation means that policy makers should very carefully evaluate any changes to our nation’s intellectual property system.
 
The last two U.S. Congresses have considered legislation to change several aspects of the U.S. patent system. Two of these provisions are highly controversial: reducing damages for patent infringement and subjecting patents to unlimited post-grant 3rd party challenges. The former would change the way that damages are calculated in patent infringement lawsuits.1 The latter would create a low cost, challenger-friendly mechanism for third parties to institute administrative oppositions to invalidate patents in the United States Patent and Trademark Office (USPTO).2
 
Proponents of changing the patent system have made a number of arguments for why Congress should change it. Because of the importance of our patent system to technological innovation in this country, the accuracy of these arguments is of great importance to policy makers considering whether or not to make these changes. This study examines these arguments in light of empirical evidence on the patent system.
 
The main finding of this study is that the arguments for changing the patent system are based on flawed logic and a poor reading of the existing empirical evidence on the performance of the patent system. Specifically:
 
  1. The growth in patent applications has not led to a decline in patent quality.
  2. The United States is not bogged down in patent disputes.
  3. Patent damage awards are not excessive.
  4. Patent litigation has little adverse impact on innovation and job creation.
  5. Patent trolls are not hijacking the U.S. patent system.
  6. The proposed changes to the patent system will not greatly improve patent quality, substantially reduce the cost of patent litigation, or speed determination of patent validity.3
The remainder of this paper is divided into three sections. The next section provides a brief primer on the role of patents and changes that have occurred in the U.S. patent system in recent years. The third section evaluates the arguments made for the post grant opposition and “apportionment” of damages proposals. The fourth section explains why the proposed changes to the patent system will not have the beneficial effects they are argued to have. The final section concludes.
 

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