A Patent System for the 21st Century (2004) / Chapter Skim
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2 Six Reasons to Pay Attention to the Patent System
2 Six Reasons to Pay Attention to the Patent System
Pages 18-38
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From page 18... ...
An open entrepreneurial economy, fueled by effective capital markets and vigorous competition, helps translate these advances into industrial innovation. This capacity did not appear to be so robust or enduring in the 1970s, when productivity growth rates fell sharply, nor in the 1980s, when Japanese competition fostered the notion that U.S.
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From page 19... ...
Other agreements, such as noncompetition covenants and prohibitions against reverse engineering, although often sought in the name of trade secret protection, are more controversial because of their possible effect on fair competition. The Economic Espionage Act of 1996 expanded the effective protection of trade secrets by providing federal criminal penalties for behavior that was traditionally addressed for the most part by state civil law.
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From page 20... ...
government followed a supportive mix of macroeconomic and microeconomic policies -- deficit reduction, conservative monetary policy, scaling back of economic regulation of transportation, finance, and communications, trade liberalization, relatively permissive antitrust enforcement, and at least until the 1990s, continued support of research across a broad range of scientific and engineering fields. The board observed that none of these favorable conditions was permanent and in some areas -- the slowing production of domestic science and engineering talent and the real decline in public support of research in most of the physical science and engineering fields for nearly a decade -- the trends were troubling (NRC, 2001)
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From page 21... ...
Patent policy per se, nevertheless, has not been on the agendas of the Council of Economic Advisers, National Economic Council, or commerce and science committees and subcommittees of Congress. Rather, it has been the preserve of practitioners, corporate stakeholders, the U.S.
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From page 22... ...
The 1996 Economic Espionage Act subjected some trade secret misappropriation to federal criminal penalties, whereas previously it had been a matter of state civil law. And the Trademark Dilution Act of 1995 extended the rights of mark holders beyond the avoidance of consumer confusion.
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From page 23... ...
But in Madey v. Duke University,9 a suit brought against the university by a former professor and laboratory director, the Federal Circuit dispelled that notion by holding that there is 7In a comparison of appeals cases from 1953 to 1978 and from 1982 to 1990, the share of District Court decisions finding validity and infringement that were upheld increased from 62 percent to 90 percent.
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From page 24... ...
Act,12 while exempting from infringement regulatory testing of generic pharmaceuticals, allowed patent term extensions on new drugs of up to five years if the drug's approval is subject to regulatory delay. Relaxed Antitrust Limitations on the Use of Patents · From the 1980s onward there was a marked evolution in the attitude of the Justice Department's Antitrust Division and the Federal Trade Commission toward business conduct involving patents, resulting in a much more nuanced and pro-patent position (FTC, 2003)
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From page 25... ...
As a result, how exclusive rights to a pioneering invention affect followon innovation has always been an issue for theorists and occasionally historians 13The reference is primarily to biological material, which is difficult to invent around, not to laboratory equipment, which has been patented for some time.
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From page 26... ...
. The issue has recently reemerged in a new context -- not whether failure to license or cross-license product patents is impeding further innovation but whether patents on some research tools and foundational discoveries have the potential to stymie further scientific research well upstream of commercial products (Nelson, 2003)
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From page 27... ...
. This is likely to be the case with most research tool patents, which are of little or no value unless the tools are used widely.
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From page 28... ...
Others believe the issue is one of unreasonably low standards of utility or non-obviousness, or excessive patent scope that allowed claims on some research tool patents covering more than the described invention and its application. Still others are of the view that the problem would not exist or would be manageable if noncommercial research activities were shielded from patent infringement liability.
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From page 29... ...
29 rces 2001 Resou 1999 1997 Science NSF 1995 1993 USPTO, 1991 (2000) ; 1989 Jaffe 1987 SOURCE: 1985 1983 entities.
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From page 30... ...
Census. doubt encouraged firms to exploit new ways of protecting market positions, especially since economic regulation, trade barriers, and artificial monopolies have been reduced.
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From page 31... ...
Patented technology is increasingly perceived as having more strategic importance than previously as reflected in the creation of intellectual property practices by nearly all large consulting firms, the emergence of specialized firms that analyze clients' patent holdings and counsel them on using patent portfolios to obtain licensing revenue, the advent of venture-backed firms that purchase unexploited patents and assert them, the use of patent information to pinpoint strategic trends and stock investment opportunities, and the appearance of business management commentary on the importance of a firm's identifying lucrative licensing prospects among its latent patents (Rivette and Kline, 2000)
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From page 32... ...
. The number of patent lawsuits settled in or disposed by federal district courts doubled between 1988 and 2001, from 1,200 to nearly 2,400 (see Figure 2-3)
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From page 33... ...
FIGURE 2-4 American Bar Association membership: Intellectual Property Law Section and total. SOURCE: American Bar Association.
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From page 34... ...
business may offer a broader explanation of the findings. An increase in the perceived importance of patents has led patentees to invest more in the process of application and examination -- asserting more claims, citing more prior art, more frequently amending and refiling applications, tolerating the longer time the examination takes, and even seeking to have their issued patents reexamined when previously unknown prior art comes to light,21 presumably in order to enhance the eventual patent's value in licensing and litigation.
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From page 35... ...
In many cases patenting activity has departed from its traditional role and has become strategic. Some firms are building large patent portfolios to gain access to others' technologies and reduce their vulnerability to infringement litigation.
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From page 36... ...
Possibly as a result, in part, of trade secrecy and copyright protection, invention flourished in both fields well before the advent of patent protection, and open source software development continues under a different incentive system (von Hippel, 2001)
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From page 37... ...
It is common that in such cross-licensing arrangements one firm pays a royalty to the other firm as a "balancing payment," recognizing the disproportionate strength or impact of the recipient firm relative to the other cross-licensing firm. Nevertheless, the avoidance of litigation is important, since litigation can be especially damaging in an industry where a new product can provoke multiple infringement suits and the capital investment required to produce it is very large.
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From page 38... ...
A neglected and largely undocumented cost of the patent system is associated with working out licensing arrangements or negotiating royalties or simply fending off threats of infringement. This was highlighted in the Hall and Ziedonis interviews of semiconductor company executives as a significant cost of the current patent-intensive cross-licensing system in that industry despite its relative effectiveness in avoiding the far higher costs of litigation (Hall and Ziedonis, 2001)
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