05.14.17

Professor Lisa Larrimore Ouellette Questions Whether Patents Work When Patent Scope is Too Broad

Posted in America, Patents at 3:08 am by Dr. Roy Schestowitz

Patent systems don’t exist in a vacuum…

Lisa Larrimore Ouellette

Summary: Citing MIT economist (and MacArthur “genius”) Heidi Williams, Professor Lisa Larrimore Ouellette from Stanford challenges old myths and quotes: “we still have essentially no credible empirical evidence on the seemingly simple question of whether stronger patent rights—either longer patent terms or broader patent rights—encourage research investments.”

TODAY we intend to publish a lot of articles about the USPTO and some of these will be relatively long. As usual, we are going to focus on software patents. After that, for at least a fortnight, I’ll be away on holiday and won’t be able to cover much.

“In the case of software, for instance, pace of innovation is high, code can count as prior art, code can be modified, forked, reused etc. and there are many programming languages with copyright assigned to underlying implementations.”Last week an article titled “Do Patents Work?” was published by Lisa Larrimore Ouellette, Assistant Professor of Law at Stanford. Our position is that patents work, but not when everything under the sun is patentable. One must not lose sight of the collaterals/externalities; Always check economic impact in said domains. In the case of software, for instance, pace of innovation is high, code can count as prior art, code can be modified, forked, reused etc. and there are many programming languages with copyright assigned to underlying implementations. There is thus not much evidence that patents on software “work” or are even needed in the first place.

Here is what this Yale Law School graduate wrote in her analysis, which focuses on pharmaceutical and chemical industries:

As everyone who has taken a patent law course knows, the reason we have patents is to increase private incentives for knowledge production. But do patents actually work? Based on her review of the existing evidence, MIT economist (and MacArthur “genius”) Heidi Williams isn’t sure; she concludes that “we still have essentially no credible empirical evidence on the seemingly simple question of whether stronger patent rights—either longer patent terms or broader patent rights—encourage research investments.”

This bottom line will not be a surprise to those who have followed the empirical literature, but Williams’s careful identification and modeling of the relevant empirical parameters and her discussion of the most relevant evidence on each point makes her review a must-read for anyone interested in patent policy.

[...]

On the second question, the ex ante incentive effect of stronger patent rights, there is again survey evidence, though it is useful primarily for indicating that the pharmaceutical and chemical industries value patent protection much more than other industries. To empirically estimate the relationship between patent strength and research investments, some researchers have looked at the impact of national patent law changes and found little effect. But one would expect such studies to understate patents’ impact: increasing protection in a small economy will not noticeably increase innovation in that economy if domestic firms were already innovating for the global market.

[...]

In the biomedical context, evidence from survey results and some clever instrumental variables studies of patent applications on human genes and patents invalidated in court have suggested that upstream patents have little effective (positive or negative) on the quantity of downstream innovation. But invalidation of patents in fields such as computing and electronics appears to increase the number of innovators subsequently citing that patent.

[...]

The bottom line is that despite the vast number of empirical patent studies—Williams notes the 3000 citations to a foundational patent-citation paper—very few studies have convincingly tackled the causal link between patent policy and research investments.

That point about “research investments” is often being exploited by pharmaceutical giants that ‘invest’ (funnel) massive profits not in research but instead give that money to shareholders. They just tell the public (and public officials) that those massive profits somehow “save lives”, by latching onto the “R&D” mythology.

“They just tell the public (and public officials) that those massive profits somehow “save lives”, by latching onto the “R&D” mythology.”What we are seeing in the news this month is the ITC weaponising patents for embargo, e.g. of drugs that are about to save lives. See this news report which says “practitioners suggest that pharmaceutical companies are beginning to look to the International Trade Commission (ITC) as an appealing alternate venue for patent litigation.”

People and firms go to the ITC when they want embargo (or injunction).

“Firms that stand to profit from the UPC are not credible when commenting on the prospects of the UPC.”Injunctions, incidentally, are what makes the UPC very dangerous to Europe. The UPC is largely backed by pharmaceutical giants; this has long been known.

Barker Brettell LLP, already mentioned here in relation to the UPC earlier this year and last year, wrote another article about the UPC (actually promotional piece in its corporate Web site) and it is noted as saying: “Irrespective of Brexit, the unitary patent (UP) agreement may come into force by early next year” (not a statement that the general public agrees with). Firms that stand to profit from the UPC are not credible when commenting on the prospects of the UPC. They just try to attract business. We certainly hope that more people now understand that patent maximalism is quite a disease; believing that the more patents we grant the better off we will be is misguided, especially when more radical measures such as embargoes are introduced. Later today we are going to show examples of software patents utilised for software embargoes (impacting small companies in Europe).

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