While the debate over patent reform has faced something of a lull, with multiple high-profile policy issues currently eating up a large chunk of Congress’s time, this lack of attention should distract nobody. The issue is still alive and well and is very much something that both sides of the aisle should be concerned about, even if the concerns over its abuse remain confined to the policy literature for the time being.
That’s not to say that the policy literature is all bad, though. Indeed, a new paper from the American Enterprise Institute (AEI) offers plenty of reasons why this issue could and should be a bipartisan success story and yet another jewel in the Trump economy’s crown. Further, the paper pushes back — soberly and intelligently — against the talking points used and abused by the junk patent lobby to pull the wool over the eyes of conservatives, libertarians, and free marketeers of all stripes.
Start with the piece’s author: Timothy Muris, a professor at the aptly named Antonin Scalia Law School at George Mason University (GMU) and also the former chair of the Federal Trade Commission under President George W. Bush. Muris is obviously no communist, and, indeed, much of his analysis is devoted to pointing out the ways that our current patent system, while broadly beneficial, actually undermines the case for property rights through the loopholes that bad-faith actors exploit.
For example, Muris points to an as-yet unresolved issue with patent issuance: the fact that the U.S. Patent and Trademark Office (USPTO) has no incentive to reject a patent, while at the same time getting paid when it grants one. In other words, the pressure among patent examiners is to approve almost any meaningless garbage idea that comes through without giving it sufficient scrutiny. Imagine if the DMV had such an incentive when it came to drivers’ licenses: Would anyone be reassured by the presence of such a document? And how chaotic and dangerous would America’s roads be?
Yet chaotic and dangerous is precisely what the patent system can become for innovators because of these kinds of errors. Indeed, as Muris points out, the brinksmanship caused by this proliferation of weak patents has led to economic Cold War-type scenarios where competitors accumulate different, complementary patent portfolios and then agree not to sue each other over each, while using those portfolios as leverage to chill innovation by competitors, even when the patents involved are questionable. This kind of “war of all against all” approach to property rights is precisely what the system is supposed to avoid, not encourage.
And then, of course, there are non-practicing entities (NPEs), more commonly known as patent trolls. Contrary to the positive spin that confused or disingenuous free marketeers sometimes put on these vultures, Muris is crystal clear about their problems: “The proliferation of nonpracticing entities does not exploit some previously unknown pro-competitive efficiency,” Muris writes. “Rather, this arbitrage strategy uses the patent system’s weaknesses to hold up the companies that manufacture and innovate in high technology industries.” (Emphasis added.)
Yes, you read that right: Trolls are not unfairly maligned property holders who are fighting back against so-called “efficient infringers.” They are not defending themselves using some noble or august element of the patent system. They are simply exploiting loopholes in a system that is meant to protect genuine property rights holders in order to extract a toll for phony, meaningless property “rights.” Imagine someone suing you for breathing the air, claiming they had a title to the concept of oxygen, and you understand the absurdity involved. What a gift to leftist skeptics of property rights that such excesses exist as bloody shirts for them to wave about.
Fortunately, Muris’s proposed solutions are anything but absurd. He applauds the courts for already reforming the system in various moderate ways, such as reforming how damages are awarded in patent cases, or by giving defendants more capacity to show that the patents they are supposedly infringing are on “obvious” non-patentable concepts. He suggests using antitrust enforcement to clear up further issues with how patents are exploited — a reasonable approach at the legal level, given that patents amount to government-granted monopolies, albeit ones that, when granted correctly, are morally justified.
But ultimately, the solutions Muris proposes are solutions designed for the legal system, not necessarily the policy arena. And while legal reforms to the patent system are necessary, they are by no means sufficient to complete the task of making the property rights conferred by patents credible again. Fortunately, as Muris acknowledges, there is a bipartisan recognition of the need for more steps to be taken at the political level. One only hopes that political will can once again attend that recognition.
