Why the U.S. Patent System is a Mess

Posted by: Michael Mandel on August 26

Everyone agrees the U.S. patent system is a mess. There’s a very simple reason why—the two industries which depend the most on innovation, pharmaceuticals and information technology, have very different interests. Ben Worthen discusses the Patent Reform Act of 2005, which was introduced in June by Representative Lamar Smith (R- TX), chairman of the House subcommittee on Courts, the Internet, and Intellectual Property. Worthen notes that

Not surprisingly, the bill included many provisions that tech companies wanted, including one that would make it much harder for a patent holder to obtain an injunction preventing a company from selling a product that might infringe on its patent. The large technology companies and trade groups that favor the bill argue that small companies or individual patent holders (the large companies call them “patent trolls”) use last minute injunctions based on overly broad patents to force large vendors to settle or delay a release. Making it harder to get an injunction would reduce development costs and speed up release cycles, both of which ultimately benefit consumers, they argue. In July Smith was saying that the bill would win easy passage when Congress returned from its August recess.

The technology sector is not the only powerful industry that cares about patents, however. The pharmaceutical industry is basically built on patents and the exclusive use rights that come with them, which allow companies to get a return on the large investments they make in R&D and clinical testing. In fact, once you get past the basic protection for intellectual property, Pharma and Tech want very different things from the patent system. The injunction issue cuts to the heart of this difference, since it is the primary tool that pharmaceutical companies use to prevent competitors from developing cheap knock-off drugs. Pharma needs injunctions in order to protect its long product lifecycle; Tech wants to eliminate them in order to protect its short one.

This all came to a head about two weeks ago, when Billy Tauzin, the former Representative from Louisiana who now leads of the Pharmaceutical Research and Manufacturers of America, met with Smith. After the meeting Smith removed the injunction language from the bill. Now the technology industry is in the awkward position of possibly opposing its own bill.


A very good point. Industries with long innovation cycles favor very different patent policies than industries with short innovation cycles.

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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