What is a Patent?

Under the Consititution, the Government is entrusted to “Progress of Science and useful Arts, by securing for limited to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Pursuant to this goal, Congress passed Title 35 of the US Code to govern the rules and regulations on patentability and remedies for patent holders against those who infringe patents.

Patents “shall have the attributes of personal property.” Patent holders have the right of possession, right to sell, and the right to exclude. In addition, similar to property rights, the government has a right the right to use a patent as long as it gives the owner just compensation. In regards to real property, Kelo ruled that a government takings of private land for economic development constitutes “public use” and is therefore consitutional. Patents may or may not be real property and in any case are not governed by the same principles that real property (federal vs. state). Nevertheless, the majority's rationale in interpreting “public use” can be helpful—and instructive—in interpreting the similar “for the United States” provision in USC 28 S 1498.

Why do we have Patents?

The principal argument for a patent system is that patents incentivize inventors to invent. Generally speaking, the logic proceeds as follows: We want law to make life more efficient (to increase happiness) and increased knowledge and new technological processes make life more efficient. Therefore, we want to increase our knowledge and improve existing processes. People only (or primarily) produce for pecuniary gain and therefore people will not produce / invest time or money in new processes unless they see a future payoff. So, to maximize our knowledge and improve existing processes we must protect investments and guarantee future payoffs. Many of these suppositions are questionable, but the bottom line should be clear: patents increase well being byi incentivizine authors to invest time and money in their art.

There are many historical and emerging arguments against patent systems. For one, patents can be quite obstructive and create gridlock. Michael Heller calls this effect the “anti-commons”: too many people have too many rights. An “anti-commons” prevents the holders of these rights from assembling them, which decreases social-welfare. His most comtemporarily relevant example is in biotechnology. To develop new drugs, companies often require the license of patents that belong to other companies. However, as more and more licenses are required, the bargaining and transaction costs may become execssive and outweigh the future financial expected value of a marketable drug. Here, Heller argues, the patent system works backwards and consequently produces the opposite goal of what it is designed to do: increase social welfare. Accordingly, the latest and greatest Viagra may be stuck in the labs because the costs of developing it are too prohibitive.

How are we fixing the the System?

Various methods of curing these defect have been employed. One such solution are patent pools where companies agree to cross-license their patents. The key in any solution is to strike a balance between the “patent” framework and the “no patent” framework. Patents are designed to protect the gains an inventor will receive in order to incentivize investment. Such a justification is rooted in the fact that there is a social gain from new and better iPads (pick your favorite gizmo). But, clearly, at some point we tread into the realm of the “anti-commons” where we are protecting too many rights and social welfare declines due to obstruction. On this side of the continuum, the patent system mainly functions to line the pockets of the elite. In many areas, this consequence is unfortunate but not tragic. However, in health care, the consequence is absurd—people are dying because companies want to get rich. This must change.

Another way to change the System

Let me suggest an alternative tactic that is being bandied about by academics but is rarely used by the holder of the tactic. Take or threaten to take people's patents back. Patents are only good if they are being used. Pharmaceutical drug patents are only good if the drugs they produce are affordable to the people that need them. As the profit margins of drug companies expand to appalling margins, the government should threaten to take the lifeblood out of these companies' balance sheet: their patents. This would be real health care reform. Because the root problem has never actually been coverage but the fact that people need coverage because health care is so damn expensive.

Employing such a tactic could bring about a revolution in health care practices. The Government could (but realistically will not) strong arm Merck, Pfizer, and the like into affordable drugs. The decree would be as follows: lower the price on Drug X or I will own drug X. Equally important, the Government could broker cross-licensing agreements and avoid the gridlock Heller deplores. The decree would be as follows: license your patent to company X or I will do it for you. Both of these decrees seem to be well within the Constitutional definition of “public use.” Is there anything more important and more used by the public use than health care? These intrusions would also be well protected by statutory language as use for the “United States.”

For a number of political reasons this revolution will probably be deferred to another generation's future. Nevertheless, such a vision would be consistent with the Constitution's decree to protect the “general welfare.” It would strike that delicate balance between protecting the inventor's enterprise and ensuring public benefit.

My last paper was inconsistent with the purpose of this exercise (writing and editing). Please edit this one instead (unless you really want to edit the other one, which is still here).

-- MatthewZorn - 20 Apr 2010