Patents are probably the best bargaining chips there are 21 Jan 13
Yesterday, the Boston Globe ran an interesting piece penned by Professor Robin Feldman of UC Hastings School of Law. Entitled ‘You patented it, you own it? Not so fast', the article’s core argument is that there needs to be a fundamental change in the way in which the US legal system considers patents if society is to avoid stifling innovation. But while Feldman is right that attitudes towards patents do need to change, perhaps she is looking in the wrong places for where it should happen.
Professor Feldman suggests that the traditional notion of a patent as a right of ownership is outdated. She says that this “fallacy” is “harmful to the economy”, and proposes that a far more useful way to think about a patent is to consider it as a “document that gives its holder an opportunity to bargain, a seat at the table—not an absolute right to everything that springs from an idea”. Her key concern is that the expense of patent litigation, and the cost of seeking to avoid it, is, in itself, holding back innovation. “As many critics have begun to point out, what we are seeing is a system of profound importance in American life that has careened out of control,” she writes. “Patents, meant to encourage innovation, today are increasingly threatening to strangle it.”
I’d agree with Professor Feldman that it is unwise to view patents purely as legal rights. But her characterisation of them as “no more than a starting point for negotiation” doesn’t really do justice to the full range of possibilities that patents can open up for their owners.
Patents don’t just afford leverage in terms of hammering out a dispute settlement or forcing a competitor’s hand inside the courtroom. More importantly, they can drive and facilitate deals. Open innovation, collaborative R&D and a whole host of other hook-ups between companies would be incredibly difficult – if not impossible – to achieve without patents and the assurance they offer those who originally came up with an idea and invested in its development that they will be rewarded for having done so. And it is not just original innovators who benefit. Others can license-in or buy patents to secure freedom to operate, to expedite their route to market and to build new, follow-on innovations on top of the original invention. The fact that patents have the potential to create value in these various ways also helps to attract investment. With more capital, there can be more R&D and, as a result, more jobs and more innovative products and services for consumers. That leads to more investment – and the cycle begins again.
It would be naive to think that things always work out that way. But patents and other forms of IP are crucial to ensuring that the potential for innovation persists. Professor Feldman suggests that courts, government agencies and legislators need to better understand the bargaining aspect of patents and limit the nature of what is and isn’t patentable to reduce the negative impact of litigation. But that would deny a huge number of businesses – large and small –the opportunity to make the most out of their investments in innovation. After all, it is worth remembering that the vast majority of patents are never litigated and that the vast majority of businesses are never defendants (or plaintiffs) in patent suits.
While lawyers, academics, judges and legislators probably could do more to appreciate the business realities of patents, the most important shift in thinking should be taking place at board and senior management level in the corporate world. If C-suite executives in general can join their colleagues in certain pioneering companies such as Microsoft, Philips, 3M, P&G and Ford in appreciating the positive contribution that patents can make to overall business success, who knows, even law professors might begin to as well!
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