Author(s)
Source
New York University Annual Survey of American Law, Vol. 66, No. 3, pp. 421-434, 2011
Summary
Article analyzes FTC recommendations on reforming the patent system and the resulting effects on competition policy.
Policy Relevance
In order to properly reform the U.S. patent system, it is necessary for policy makers to both limit the number of questionable patents that are issued and to consider competition policy goals moving forward.
Main Points
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Intellectual property (IP) consists of the rights granted to inventors allowing them the exclusive ability to create and profit from their inventions for a limited period of time. Competition policy, on the other hand, is composed of the legal antitrust system designed to prevent anticompetitive behaviors in the marketplace.
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IP regimes and competition policy can both be used to promote innovation and increase benefits to consumers in the marketplace. Because these two fields intersect, the efforts in both fields should be coordinated to prevent chilling IP-driven innovation.
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One problem with the current IP rights system is the high number of questionable patents that are currently in existence. Questionable patents are those which may not be enforceable, either because they are not valid or for some other technical or legal reason.
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The existence of questionable patents can slow innovation in several ways:
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First, they may discourage firms from conducting research into areas that the patent may improperly cover for fear of infringing.
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Secondly, because of the high cost of patent litigation, new companies entering into areas of research covered by questionable patents must either risk expensive litigation or pay licensing fees.
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Lastly, companies entering into markets filled with questionable patents may attempt to obtain defensive patents, designed not to protect their own IP rights, but to allow them to trade patent licenses with the firms holding questionable patents.
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In a 2003 report, the Federal Trade Commission (FTC) recommended a series of policy changes, at both the legislative and judicial levels, in order to help bring IP policy and competition policy into alignment.
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The first group of FTC recommendations suggested tightening the standards for receiving patents, attempting to limit the number of questionable patents.
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The FTC also recommended the creation of a post-grant review process by which a third party could challenge the validity of questionable patents.
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Thirdly, the FTC recommended that all patent applications be published eighteen months after filling in order to allow competing companies to better avoid infringement.
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Finally, the FTC encouraged patent reform to consider competition and economics in shaping future patent policy.