Bringing facts to bear in discussing the patent system

At the National Academy of Sciences’ Committee on Science, Technology, and Law (CSTL) 25th meeting held on May 13 and 14, CSTL considered undertaking a study of the patent system with the Academies’ Science, Technology, and Economic Policy Board (STEP). I applaud CSTL’s interest in convening prominent minds from the areas of science, engineering, law and public policy to discuss the patent system’s role in the 21st century.

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CSTL invited Seventh Circuit Judge Richard Posner to address the meeting. Any study should hear from all perspectives, but while Judge Posner brings a powerful intellect and a recent headline grabbing opinion, his harsh critique of the patent system appears to be based on abstract economic theories and perhaps his individual cases. But the patent law is a pragmatic body of law. And any useful reevaluation of America’s patent system must start with facts, not theory. During my service as director of the U.S. Patent and Trademark Office (USPTO), I studied those facts. They do not point in the direction that Judge Posner is urging.

At the CSTL meeting, as in his July 2012 article in The Atlantic, Judge Posner made the sweeping assertion that most industries could get along fine without patents. Judge Posner claims various economic justifications for this radical conclusion: the cost of invention is low, first-mover competitive advantages or cost efficiencies will protect the innovator, or the product will be quickly superseded, making protection pointless. But these theoretical anti-patent arguments simply brush aside a towering fact: our nation’s 200-plus year history of world-leading innovation.

It is incontrovertible that the United States has long led the world in innovation. And, contrary to speculative economic theory, in the words of legendary USPTO patent judge Pasquale J. Federico, “no one can faithfully say what the industrial history of this country would have been without a patent system, but this much can be said, that with one it has been greater than that of any other country.” This remains true today. I hope CSTL will seek the facts around U.S. innovation leadership, and the correlation of our innovation leadership to our strong patent system.

Nor do the facts support the other reasons offered for the proposition that industries could get along fine without patents. Take the smartphone patent wars, a portion of which Judge Posner presided over in the Apple v. Motorola case now on appeal. Are patents slowing innovation and enabling earlier innovators to squelch competition? Hardly. Late-comers such as Apple and HTC quickly seized market share through additional innovation or cost advantages, while early entrants — holders of extensive cellular patent portfolios including Nokia and Motorola — have seen their shares of smartphone sales decline significantly. This reality stands in sharp contrast to the economic theories of patent critics. Facts and data-based analysis are needed.

The assertion made during the CSTL meeting that there are “too many” patents also lacks factual support. Consider that there is far more innovation going on now than ever before, with more talented Americans, as well as millions of Chinese, Indians and Brazilians and others getting good educations and making inventions. And the proliferation of high-tech manufacturing enables near instant introduction of copycat products, leaving innovators with no way to recoup investments in major advances, and a recognition by business people and inventors that patents play a more important role than ever in providing returns on those risky investments. All these factors and others are doubtless contributing to increased patent filings. Again, facts and analysis are needed to assess both positive and negative factors associated with increases in patenting, before mandating drastic action. Would we be so unhappy if today’s opportunities caused twice as many modern-day Edisons to invest their talents in innovation? We’d be ecstatic.

Judge Posner also has taken the position that many patent examinations are perfunctory and that the USPTO is doing a poor job of examining patents. While these sentiments are sometimes bandied about, once again the facts in support are lacking. During my tenure at USPTO, I initiated research to obtain the facts. In a paper published by Stuart Graham and Saurabh Vishnubhakat in the Journal of Economic Perspectives and in my forthcoming article in the Stanford Technology Law Review, the empirical data show that patent allowances were correctly issued more than 95 percent of the time over the last six years while final rejections were correctly issued about 96 percent of the time. These results were from a study of nearly 29,000 random patent examination audits. Far from representing perfunctory examinations, the data demonstrate that patent examiners are doing a very solid job.

Finally, however it was intended, the effect of Judge Posner’s recent ruling concerning remedies in patent infringement cases can only be to weaken incentives at the intersection of innovation and standard-setting. Strikingly, the Apple v. Motorola opinion appears to create a bright-line rule against injunctive relief in any case involving standard-essential patents. However, as the USPTO and Department of Justice explained in a joint policy statement, a rigid rule removing the possibility of injunction goes too far, glossing over hard cases and sheltering stubborn infringers. Before we substantially weaken our patent system, I hope CSTL will find facts and conduct policy analysis to assess the damage such a move may wreak on US innovation leadership.

Our patent system is by no means flawless. The America Invents Act represented a substantial step forward in improving our patent system in a measured way. And certainly there remain areas where we can continue to improve just as the system has continually evolved over two-plus centuries and numerous technological paradigms. Having CSTL and STEP engage in reasoned debate about the future of the patent system is a welcome step in plotting a pragmatic path forward. I encourage the committees to focus on facts and data, rather than currently fashionable theories and unproven conjecture.


Kappos is a partner at Cravath, Swaine & Moore LLP. Prior to joining Cravath, he served as the under secretary of Commerce and director of the United States Patent and Trademark Office from 2009 until 2013. He previously spent more than 25 years at IBM, including serving as the company’s vice president and assistant general counsel for Intellectual Property.