Atlas isn't about to shrug over current IP laws

Charles Sauer’s recent op-ed for The Hill is the latest in a long list of recent articles, speeches and amicus briefs by conservative or libertarian commentators arguing that various changes to patent and other intellectual property (IP) laws over the past decade or so undermine private property rights and threaten American innovation. 

Examples of IP changes in that time frame include new procedures that make it easier to challenge the validity of issued patents and a Supreme Court decision allowing courts to deny injunctions under some circumstances.

These arguments are not trivial, but they often omit crucial details about the nature of IP and the current state of U.S. innovation.

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First off, it’s important to recognize that the Constitution authorizes Congress to enact patent and copyright laws to “promote the progress of science and useful arts;” that is, to promote the spread of knowledge and technology. 

The point, in other words, as the Supreme Court recognized in its 1991 decision in Feist v. Rural Telephone, is not to reward authors (and inventors) for their labor; it is to provide an incentive to invest in creating and disclosing new inventions and works of authorship. 

Further, as economists have long recognized, our intellectual creations are both an output and an input of the creative process, since every new idea necessarily builds upon other, earlier contributions. 

In addition, IP is “nonrivalrous,” meaning that an infinite number of people can simultaneously use an invention or work of authorship without depleting it. For this reason, IP (unlike other forms of property) comes with a constitutionally-mandated expiration date (currently, 20 years from the date of application for patents, and 70 years after the author’s death for copyrights). 

The job for policymakers therefore is to achieve the correct balance, granting rights that are strong enough to encourage investment but not so strong that they create unnecessary monopolies or inhibit future research and development (R&D).

Opinions naturally differ over where that balance lies. Even among conservative and libertarians there is no consensus. While some, like Mr. Sauer, appear to favor very strong IP rights, others perceive IP as a government-granted monopoly that potentially interferes with the individual liberties of users. 

To be sure, most economists believe that patents are crucial to industries such as pharmaceuticals, in which R&D costs are astronomical. The empirical evidence provides much less support, however, for the notion that extremely strong IP rights are crucial to innovation in most other sectors. 

It’s also hard to find any empirical support for the notion that U.S. innovation has slowed during the past decade, just as Congress and the courts were implementing their changes to U.S. law, which might lead one to question laments, like Mr. Sauer’s, that the sky is falling.

Mr. Sauer’s particular bone of contention centers on a recent decision of an administrative law judge (ALJ), who recommended that the International Trade Commission (ITC) — an agency that enforces the not-very-libertarian-sounding Tariff Act — deny Qualcomm an exclusion order (effectively, a type of injunction), on public interest grounds. 

I offer no opinion on whether the ALJ’s decision was right or not on the facts of the case. (There is one earlier precedent, albeit in a case involving a standard-essential patent that the owner had committed to license on fair, reasonable and nondiscriminatory terms, that ultimately was resolved in the same way.) 

But to suggest that it leaves Qualcomm with no remedy at all is simply wrong. The ITC is hardly the only forum for resolving patent disputes, the vast majority of which are resolved in federal court. 

When patent owners win in court they get injunctions about 75 percent of the time, and even when they don’t, courts award them ongoing damages to compensate for their loss.

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Of course, it’s possible that the damages courts award are systematically too low, which perhaps is an unstated hypothesis on which many of the recent conservative critiques rest. But hypotheses are not evidence, and I’m not aware of any evidence to substantiate this one.  

In sum, economists generally believe that patents — along with such other social institutions as basic research and education, freedom to compete and the free exchange of ideas — are crucial to innovation. But that doesn’t mean that stronger IP rights are always better. 

Reasonable observers on both right and left may differ over whether the current system achieves the optimal balance, but there’s no good reason to believe that Atlas is about to shrug.

Thomas F. Cotter is the Briggs and Morgan professor of law at the University of Minnesota Law School and the recipient of an Innovators Network Foundation Intellectual Property Fellowship for 2018-19.