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< | Update (*6/12/10*) - I'm currently working on revising this paper. |
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> | Update (*6/13/10*) - I've finished revising my first paper (for this round of review) |
| | Major Version History: |
| | Version 12 - My first paper with Eben's comments |
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< | Version 13 - Outline for my revised first paper |
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> | Version 13 - Outline of my revised first paper |
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< | Version 14 - Working draft of my revised first paper (*in progress*) |
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> | Version 14 - Draft of my revised first paper
Version 15 - Finished revised first paper |
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| | I. Introduction |
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< | Government can improve social welfare by implementing policy that encourages technical innovation. While most parties agree that private intellectual property (IP) rights (or their equivalent incentives) are a necessary part of such a policy, the exact “nature” and “degree” of such rights has proven to be highly contentious [1], [2], [3]. The balance between private and public IP rights is almost universally acknowledged to be sub-optimal, but change is hard to come by, as today’s “patent culture” is deeply embedded in United States statues and the day-to-day operation of the Patent and Trademark Office (PTO). Therefore, most proposals to improve the balance between public and private IP rights focus only on small-scale changes.
This essay argues that patent rights should be recognized only for “platform” technology, and not for mere “incremental” innovation, and further, that this revised definition of patentability can be implemented using the current machinery of current patent law under 35 U.S.C. § 103 [4]. Although the proposed policy would dramatically reduce the overall amount of private IP rights awarded to citizens and organizations for their inventions, it would likely encourage the actual kinds of innovation that increases societal welfare, while also avoiding many of the negative side effects of the current patent system.
II. Private IP Rights and Technical Innovation |
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> | Government should implement policies that maximize the social welfare of its citizenry. Among the possibilities for doing so, policies that encourage technical innovation are particularly attractive. A technical innovation, once brought to fruition, has a low recurring cost (compared to alternatives such as, say, welfare programs, which need to be continually funded) and makes future technical innovations possible. While most parties agree that private intellectual property (IP) rights are a necessary part of such a policy, the ideal “nature” and “degree” of private IP rights is highly contentious [1], [2], [3]. |
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> | This essay argues that patent rights should be recognized only for “platform” technology, and not for mere “incremental” innovation, and further, that this revised definition of patentability can be implemented using current patent law under 35 U.S.C. § 103 [4]. Although the proposed policy would dramatically reduce the overall amount privately-owned IP, it would likely encourage the actual kinds of innovation that increase societal welfare, while avoiding many of the negative side effects of the current patent system. |
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< | Private IP rights create a strong monetary incentive for people and corporations to develop new technology, which, if brought to market, can greatly increase social welfare. However, private IP rights also give rise to many undesirable effects. First, private rights prevent the public from gaining quick and cheap access to patented inventions, including invention that would have been created even without any private IP rights whatsoever. Second, private IP rights tend to concentrate research and development efforts on technologies that are “protectable” and that can be commercialized, rather than those that have the most potential to increase social welfare To avoid these pitfalls, a technology policy should to be carefully crafted to find the “sweet spot” in private IP rights. That is, the best policy is one that creates sufficient inventive incentive, while not unduly robbing the citizenry of quick and cheap access to new innovations, and while encouraging the types of innovation that are most useful to the societal welfare. |
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< | III. The Current Patent System Misses the Sweet Spot |
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< | Unfortunately, the current patent system fails to find the sweet spot in private IP rights. First, the current system makes no effort recognize, and deny patentability to, technologies that would have been brought to bear even without private IP rights, thereby increasing the cost of these goods to the public. Second, the current system diverts research and development resources from long-term and potentially ground-breaking, but unpatentable, innovations to short-term ideas that are only incrementally innovation, but that are patentable. Third, the current system is inefficient. A large company may spend millions of dollars a year on the “overhead” of patent litigation and prosecution, while a small company may be deterred entirely from the market due to these expenses. Finally, the current system allows inventions to be patented that an owner has no intention of actually using or otherwise making available to the public (e.g., through licensing or dedication to the public). This leads to patent stockpiling, which harms rather than helps the social welfare. |
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< | While the issue described above are each serious flaws of the current patent system, many current proposals fail to address these issues entirely, and instead focus only on small-scale solutions to less serious problems (e.g., tweaking "patent-term" or limiting the number of continuing applications that can be filed). |
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> | II. Private IP Rights - The Current Patent System Misses the Sweet Spot |
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> | Private IP rights create a strong monetary incentive for people and organizations to develop new technology, but they can also give rise to many undesirable side effects. An ideal technology policy should therefore be carefully crafted to find a “sweet spot” in private IP rights, where inventors have a sufficient incentive to develop the types of inventions that lead to social welfare increases, but where the citizenry is not unduly robbed of quick and cheap access to those inventions. |
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> | Unfortunately, the current patent system fails to find this sweet spot. First, the current system makes no effort to identify and deny patentability to technologies that would have been brought to bear even without private IP rights, and it therefore unnecessarily increases the costs of these technologies. Further, the current system fails to encourage the types of innovations that actually increase social welfare because it awards patentability to short-term technology, while denying patentability to long-term and fundamental innovations (which are inherently abstract at their early stages of development). Third, the current system is inefficient. A company may spend millions of dollars a year on the “overhead” of patent litigation and prosecution, or may be deterred entirely from entering the market due to these expenses. Finally, the current system allows inventions to be patented by owners who have no intention of actually using or otherwise making their inventions available to the public. This leads to patent stockpiling, which harms rather than helps the social welfare. |
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< | IV. Platform-Based Innovation |
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> | Many current proposals, perhaps out of recognition that today’s “patent culture” is deeply embedded in statute and the day-to-day operation of the Patent and Trademark Office (PTO), do not attempt to address these serious flaws of the current patent system. Rather, they focus on small-scale solutions to less serious problems, such as the optimal amount of "patent-term" or the number of continuing applications that an inventor may file. |
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< | In order to address each of the serious flaws described in Section 3, the current patent system should be tweaked to distinguish between "platform" technology, which should be patentable, and mere "incremental" innovation, which should not be. Further, the current patent system should be changed to allow the government to buy any patented technology, at fair market value, as long as it is doing so for the public good. Under this policy, each of the major pitfalls described above would be remedied. |
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< | First, the proposed policy would inherently minimize the patenting of the incremental technology that would have been developed even in the absence of private IP rights. History has shown that when technical platforms are widely available (e.g., computer software), incremental innovation happens automatically through natural human curiosity and experimentation. Second, the proposed policy would encourage long-term research and development that would lead to fundamental new “platform” technologies, which would have the largest impact on social welfare, while discouraging the expenditure of limited resources on only “incremental” innovation. Third, the proposed policy would reduce the overhead costs of obtaining and protecting patent rights. This is because fewer patent applications would be filed, and because those few patents that are granted would be sufficiently different from each other to avoid the confusion and ambiguity, fewer false patent infringement lawsuits would also be filed. Finally, the takings provision ensures that those few patents that are granted cannot be stockpiled and offered to the public at ransom prices. The government would always have the option of buying patented technology at fair market value and dedicating it to the public. |
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> | III. Platform-Based Innovation |
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> | To truly address these flaws, the current patent system should be altered to distinguish between "platform" technology, which should be patentable, and mere "incremental" innovation, which should not be. Further, the system should be changed to allow the government to buy any patented technology at fair market value from the patent owners. |
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> | First, history has shown that when technical platforms are widely available to the public (e.g., personal computers and related software), incremental innovation happens automatically through natural human curiosity and experimentation, even without the lure of private IP rights. Therefore, the current proposal correspondingly denies protection to mere “incremental” innovation. |
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> | Second, because only “platform” technology would be patentable, the proposed policy would encourage the type of long-term and fundamental research that would tend to produce such platforms, and would correspondingly discourage the expenditure of limited resources on mere “incremental” innovations. |
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> | Third, the proposed policy would reduce the overhead costs of obtaining and defending patent rights. This is because, by denying patentability to incremental innovations, fewer patent applications would be filed, and further, the patents that would be granted would be sufficiently different from each other to avoid the confusion and ambiguity that currently leads to many patent infringement lawsuits. |
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< | V. Implementing Platform-Based Innovation |
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> | Finally, the proposed takings provision would ensure that patents could not be hidden away or offered to the public at ransom-like prices by nefarious owners, since the government would always have the option of buying the patented technology and dedicating it to the public. |
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< | There is at least one relatively practical way to bring about such change. The proposed policy can be implemented under the 35 U.S.C. § 103 non-obviousness requirement of the current patent system. That is, the PTO could take the position that only "platform" based innovations are “non-obvious” in the sense of 35 U.S.C. § 103, while "incremental" innovations are always “obvious.” |
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< | VI. Sources of Resistance and Corruption |
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< | If the current proposal is adopted, many, many, fewer patents would issue, and these would mean less revenue for the PTO. There would likely be resistance to this idea, as Congress is fond of diverting PTO user fees for general use [5]. Further, there would be a scaling down of the multi-billion dollars enterprise that is the PTO [6]. |
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> | IV. Implementing Platform-Based Innovation |
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> | Although the proposed policy represents large-scale change, it could be implemented today by reinterpreting the 35 U.S.C. § 103 non-obviousness requirement of the current patent system. In particular, the PTO could take the position that only "platform" based innovations are “non-obvious,” while "incremental" innovations are always “obvious.” |
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< | Further, there are many sources of corruption to be considered. First, it is not clear who would decide what is a "technical platform" is for the purposes of granting a patent. Further, it is not clear how to determine which innovations the government should buy out, or what just compensation ought to be for a untested innovation that has no established market. |
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> | V. Sources of Resistance and Corruption |
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< | VII. Conclusion |
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< | Patent rights should be recognized only for “platform” technology, and not for mere “incremental” innovation. This revised definition of patentability can be implemented using the current machinery of current patent law under 35 U.S.C. § 103. Although the proposed policy would dramatically reduce the overall amount of private IP rights awarded to citizens and organizations for their inventions, it would likely encourage the actual kinds of innovation that increases societal welfare, while also avoiding many of the negative side effects of the current patent system. |
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> | If the current proposal is adopted, many fewer patents would issue, leading to less revenue for the PTO. There would likely be resistance to this idea, as Congress is fond of diverting PTO user fees for general use [5], [6]. Further, it is not clear how a "technical platform" could be objectively defined to avoid corruption, nor is it clear who would determine which innovations the government should buy, or what would constitute the “fair market value” for an untested product. However, these sources of resistance and corruption are similar to those that already exist in other areas of government contracting (e.g., defense contracting), and similar preventative measures could be taken in the patent realm to reduce or eliminate these sources. |
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> | VI. Conclusion |
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> | Patent rights should be recognized only for “platform” technology, and not for mere “incremental” innovation. This revised definition of patentability can be implemented under 35 U.S.C. § 103. Although the proposed policy would dramatically reduce the overall amount of private IP rights awarded, it would likely encourage the actual kinds of innovation that increase societal welfare, while avoiding many of the negative side effects of the current patent system. |
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< | -- By SaswatMisra - 12 June 2010 |
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> | -- By SaswatMisra - 13 June 2010 |