Improving Quality-of-Life through...Patents?

I. Improving Quality-of-Life through Technical Innovation

Government should implement policies that maximize the aggregate quality-of-life of its citizenry subject to its available resources. Among the possibilities for doing so, technical advancements are a particularly attractive option. A particular technical advancement, once brought to fruition, has a low recurring cost (compared to alternatives such as, say, welfare programs, which need to be continually funded) and further enables additional technical advancements in the future (for example, each epoch in computer microprocessor evolution has arrived more quickly than the last, in part because of the knowledge gained in building the previous generation of microprocessors). Therefore, government should implement policies that provide the most quality-of-life improving technical advancements ("innovations") to the most people at the least societal cost, in order to increase the aggregate quality-of-life of its citizenry,

Technical innovation comes in many forms, including industrial methods and processes, mechanical devices, and increasingly, software. Societal cost includes: (a) the “excess” time for an innovation to emerge relative to some inherent "earliest-possible time," as well as (b) the “excess” cost of the innovation relative to its natural market price during the time period in which access to the invention is artificially restricted (for example, through competition-limiting intellectual property (IP) rights).

II. The Constitution's Approach: Patents

Interestingly, the Constitution appears to have a vision of how the otherwise open-ended and aesthetic goal described above (i.e., implementing policy that provides the most quality-of-life improving technical innovation to the most people at the least societal cost) should be achieved. Article 1, Section 8, Clause 8 of the Constitution grants Congress the power to:

“promote the progress of science. . . by securing for limited times to. . . inventors the exclusive right to their respective. . . discoveries.”

First, this clause strongly endorses private and exclusive IP-rights, i.e., patents, apparently assuming that such rights “promote the progress of science.” Second, this clause recasts the goal described above into a simple one-dimensional optimization problem: maximizing aggregate quality-of-life through technical innovation is apparently done simply by turning a “knob” that controls patent-term (i.e., the duration of time for which a patent owner enjoys private and exclusive rights to her innovation) to a "sweet spot," at which the inventor receives just enough patent-term so that she is sufficiently motivated to invest her time and resources in creating new innovations. (To give her any additional patent-term would, of course, unduly rob the citizenry of rapid and low cost access to her patented innovations.)

Even accepting this Constitutionally-endorsed formulation as a sensible one, it seems difficult or impossible to determine how to adjust the knob in practice. For starters, the amount of patent-term awarded should depend on the likelihood of commercialization, the time needed to recoup investment costs, and the expected time until a substantially similar innovation would likely be developed by another inventor. The intended use of the patent (does the inventor actually seek to bring the patented innovation to bear, or is she simply going to add it to her "stockpile" to scare potential competitors from entering her market?) would matter. Further, patent-term would ideally be adjusted downward in a scenario where the grant of a patent eliminates an inventor's incentive to develop still-better innovations, especially when she is in the best position to do so. (For example, consider a hypothetical corporation that corners the market by patenting a drug that can keep a patient alive, albeit with constant physical pain - what is this corporation's financial incentive to develop a better drug that can keep the same patient alive with no pain?)

III. The Patent Office - Poorly Implementing Misguided Policy?

Admittedly, it would be difficult to perfectly adjust the knob based on even a small number of the factors identified above. Still, it is surprising that the United States Patent and Trademark Office (USPTO) does not make even a rough attempt to do so. Instead, the USPTO awards every issued patent a patent-term of 20 years from the date on which the patented innovation was first disclosed to the public. 20 years seems pretty arbitrary. Under this rule, 20 years are awarded to a brilliant small-time inventor, who slaves away at great personal sacrifice to create a new product, and who then “loses” many of these precious years attempting to secure production and marketing for his invention. It seems illogical that the same patent-term, 20 years, would be awarded to a mega-corporation, for a product created using the minimal efforts of a corporate assembly-line “invention” process, for a patent that will predictably and immediately generate millions of dollars in daily profits.

Under this system, some patent owners gain, at public expense, billions of dollars over what would have been necessary to create an "inventive incentive" ([1]). On the other hand, truly inventive but resource-strapped individuals and small organizations have little incentive to create, given the expense and hassle of dealing with the USPTO, and threat being slapped with a possible patent-infringement lawsuit ([2]).

IV. Towards a Solution

Predictably, I do not have a solution to the question posed (i.e., what policy maximally encourages technical innovation so as to improve the aggregate quality-of-life?), but the approach endorsed by the Constitution (and therefore, the patent system) seems misguided. One alternative proposal calls for creating an “efficient market” for buying and selling patent rights ([3] and [4]). Another approach, of my own thinking but certainly not original, would allow the government to force the sale of certain high-value patents from private hands to the public at prices substantially lower than their “fair market value.” However, these approaches are unimpressive. In addition to being susceptible to corruptive influences and findings of unconstitutionality, they are merely "patchwork" solutions based on the existing patent system. The best solution, whatever it may be, has to be more elegant than that.

-- By SaswatMisra - 3 March 2010

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