By Paul Michel
America’s Founding Fathers considered patents important enough to put the patent right to exclude into the U. S. Constitution. In Article 1, Section 8, they listed patent protection above even the establishment of an Army and Navy. Their sequencing of priorities for Congress to address was not accidental, but reflected their plan for transforming the new nation from a poor, agrarian, former colony into the wealthy, independent, industrial and commercial power it became.
So in April, 1790, the first Congress enacted the first Patent Act. Over the next two centuries, the Act was amended and strengthened regularly, because successive Congresses observed industrialization and economic growth all around them, as under the Founders’ system, the United States went from importing nearly all manufactured goods to itself manufacturing all the products it needed and prospering as a major net exporter.
Within just a little over one hundred years, America surpassed all other nations in wealth and technology, partly because of its strong patent system, aided by wide oceans, abundant natural resources, and universal public education. Throughout the 19th century American inventors outpaced their counterparts elsewhere. During the 20th century, the American patent system helped stimulate the computer revolution as well as astonishing advances in medicine, including creation of whole new fields, such as bio-technology. After a slump in the 1970s, when Japan replaced America as the leading maker of consumer electronics, in the last two decades of the century our nation regained its rapid growth and technological leadership.
During the first decade of the present century, however, complaints about specific inefficiencies in the patent system escalated into an attack on the system itself. Some commentators now question the benefits of patents while a dozen global giants from the IT industry campaign to weaken them. What they overlook is that a weaker patent system will discourage investment in R&D just when the nation needs it to grow.
Ironically, criticism of patents and especially of the U. S. Patent and Trademark Office is peaking just as an array of reforms are taking hold. Over the past nearly four years the extraordinary leadership of former IBM executive David Kappos has greatly upgraded PTO operations. The courts, too, have instituted reforms in damages and other areas of controversy. Congress has responded by enacting the America Invents Act, which after a decade of neglect and fee diversion finally has provided the PTO with the resources it needs. The AIA also launched a Patent Pilot Program to have volunteer judges in over a dozen districts largely specialize in managing such cases. And, the private sector has stepped in to help train patent examiners in the newest technologies. In light of all this, now is the time to rely more, not less, on the American Patent System.
Nevertheless, some commentators suggest excluding whole business sectors, such as software, from patent eligibility and greatly shortening the patent term for other technologies. A few go so far as to say that only pharmaceutical firms really need patent protection. But the behavior of hundreds of companies in dozens of technologies suggests otherwise. Witness IBM: for the past 20 consecutive years it has received more U.S. patents than any other company in the world. Examples of other companies that rely on patents include Microsoft, General Electric, General Motors, Caterpillar, DuPont and Procter & Gamble. Ignoring such facts, certain commentators even argue that patents deter more innovation than they promote.
Yet, with many corporations and banks flush with cash reserves and pension and private equity funds seeking places to invest, now should be the era of increased investment in innovation, the country’s best hope for creating new wealth and new jobs. Instead, such investments lag. What, then, is needed to produce the needed private investment? Adequate incentives, for such investments are inherently risky. Slack consumer demand in a continuing recession is part of the problem, but so is the inadequate strength of patents. Obtaining and enforcing them remains far too slow, costly and cumbersome. Still worse, the uncertain scope of patents and the unpredictability of infringement and remedies outcomes inhibit business leaders who need certainty and predictability.
Most informed persons believe, correctly, that innovation holds the key to future prosperity. What we need is a stronger, faster, fairer patent system with quality patents and predictable protections. The issue is whether companies can look beyond short-term earnings and stock prices to also focus on the company’s long-term health and on the needs of the American economy, American communities and American workers.