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PFF Academic Advisory Council member, F. Scott Kieff, a Research Fellow at the Hoover Institution and law professor at Washington Univ, has released a comment on the proper direction for patent reform.
Kieff argues that patent system reform can increase competition and innovation by facilitating strong, enforceable, patents. For the patent system to enable the creation and diffusion of new technologies, patent validity-infringement-injunction rules must provide patent owners, especially small-independent inventors, the credible option of enforcing exclusivity. In making his proposal, Kieff addresses current reform discourse that would weaken patents, and consequently exacerbate rather than solve anti-competitive effects and blocking of downstream access to inventions. When patents are not enforced by a strong right to exclude, the patentee’s incentives to enter into deals are disrupted. Court-awarded damages in general often are seen to under-compensate for harms compared to the price a property owner would receive for selling permission to infringe, which is typically why the infringer decides to infringe in the first place. A central aspect of Kieff’s argument is that the main function of the patent system is not merely to induce invention, but to facilitate the risk taking and transactions necessary for commercializing them. The commercialization theory of patents aims to diffuse inventions broadly and rapidly into society. It recommends a patent landscape where patents are “enforced with clear and robust rules, providing a strong right to exclude,” and can “serve an essential coordinating role in facilitating the complex process of getting inventions commercialized.”
Commercializing inventions requires the participation of many parties, such as makers of complementary technologies, financers, manufacturers and distributors. Strong patents facilitate interaction among these parties, first, by allowing a centralized point around which coordination and negotiation can occur, and second, by a bargain effect, which gives incentive for actors to strike deals and enables some predictability for investment backed ventures.
Patent system reform entailing the proliferation of weak patents, in contrast, would decrease competition, close-off access to inventions and encourage patenting for reasons such as defensive stock-piling.
One of the justifications behind proposals to weaken patents is the belief that strong patents may create an "anti-commons," which raises transaction costs for innovators who need to clear rights in order to commercialize their inventions. Kieff argues that weak patents would simply extend the problem they seek to resolve. ...a US patent owner does not have…incentive to avoid open transactions. Transactions over patents... are important in monetising the value of the patent... patentees have a strong incentive to encourage use.
Refusing to enforce patents when there is a breakdown in negotiations would suffer a fundamental circularity that would create perverse, harmful incentives. If the ability to avoid the injunction hinged upon the failure of a deal getting done, then there would be a markedly increased incentive for those wanting to obtain use through court-ordered terms to resist striking licensing deals. A legal test that rewards a failure to cooperate would lead to a decrease in cooperation, not an increase. Kieff predicts that reform proposals for weak patents would result in a “keiretsu” patent landscape. Keiretsu refers to large conglomerates in Japan, where the patent system is full of weak patents. Keiretsu leverage a system of weak patents to maneuver through transaction costs and litigation that smaller competitors cannot withstand, without fear of debilitating losses. What enables the keiretsu model is that “only weak patents be available, because strong patents could end up as the slingshots able to take down the Goliaths." Lets avoid such a future where weak patents harm competition, innovation, and fail to facilitate commercialization essential to innovation.
posted by Noel Le @ 4:00 PM | Academia, Patents
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