{"id":6072,"date":"2020-02-06T16:27:01","date_gmt":"2020-02-06T22:27:01","guid":{"rendered":"https:\/\/studentorgs.kentlaw.iit.edu\/ckjip\/?p=6072"},"modified":"2020-02-06T16:27:01","modified_gmt":"2020-02-06T22:27:01","slug":"is-the-u-s-patent-system-promoting-innovation","status":"publish","type":"post","link":"https:\/\/studentorgs.kentlaw.iit.edu\/ckjip\/is-the-u-s-patent-system-promoting-innovation\/","title":{"rendered":"Is the U.S. Patent System Promoting Innovation?"},"content":{"rendered":"

By: D. Deitch<\/strong><\/p>\n

 <\/p>\n

Innovation is understood to be a foundational pillar to a thriving economy.\u00a0 Historically, the United States has incentivized innovation for its believed increase in prosperity as well as social welfare.[1]<\/a>\u00a0 The United States patent system, in its broadest sense, was simply an extension to the long-established history of property rights.\u00a0 Although, what made the patent system so exciting is that, unlike real property, there is not a finite limit to the amount of property that can be distributed. \u00a0Equally important to both real property rights and intellectual property rights (like patents) is having well-defined rights to ensure security and protection.\u00a0 Without a widespread belief that an inventor\u2019s work will be properly protected, participation in the patent system will steeply decline.<\/p>\n

 <\/p>\n

The patent system incentivizes innovation through rewarding invention and protecting that of the invention, however, just because the patent system incentivizes innovation doesn\u2019t necessarily mean it promotes it.[2]<\/a>\u00a0 A modern look into the patent system, with respect to what aspects spur and deter innovation, as well as patents inevitable intersection with competition and policy help to understand if our current system truly promotes innovation in America.<\/p>\n

 <\/p>\n

Competition\u2019s Relationship to Patents<\/em><\/strong><\/p>\n

The patent system is inherently linked to competition.\u00a0 Patents created a competitive environment of innovation, with innovators expecting to be able to profit off the ownership rights their patents conferred.[3]<\/a>\u00a0 Every day people made long-term commitments to their inventions in large part due to the perceived idea that they would receive higher returns on their inventive activity.[4]<\/a>\u00a0 This notion remained true through the 20th<\/sup> century and continues to thrive well beyond the technological boom.<\/p>\n

 <\/p>\n

Not shockingly, people are still driven by return on investment.\u00a0 In recent years, economists such as Scotchmer (1999), and Gallini (2002) have found that patents continue to promote ex ante innovation, meaning that patents influence people to invent because of the expectation of profiting on their invention.[5]<\/a>\u00a0 A competition to win a patent right can lead to a race to innovate and the more competitors the system has in \u201cthe race\u201d the greater the variation in thought process leading to a higher likelihood of breakthrough.[6]<\/a>\u00a0 One of the many examples of this comes from the pharmaceutical industry.\u00a0 Tagamet, an ulcer treating drug was patented, which forced other pharmaceutical R&D efforts to design around the Tagamet patent.[7]<\/a>\u00a0 In designing around the innovation from Tagamet, the development of another successful product, Zantac, would not have been possible.[8]<\/a>\u00a0 This is just one of many isolated examples of how competition can stimulate innovation.\u00a0 Another way in which competition and patents coexist is how they are mutually affected by federal policy.<\/p>\n

 <\/p>\n

Policy has had a major impact on the current state of innovation in the United States.\u00a0 \u00a7101 of the Patent Act states \u201cWhoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof, may obtain a patent.\u201d[9]<\/a>\u00a0 Despite this language being tremendously broad, courts universally held that some inventions are off-limits like abstract intellectual concepts, mental steps, and business methods.[10]<\/a>\u00a0 However, recent changes in the last 30 years have substantially altered the patent ecosystem.<\/p>\n

 <\/p>\n

Altering the Scope of Patentable Subject Matter<\/em><\/strong><\/p>\n

As mentioned, some of the long-held areas of \u201coff-limits\u201d patenting have been challenged in recent years.[11]<\/a>\u00a0 In the 1980s, two different Supreme Court decisions held that both man-made living organisms and computer software constitute as patentable subject matter.\u00a0 Additionally, in 1999, Federal Circuit Court ruled that business methods can be patented.[12]<\/a>\u00a0 These significant decisions opened up an argument that is still ongoing as to whether the allowance of such patents accelerate or obstruct innovation.[13]<\/a>\u00a0 Patenting software and business methods was a dangerous door to open because of America\u2019s history in avoiding ownership of such abstract ideas.\u00a0 Since innovation in many fields builds incrementally off preceding work, competitive concerns have been raised with the thought that allowing these patents will increase the potential for patent thickets and royalty stacking which undoubtedly deter innovation.[14]<\/a><\/p>\n

 <\/p>\n

As the boundaries continue to get stretched, policy makers must assess the system and decide if granting patents on previously dismissed subject matter promotes progress or hinders competition and innovation. If the scope of patentable subject matter continues to widen, the transition for patent and competition policy will only get more tumultuous.[15]<\/a>\u00a0 An idea that was previously held as open to free competition that is now allowed to be patented by an individual or group, creates a difficult task for policy makers.[16]<\/a>\u00a0 How should the existing patent doctrines apply to the newly patentable subjects?\u00a0 This is one of many questions that has been tangled with but is far from answered.<\/p>\n

 <\/p>\n

It is unclear to what extent expanding the scope of patentable subject matter impacts innovation, but it is evident that a recognizable relationship exists.\u00a0 The \u201cobvious\u201d component of the legal standard for a patent continues to weaken which is allowing people to gain ownership over ideas that are not significant technological advances.[17]<\/a>\u00a0 It is imperative that the statutory application be held to a high standard or we will see the participation in patents diminish.[18]<\/a>\u00a0 The participation alone in the patent system promotes innovation regardless of what the legitimate returns are.[19]<\/a>\u00a0 However, the trend in policy has given the common inventor a weaker belief that their labor will be compensated for.<\/p>\n

 <\/p>\n

Achieving the Balance <\/em><\/strong><\/p>\n

The balance our patent system is in constant search of is between encouraging innovation and avoiding monopolies.[20]<\/a>\u00a0 The economic effectiveness of all forms of property is dependent in large part to the supporting institutions.[21]<\/a>\u00a0 So what things, from a policy standpoint, should be considered to help achieve this balance?<\/p>\n

 <\/p>\n

As previously mentioned, tightening the legal standards that are used in evaluating whether a patent is \u201cobvious\u201d would promote open market efficiency.[22]<\/a>\u00a0 Additionally, the Patent and Trademark Office (PTO) has long recommended expanding its \u201csecond-pair of eyes\u201d review.[23]<\/a>\u00a0 This form of review allows the PTO to identify issues that should be given further attention by the examiners.[24]<\/a>\u00a0 The PTO first utilized this method in an attempt to improve the quality of business method patents.[25]<\/a>\u00a0 Understanding that examining business method patents needed a far different approach than the traditional patents the examiners were accustomed to evaluating, the PTO implemented this new style of review to boost the patent quality.[26]<\/a>\u00a0 There have been suggestions to expand this stylistic review to patents that pose substantial economic impact.[27]<\/a><\/p>\n

 <\/p>\n

Emerging technologies have given examiners trouble in providing consistent and efficient examination and eventual issuance or denial of such patents.\u00a0 Many feel that implementing the expansion of the second pair of eyes approach will help strike the balance between public interest in intellectual property and individual customer\u2019s interest in their patent or trademark.[28]<\/a>\u00a0 Innovation is directly impacted because just as the PTO should issue valid patents to encourage invention, disclosure and commercial development, they also must protect the public against the issuance of invalid patents.[29]<\/a>\u00a0 Innovation is hampered when unnecessary costs and market power are distributed via invalid patent issuance.[30]<\/a><\/p>\n

 <\/p>\n

Conclusion<\/em><\/strong><\/p>\n

The patent system plays a significant role in innovation and when the system is operating in harmony with competition, innovation thrives.\u00a0 However, the implementation of questionable patents can prevent innovation by deterring competition.\u00a0 The essential balance between encouraging innovation and preventing monopolies needs to remain steady in order for the system to flourish.\u00a0 Based on recent momentum, measures may need to be taken in order to balance the scale once again.<\/p>\n

 <\/p>\n

[1]<\/a> James Bessen & Michael J. Meurer, Do Patents Perform Like Property<\/em> in <\/em>academy of management perspectives: Vol. 22, no. 3, (Aug. 2008) https:\/\/www.jstor.org\/stable\/27747459?read-now=1&seq=1#page_scan_tab_contents<\/p>\n

[2]<\/a> David Kline, Do Patents Really Promote Innovation<\/em>, micholsonip hot topics blog (April 24, 2017) https:\/\/michelsonip.com\/wp-content\/uploads\/2017\/04\/4-A-Hot-Topic-Do-Patents-Really-Promote-Innovation.pdf<\/p>\n

[3]<\/a> Id<\/em>.<\/p>\n

[4]<\/a> Id<\/em>.<\/p>\n

[5]<\/a> Suzanne Scotchmer, On the Optimality of the Patent Renewal System, the RAND journal of economics, vol. 30, no. 2, 181 (1999) https:\/\/www.jstor.org\/stable\/2556076; \u00a0and Nancy, T. Gallini, The Economics of Patents: Lessons from Recent U.S. Patent Reform<\/em>, Journal of Economic Perspectives, vol. 16, no. 2, 131 (Spring 2002) https:\/\/www.aeaweb.org\/articles?id=10.1257\/0895330027292<\/p>\n

[6]<\/a> United States Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy<\/em>, 10, (October 2003) https:\/\/books.google.com\/books?hl=en&lr=&id=4EXaUQRxsf0C&oi=fnd&pg=PA1&dq=Do+Patents+promote+innovation&ots=lCxwT8xdme&sig=h2y3KnNQu_ErV84Rvb0N3x7NNmk#v=onepage&q=race&f=false<\/p>\n

[7]<\/a> Id. <\/em>at page 21.<\/p>\n

[8]<\/a> Id<\/em>.<\/p>\n

[9]<\/a> 35 U.S.C. \u00a7 101.<\/p>\n

[10]<\/a> Supra<\/em> note 6 at page 38<\/p>\n

[11]<\/a> Id. <\/em><\/p>\n

[12]<\/a> Id <\/em>at page 14<\/p>\n

[13]<\/a> Id<\/em>.<\/p>\n

[14]<\/a> See <\/em>Bessen, supra<\/em> note 1.<\/p>\n

[15]<\/a> Supra <\/em>note 6.<\/p>\n

[16]<\/a> Id<\/em>.<\/p>\n

[17]<\/a> See <\/em>Bessen, supra <\/em>note 1.<\/p>\n

[18]<\/a> Id<\/em>.<\/p>\n

[19]<\/a> Denis Dutton, Understanding Human Action<\/em>, analytic philosophy, vol. 25, no. 1, 38 (January 1984)<\/p>\n

[20]<\/a> See <\/em>Scotchmer, supra <\/em>note 5.<\/p>\n

[21]<\/a> See <\/em>Bessen, supra<\/em> note 1.<\/p>\n

[22]<\/a> Supra <\/em>note 6.<\/p>\n

[23]<\/a> Id<\/em>.<\/p>\n

[24]<\/a> Id<\/em>.<\/p>\n

[25]<\/a> Id<\/em>.<\/p>\n

[26]<\/a> Id<\/em>.<\/p>\n

[27]<\/a> Id<\/em>.<\/p>\n

[28]<\/a> Id<\/em> at page 20.<\/p>\n

[29]<\/a> Id<\/em>.<\/p>\n

[30]<\/a> Id<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"

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