Patents, problems, Posner

Judges’ involvement with patent law isn’t limited to deciding cases.  One jurist who publicly jumped into the patent fray with a big splash is Richard Posner, a well-known judge on the U.S. Court of Appeals for the Seventh Circuit and long-time law professor at the University of Chicago.  After dismissing competing patent infringement claims by Apple and Motorola, Judge Posner made news urging lower strength or length for patents outside the field of pharmaceuticals, an argument he repeated recently in a Federalist Society program on judges’ views of the patent system.

Judge Posner isn’t the only one urging cutbacks on IP protections, but as a long-time booster of property rights in many contexts he seems a decidedly odd fit with the often property-phobic commentators pushing similar views.

Admittedly, most academic commentary these days emphasizes problems with patents.  A common argument is that firms with weak or questionable patents that are small inputs to valuable, complex products can use litigation strategically to extract far more than the value of the patent in question.  This “hold-up” story mainly focuses on firms asserted to hold patent rights principally in order to litigate, a complaint most prominently associated with the large settlement NTP, Inc. negotiated as BlackBerry maker RIM faced an injunction that would have temporarily shut down BlackBerry service (with huge costs for RIM).

The salient questions, however, aren’t whether the patent system is perfect but whether it’s seriously defective and, if so, what can be done to fix it.

Initially, the need for major reform looks questionable.  Across all nations, strong protection for IP (including patent) generally correlates with stronger economic performance. U.S. economic data are in line with that finding.  According to a study from the US Patent and Trademark Office, IP-intensive industries account for a third of the U.S. economic output, almost half of our economic growth, and more than 60 percent of our merchandise exports, contributing much more than proportionately to growth and exports -- signs of success in competitive global markets.

Economic performance over the past three decades has been especially strong in fields where patents and other IP protections play critical roles, as in high-technology fields of communications and computing.  This hardly indicates that U.S. laws seriously impede progress.  And the prevalence of IP theft in many industries and many parts of the world raises the importance of strong IP protections today, a reason for increasing, not decreasing, those protections.

Further, suggested solutions to problems in the world of patents often pose at least as many issues as they solve.  Judge Posner asserts that some industries do not need patent protection and others merit shorter patent terms or more limited remedies for patent infringement.  Tweaks to the patent system may be warranted, and courts have been making slight adjustments in practice, which explains the increase in Supreme Court patent cases.

But significant restructuring of the sort Judge Posner asks lawmakers to consider is a dicey gamble.  Posner surely is right that the benefits and costs of patent protection differ in different fields.  They also differ at different times and for different types of business.  But no one can establish exactly the right length or strength for patents in any given field, a problem at the core of Posner’s proposal.  Even defining what field patents are in can be problematic (patents critical to smartphones initially were solutions to problems in optics, photography, wireless communication, battery operation, etc.).

One great advantage of the current system is that central planning is not needed to make fine distinctions among patented innovations. An old joke observes that a thermos keeps hot things hot and cold things cold, but asks how the thermos knows which to do.  As with the thermos, laws and bureaucracies work better with lower requirements for detailed planning.  Setting clear property rights and letting markets sort out the values and applications of the rights almost always works better than creating separate rules for specific people, businesses or circumstances.  Judge Posner has made this point in other contexts; it applies to patent law as well.

Ronald A. Cass is dean emeritus of Boston University School of Law, former vice-chairman of the U.S. International Trade Commission, and co-author of “Laws of Creation: Property Rights in the World of Ideas,” a book on intellectual property, innovation and antitrust, from Harvard.