Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Compelling economic evidence favors the patent system, says FTC Commissioner Ohlhausen, (Jun 15, 2016)

By Jody Coultas, J.D.

FTC Commissioner Maureen K. Ohlhausen made the case for a strong patent system at the U.S. Patent and Trademark Office Global Intellectual Property Academy "The Economic Contribution of Technology Licensing" Conference. Ohlhausen stated that while recent criticism of the patent system requires some explanation, there is more than sufficient evidence to overcome these criticisms and to support the IP system.

The patent system is undergoing a period of significant reform, and recent changes in the law have solved many problems, according to Ohlhausen. Also, recent work by the FTC illuminates certain patent uses that unequivocally benefit society. While the status quo should be continuously scrutinized and policies and laws adjusted when necessary, such changes should be based on evidence. Above all, we should respect the impressive body of evidence that supports strong IP rights, according to Ohlhausen.

Commissioner Ohlhausen noted four reasons for criticism of the patent system. First, patent-assertion entities have drawn criticism. Second, patenting technologies and commercializing them are increasingly separate acts. Third, litigation costs make enforcement and defense expensive. Finally, not all patents are valid.

Criticism of the patent system. While several critics have questioned the premise of the patent system, Ohlhausen pointed out that there is abundant evidence linking strong patents with R&D investment and economic growth. Discarding or weakening inventors’ rights would be reckless.

U.S. innovation. Patents are recognized in the Constitution, and patent laws date back to just one year after the Constitution’s adoption. Today, patents are big business with firms in many industries investing heavily. In 2015, the PTO received almost 630,000 patent applications and issued over 325,000 patents. IP rights form part of the innovation environment in which U.S. companies like Apple, Google, IBM, Microsoft, GE, Amazon, and Tesla have arisen. Many of those firms apply for, and receive, hundreds if not thousands of U.S. patents annually. "That is the backdrop in which one should construe arguments in favor of abolishing or diluting patent rights. It is a context to which patent skeptics pay little attention," according to Ohlhausen.

Arguments against patents. Abolishing patents would discard a policy imbedded not just in our country’s entire history, but in a program that has overseen an economy uniquely successful in producing world-beating technologies. Abolition also would deprive individual inventors, start-ups, and other small businesses of crucial benefits. There is little empirical work suggesting that granting robust rights to the owners of valid patents restrict innovation, according to Ohlhausen. That patents matter greatly to some inventors, and less to others, is not grounds for discarding a system on which much R&D investment relies. Much is at stake and it would be a disaster to change course only to find that innovation requires an ecosystem in which strong patents loom large.

Empirical evidence of patent system. The Brookings Institute observed in 2013 that "patents are correlated with economic growth across and within the same country over time" and "R&D spending since 1953 is highly correlated with patenting and the patent rate[.]" There is also evidence that firms respond to changes in strength of patent protections. Additionally, Ohlhausen points to survey evidence that patents are critical to innovation in some markets and relevant to varying degrees elsewhere.

Statistical issue. Studies find a positive correlation between patent strength, private R&D expenditures, and economic growth.Ohlhausen suggested that anti-IP critics faults IP supporters for not disproving the possibility that patents impose greater costs than they confer benefits. However, patents underlie successful innovation policies and correlate with R&D and economic growth, which should caution against discarding or weakening IP protection. Business models that rely on patents either for licensing revenue or to protect their inventions would cease to exist absent the patent system.

News: Antitrust FederalTradeCommissionNews