Current Patent System is Misguided and Hinders U.S. Competitiveness, Argues New Council Special Report

Report Recommends Changing Legislation and Trade Policy

November 28, 2006—Reforms of the U.S. patent system have made it too easy to obtain and defend patents and more costly to challenge patent decisions, thereby limiting the competition of ideas, discouraging innovation, and ultimately reducing U.S. competitiveness, argues a new Council Special Report. Additionally, the U.S. policy of promoting this unbalanced system in trade negotiations is “senseless” and damaging to U.S. influence. Instead, the United States should strike a grand bargain that emphasizes enforcement of existing patent laws in return for relaxed patent standards, says the report.

Reforming the U.S. Patent Policy: Getting Incentives Right, by the University of Colorado’s Keith Maskus, examines the domestic patent system and urges that “U.S. policy relax the modern notion that intellectual property rights are basic rights and return to the tradition of limiting the scope of patents in order to encourage the use of new technologies and information.”  

Recent congressional proposals to reform the system, writes Maskus, “would be the most sweeping in many years, but they would still not do enough to improve the functioning of the clogged and costly patent system.” Proposed reforms also do not address theU.S. counterproductive approach to international patent rules.

In the global economy, “many countries prefer to strike a balance more in line with the needs of technology users, while transparently recognizing the importance of innovation incentives. In contrast, the U.S. patent system has become so protective of exclusive rights that it diminishes incentives for competitive innovation in some respects.” These differences could help competitors gain an advantage by creating more welcoming environments for innovative businesses. The report also addresses problems with enforcement and piracy in emerging markets. “The familiar problem in China is that patents are poorly enforced, a deficiency that encourages massive copying and imitation.”

The U.S. policy response to these differences has been a drive to harmonize patent standards through both bilateral free trade agreements and the World Intellectual Property Organization. However, argues Maskus, “countries need the flexibility provided under TRIPS [Trade-Related Aspects of Intellectual Property Rights]—the multilaterally agreed regime—to manage and support their own innovation and competition policies. Pushing a high-level harmonization agenda has not been fruitful but has generated resentment in trading partners and raises risks for the future of U.S. bilateral trade policy.”

To address the problems in the current patent system, the report focuses on the recent House and Senate bills and makes recommendations that would tighten domestic standards for patentability while making it easier to challenge patents of questionable quality.

On the international front, Maskus calls for the United States to abandon efforts to raise international intellectual property rights standards to its own levels and exchange relaxed harmonization standards for “greater assistance for effective enforcement procedures in order to relax budget constraints,” on emerging markets.

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