Reforming the Patent System

Innovation and Economic Growth, Intellectual Property and Patents

Article Snapshot

Author(s)

Lisa Larrimore Ouellette and Heidi Williams

Source

The Hamilton Project, 2020

Summary

Three tailored patent reforms would improve the patent system without requiring more evidence as to whether stronger patent protection promotes innovation generally.

Policy Relevance

Policymakers should facilitate the identification of patent owners to promote licensing. The term of patent protection for drugs that require long clinical trials should be extended.

Main Points

  • The fundamental question of patent policy is whether the costs of the patent system, including higher prices on patented goods, are outweighed by the value of increased innovation.
     
  • Theoretical models predict that stronger patent protection will spur innovation, but some economists question this conclusion.
     
    • Patent monopolies could stifle competition.
       
    • Patents could hinder follow-on innovation.
       
    • Empirical studies of the link between patents and research investment are inconclusive.
       
  • The Supreme Court has limited patent protection for some software and medical diagnostics; some lawmakers support restoring patent protection for these technologies, but the evidence is inconclusive as to whether the benefits of this legal change would outweigh the costs.
     
  • Patent applications often include “prophetic examples” describing uses of a new technology that have never been tested; examiners and follow-on innovators often confuse hypothetical examples with tested working examples.
     
    • The USPTO should require clear labelling of purely hypothetical examples.
       
    • Policymakers should consider requiring applicants to list only tested, working examples.
       
  • USPTO patent ownership records are unclear and incomplete, hindering follow-on innovators in licensing the patents they need.
     
    • Congress should require standardization of patent owner name records, perhaps by using Taxpayer Identification Numbers or Open Researcher and Contributor ID numbers.
       
    • If the owner of a patent changes, USPTO records should be updated.
       
    • Disclosure of hidden owners should be required.
       
  • Pharmaceutical patents are filed before clinical trials begin, but the drug cannot be sold until the trials’ end; a drug requiring long trials will have few years of patent protection left when it can finally be sold.
     
    • Truncated patent protection may reduce investment in drugs that require the largest investments and take the longest time to develop.
       
    • Congress should start the term of patent protection for drugs running when the drug is approved for sale.
       
  • Congress could reduce the pharmaceutical industry's reliance on patents by providing the industry with a right of regulatory exclusivity following FDA approval instead.
     
    • Regulatory exclusivity could easily be tailored to conditions in the pharmaceutical industry.
       
    • Regulatory exclusivity would not protect drugs marketed in other nations.
       

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