Northwestern Professor Daniel Spulber Makes a Case for Patents

The Case for Patents, a new book by Northwestern University business and law professor Daniel Spulber, emphasizes the importance of incentives for invention, innovation, and technology adoption. Professor Spulber has decades of research in technology and innovation, intellectual property, international economics, and law, and he uses this expertise to provide a strong argument for strengthening intellectual property rights and preserving the incentives built into the U.S. patent system.

Below are a few excerpts from The Case for Patents by Daniel Spulber (World Scientific Publishing, April 2021):

Increase Awareness of What Patents Do

Patents play a significant role in the extensive global market for IP [intellectual property]. Patents contribute to the intangible real assets of corporations. Patents support a wide variety of transactions including licensing, cross-licensing, transfers, joint ventures, mergers, and financing of research and development (“R&D”).

The patent system protects incentives for invention, innovation, and technology adoption. Patents provide a system of IP rights for inventors and innovators. Patents allow inventors and innovators to stake out new areas for exploration. Patents are part of the system of IP rights that is essential for investments in invention and innovation. Patents increase transaction efficiencies that are fundamental to the operation of the market for technology. Patents provide incentives for advances in medicines, computers, software, communication systems, energy, transportation, and transaction methods. Patents continue to drive employment, development, and progress throughout the modern economy.

The United States Patent System

The United States patent system faces a war of attrition. Advocates who oppose patents have influenced judges and legislators. Perhaps because the patent system has worked so well, it is nearly invisible and often taken for granted. Although some inventors with valuable patents make headlines, many inventors find it increasingly difficult to obtain patents. Inventors that do obtain patents encounter difficulties in defending their patents against infringers and legal challenges.

The Case for Patents

Chapter 1 develops a comprehensive framework demonstrating how patents provide the foundation of the market for inventions.

Chapter 2 argues that the current system of patents and market prices provide far better incentives for invention and innovation than would a system of public contests and government ownership and distribution of technology.

Chapter 3 examines limits on the subject matter of inventions that can be granted patents.

I conclude that the patent system should continue to provide intellectual property protections for business method inventions just as it does for other types of inventions.

Chapter 4 examines enforcement of IP rights through remedies for patent infringement.

Chapter 5 offers a general legal framework for addressing technological change. Technological change is altering the nature of contract law toward a greater focus on intangible assets.

Why Does the Patent System Work?

The answer is that the patent system helps protect ideas that translate into patented inventions. Protection of ideas gives inventors incentives to engage in R&D. Patent protections also help inventors to develop those ideas further after the patent is grated. The patent system provides protections for innovations that apply patented inventions.

But, patents do much more than offering basic protections for IP. Patents contribute to the foundation of the market for inventions. Patents improve transaction efficiency through information and standardization. These transaction efficiencies allow markets to form and operate that could not otherwise do so. Patent holders and technology implementers can negotiate mutually beneficial contracts that transfer technology.

Patents foster the development of a market by allowing a separation of the idea from the inventor. What typically begins as the inventor’s tacit knowledge becomes an asset that can be licensed and transferred to others. This allows specialization and division of labor in invention, innovation, and technology adoption. Inventors can more readily commercialize their ideas. Companies can manage and apply their IP and markets can effectively allocate that IP.

Conclusion

The patent system itself must remain flexible to continue promoting innovation. Patents are necessarily on the technology frontier because inventions must be novel and non-obvious. Technological change requires that there not be excessive or arbitrary limits on patent eligible subject matter.

Technological change is essential for economic growth and development. Maintaining and strengthening IP rights enhances economic growth and development. Patents help motivate companies and entrepreneurs to invest in intangible assets and to bring innovations to market. Patents stimulate employment and the rise of new industries. Patents support innovations in products, production, and transactions that improve the well-being of consumers. The widespread and significant benefits of technological change make a strong case for patents.

Read more about Professor Spulber’s new book, The Case for Patents (World Scientific Publishing, April 2021).

Daniel Spulber is the Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy at the Kellogg School of Management, Northwestern University, where he has taught since 1990. He is also Professor of Law (Courtesy) at the Northwestern University Pritzker School of Law. Professor Spulber’s research is in antitrust, technology and innovation, intellectual property, platforms and two-sided markets, industrial organization, international economics, management strategy, and law.

He has provided expert testimony before the Federal Trade Commission (FTC), the International Trade Commission (ITC), the Federal Communications Commission (FCC), the Federal Energy Regulatory Commission (FERC), the Postal Rate Commission, and several state regulatory agencies. His research has been cited by the Supreme Court of the United States. Professor Spulber is the author of fourteen books including The Case for Patents (World Scientific Publishing, 2021). Additionally, he has published numerous articles in leading economics journals and law reviews.