The U.S. Can't Fix a Broken Patent System Alone

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The U.S. Can't Fix a Broken Patent System Alone

 news 2015-03-03 at 10:38:38 am Views: 200
  • #42085

    The U.S. Can't Fix a Broken Patent System Alone

    When not preoccupied by Department of Homeland Security funding or deals over Iran’s nuclear capacities, a bipartisan group in the House of Representatives has been working on a patent reform bill designed to free innovators from predatory lawsuits. The bill makes it more difficult to launch an ill-defined patent infringement case—a favored technique of patent trolls who collect poor-quality patents to extract license payments from legitimate innovators. It's a good start on an issue that may even unite both ends of Pennsylvania Avenue: In 2013, the White House issued a report that called for clearer patents as well as a higher standard of innovation.

    But tackling innovation and patent reform as a solely domestic issue is a mistake: The U.S. remains a world leader in technological innovation, but other countries are catching up. Already, according to almost any measure, most innovation is occurring outside the U.S. And many of the countries that are home to booming innovation are contending with similar, or even more severe, problems with their patent regimes. It's a problem slowing innovation everywhere, and to solve it, the White House and Congress should unite to lead a global reform effort.

    The U.S. remains a leader in producing desirable technology, and it still spends more on research and development than the EU or China. But the rest of the world, and China in particular, is catching up. Around 75 percent of R&D researchers now live outside the U.S., and the same percent of journal-quality research occurs in other countries. According to World Bank data, China has a similar share of the 9 million R&D researchers worldwide as the U.S. Forty percent of articles published in scientific and technical journals worldwide were by U.S. researchers in 1990, but that had dropped to 26 percent by 2009. China climbed from 1 percent to 9 percent over the same period. And China’s growing R&D base is reflected in the country’s output: From 1999 to 2011, its share of global high-technology exports climbed from 3 percent to 24 percent. At the same time, the U.S. share declined from 18 percent to 8 percent. 

    That isn't necessarily a dilemma for the U.S., because innovation isn't zero-sum. America benefits from inventions elsewhere just as the rest of the world benefits from the creativity of U.S. innovators. And increasingly, research itself is international: In 1981, about 6 percent of U.S. scientific papers had a foreign co-author, but today that figure is closer to a third. Innovation crosses borders as well. A recent Breakthrough Institute report on international energy collaboration highlighted numerous examples, including the Solar Energy Center, a joint venture between the U.S. Department of Energy and the Indian Solar Energy Center to test new manufacturing technologies in thin-film solar photovoltaics. And U.S. multinational companies perform $40 billion of their own R&D in other countries (15 percent of their total R&D expenditures).

    But there is one problem: The patent, arguably the most important tool countries use to promote innovation, is hampering international collaboration and technological progress. In a recent review in the Journal of Economic Perspectives, Michele Boldrin and David Levine conclude that “there is no empirical evidence” that patents “serve to increase innovation and productivity.”  The massive increase in U.S. patent awards in the past few decades hasn't been associated with more rapid economic growth, largely because many of the patents issued are for advances of marginal value, which slows high-quality development and rollout by enabling patent trolling. Patent trolls were responsible for an estimated half a trillion dollars in lost wealth in the U.S. from 1990 to 2010, according to Boston University’s James Bessen and colleagues. 

    This is more than an American problem: From 1996 to 2011, global R&D spending increased 60 percent, while global patent applications climbed 90 percent. That's likely because the quality of patents has declined worldwide, most acutely in China, where resident patent applications account for 37 percent of the global total. In part, that reflects China’s growing innovation base, but it's occurring mainly because China is issuing a lot of terrible patents. A review by Dan Prud’homme of the European Union Chamber of Commerce in China concludes that “many patents in China—particularly those filed by domestic applicants—are not being transformed into innovations, or at least not particularly useful innovations.” That’s bad news for China, and for everyone worldwide who could benefit from the inventions produced by a Chinese system that wasn’t drowning in junk patents.

    The global problems with patent regimes suggest that Washington’s reform efforts should include input from other countries: If the U.S. wants better access to an increasing amount of innovation that happens elsewhere, it should be working toward a global agreement. Countries could negotiate improvements in patent law and regulations that allow for easier innovation within their domestic markets, smoother cooperation across countries, and an acceleration in global progress toward breakthroughs. If we want to speed the development of innovations, from cost-competitive renewable power to cures and treatments for diseases, it's time the world’s most innovative countries worked together to free their researchers and inventors from the dead weight of bad patents.