Erosion of Patent Rights Is a Threat to Innovation and American Prosperity

COMMENTARY Economic and Property Rights

Erosion of Patent Rights Is a Threat to Innovation and American Prosperity

Oct 6th, 2017 6 min read
COMMENTARY BY
Alden Abbott

Deputy Director of Edwin Meese III Centerfor Legal and Judicial Studies

Alden Abbott serves as Deputy Director of Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.
A series of recent Supreme Court decisions have made it harder to obtain and defend a patent. iStock

Key Takeaways

The American patent system has been a bulwark of American prosperity throughout our country’s history.

A 2017 U.S. Chamber of Commerce ranking of national patent systems found that the United States has slipped to No. 10 in the world in strength of patent protection.

Fortunately, there are public policy cures for this anti-patent disease.

The American patent system has been a bulwark of American prosperity throughout our country’s history.

Unfortunately, recent judicial and executive branch blunders that weaken patent protections are a clear and present danger to economic innovation. The federal government should act quickly to restore the vitality of our patent system and thereby strengthen the American economy.

Patent protection is authorized in the Constitution to “promote the Progress of Science and Useful Arts,” and American patent laws have been on the books since 1790, when Congress passed the first Patent Act.

A patent is a time-limited property right granted to inventors under U.S. law for a novel, useful, and non-obvious invention. A patent confers “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States.

The Patent and Trademark Office, an agency within the Commerce Department, reviews patent applications and issues patents for inventions that meet patentability criteria.

Patents played a central role in supporting the Industrial Revolution in 19th-century America, and they were associated with key U.S. innovative breakthroughs in the 20th and early 21st century as well.

Patent-enabled breakthroughs led to new products that fundamentally transformed American industry—sewing machines in the 1800s; telephones, airplanes, antibiotics, and electrical equipment in the 1900s; smartphones and new biologic drugs in the 2000s, just to name a few.

In short, patents have clearly been at the heart of successive waves of critically important American commercial innovation and continue to make enormous contributions to the American economy.

But today, unfortunately, U.S. patent rights are under serious threat.

For starters, a series of Supreme Court decisions over the last 15 years have made it harder to obtain and defend a patent.

For example, in its 2006 eBay v. MercExchange decision, the Supreme Court made it more difficult for a patent holder to obtain a federal court injunction—an order preventing others from using patented technology without permission.

And more recently, the Supreme Court has cut back significantly on what it deems “patent eligible,” particularly in such areas as biotechnology, computer-implemented inventions, and software.

As Gene Quinn, a leading patent lawyer, explains, these changes mean that today “there are many other parts of the world that have more expansive views of what can be patented, including Europe, Australia, and even China.”

What’s worse, the America Invents Act of 2011 established a Patent Trial and Appeals Board within the Patent and Trademark Office to review already-issued patents at the request of third parties.

Patent experts note that this Board has wreaked havoc, striking down the vast majority of patent claims it considers in a way that undermines fundamental due process rights of patent holders.

By eliminating numerous statutorily protected patents, the Board review makes patents less valuable. Investors will be less willing to invest in new patents covering groundbreaking inventions if there is a good chance that copycats seeking a “free ride” on these innovations can get the Board to kill the patent rights.

In June 2017, the Supreme Court agreed to review the case of Oil States Energy Services v. Greene’s Energy Group, which will decide whether the Board’s reviews violate the Constitution by allowing patent rights to be extinguished without the possibility of a jury trial.

But given the Supreme Court’s faulty track record, it is far from clear that the high court will overturn the system.

That’s not all. Until the past few years, American antitrust policy respected the rights of inventors to receive full and fair returns on their patent rights. But that policy changed during the Obama administration, as antitrust enforcers focused on limiting patent-licensing fees on patents that are important in high-tech industries that rely on technical standards.

Similarly, foreign antitrust agencies have chimed in, bringing their own enforcement actions against patent holders.

More broadly, the Obama administration’s regulatory posture on patent-antitrust policy created an environment that is less favorable to patents.. These actions have undermined the incentives of patent owners to develop new technologies—and, in particular, to invest in technologies related to standards, to the detriment of innovation.

The harmful consequences of these “anti-patent” developments are becoming apparent. A 2017 U.S. Chamber of Commerce ranking of national patent systems found that the United States has slipped to No. 10 in the world in strength of patent protection (tied with Hungary), after having been rated No. 1 in prior rankings.

This is bad because economic research “demonstrates that strong patent systems, which encourage research and development and investment, spur innovation and support robust economic growth.”

In short, American innovation and economic growth will suffer if something is not done. Fortunately, there are public policy cures for the anti-patent disease. Specifically (as I have explained previously in greater detail):

  • Federal legislation should eliminate (ideally) or at the very least strongly rein in the Patent Trial and Appeals Board.
  • Congress should also change substantive patent law to overturn Supreme Court decisions that have harmfully limited patent eligibility and remedies for patent owners.
  • President Donald Trump should take actions to appoint “pro-patent” officials and establish strong “pro-patent” policies throughout his administration.
  • U.S. antitrust officials should reverse the Obama administration’s misguided anti-patent policies.
  • The Trump administration should vigorously oppose foreign actions aimed at undermining American patent rights. It should also act on the global stage to promote greater respect and protection for patents.

While not a panacea, taken together, these proposals provide a blueprint for making America once again the world’s leader in patent protection—and for enhancing American innovation and economic growth.

This piece originally appeared in The Daily Signal