Once Again, The New Yorker Gets It Wrong on Patents -- Update

Last week, Patent Docs posted an article by Kevin Noonan (see "Once Again, The New Yorker Gets It Wrong on Patents") regarding "The Permission Problem," an article by James Surowiecki that appears in the August 11th edition of The New Yorker.  Over the weekend, Mr. Surowiecki and Dr. Noonan engaged in an interesting and spirited dialog regarding each of their articles in the Comments section following Dr. Noonan's piece.  For Patent Docs readers who may have missed their online conversation, we are reprinting it:

Mr. Surowiecki:

Actually, Heller opens his book with precisely this kind of example:  a drug company that has decided not to develop a promising Alzheimer's drug because of the patent thicket that surrounds it.

On the broader point, I'm not "blindly accepting" Heller's argument.  I'm familiar with the anti-anticommons literature.  I just find it unconvincing, particularly the work based on surveys.

I'm also mystified by the idea that the U.S. drug industry is "flourish[ing]."  On the contrary, as you well know, despite the massive amounts of money put into R&D, the number of NMEs approved annually has been dramatically lower in the 2000s (with the exception of a spike in 2004) than it was in the 1990s.  And this decline follows, of course, the biggest explosion in patenting in the industry's history.  Now, it may be that a few years from now we'll all be reaping the benefits of the patent explosion in the form of powerful and efficacious new drugs.  But to say the empirical record of the past decade demonstrates that more patenting leads to more innovation is absurd.

What I find most curious is the idea that it's those who are skeptical about the value of expanding the reach (and length) of patents who are accused of "hysteria."  On the contrary, what's hysterical is the insistence that any limitations on intellectual-property rights will lead to disaster (thus EG in this thread saying that the anticommons folks are going to "doom this country's remaining competitive advantage, namely innovation.")  There is no theoretical or historical evidence that would suggest this is true -- as Lerner's work shows, the connection between stronger patent protection and innovation is tenuous at best.  And there's no good reason to believe that with the expansion of patent rights in recent decades we've struck the right balance between giving incentives to innovators (the only justifiable reason for patents or copyright) on the one hand and allowing the free movement of ideas on the other.

Dr. Noonan:

I am aware of Professor Heller's anecdote to begin his book, and I am skeptical -- as someone who performs freedom to operate searches for drug companies, I can think of many ways to avoid the kind of problem he maintains exists.  As I mentioned elsewhere in the thread, with the exception of gene chips, the kind of patent thicket that occurs in IT does not occur in biotech/pharma, and with the Merck v. Integra decision the liability for using such chips to develop new drugs is tenuous at best.

The anti-commons idea, especially as Professor Heller developed it with Professor Eisenberg, has been debunked by empirical studies showing that patenting has had negligible effects on research.  It was a plausible idea for anyone who had no experience with high-level science; believe me, before patenting became commonplace in the biological sciences, research results and materials were jealously guarded between lab groups.  And the ultimate benefit to society of the research, disclosure, is a goal also served by the patent system.

As for the state of the pharma industry, my point was about the changes in the robustness from about 1980, when European drug companies and products predominated, until recent times, when it has been U.S. companies that have dominated.  This was discussed in the earlier post referenced in the piece, based on a Washington Post article last year.  I agree that things don't look so rosy for pharma worldwide at the moment, but every industry has ups and downs, and the Post authors looked over a sufficiently long time frame that the trend became clear.

It is also untrue that there has been any "expansion" of patent rights in recent times.  Indeed, these rights have been diminished, first by changes in the way patent term is calculated, and second by the expansion of what amounts to inequitable conduct and Supreme Court decisions such as eBay that have reduced the certainty that patent holders have in the patent right.  The "hysteria" I reference is that kind of hyperbole -- as if patents were some new government boondoggle that is threatening our economic well being.  The exact opposite is the case.  Your reference to Lerner's work is telling, since it has also been refuted by others who are not academic economists with a careerist ax to grind.

Finally, you didn't address the point -- patents are by definition extremely limited in time, and have definite expiration dates which have consequences for the patentee, their competitors and society.  One of the reasons that those who understand this feature of patents strongly react to the anti-patent crowd is that they generally propose long-term changes in patent law, which I believe are not in our best economic interests, to solve short term problems.  Patents are not the problem -- being unwilling to license them is the problem.  If the license is too expensive, all a competitor need do is wait a short time (a time getting shorter every minute) and the patents will simply expire.

So, no, Mr. Surowiecki, if Congress hadn't stepped in to solve the airplane patent problem in the second decade of the 20th Century, we wouldn't still be flying blimps.  And if you understood the ephemeral nature of patents you wouldn't have written that we would.

Mr. Surowiecki:

As the recent history of copyright shows, IP rights aren't "by definition" limited, at least not by any reasonable definition of "limited."  If Congress decided patents should last well over a century, it could.  And by your logic, it seems like that would create an innovator's paradise.  Part of the point of the anticommons argument is to ensure that we don't see the kind of creep in patent length that we've seen in copyright.

Your contention that we haven't seen an expansion in patent rights in "recent decades" (which is what I wrote) is simply mystifying.  Strictures against universities (particularly public universities) patenting have been abolished.  Living-organism, business-method, and software patents have all become generally accepted by the court and ubiquitous.  Things have gotten a little better in the last couple of years -- thanks to a widespread sense that our veneration of IP rights has gone way too far -- but the arc of the last 25 years is clear, and it bends firmly in the direction of more patents, not fewer.

Finally, on the supposed impact of Josh Lerner's "careerism" on his research findings.  Let's be serious.  The people producing much of the research and the studies you cite so favorably -- like BIO -- have a huge financial stake in keeping their own IP rights as strong as possible.  Other researchers receive funding from the drug industry.  You yourself, meanwhile, are apparently a patent attorney, which I assume means that in a world with many fewer patents you would have less work.  The financial incentives that are influencing your side of the argument, in other words, are huge, and I think most people would say that they might very well have a material impact on your arguments and your findings.  Lerner, by contrast, is an academic who can look at whatever he wants to look at, who reaps no obvious financial (or career, for that matter) benefit from reaching one conclusion or another.  (You can bet that if he'd found that patents had a massively positive impact on innovation that he'd have been feted by industries across America.)  The notion that his research is somehow less valid than the work you cite because of some supposed ax he has to grind (when all the obvious grinding axes are on your side) is preposterous.

Dr. Noonan:

As to the "expansion" of patent rights, it isn't the rights that have expanded, it is the scope of what can be patented.  Part of that has to do with new technologies that didn't exist decades ago, like biotech.  If you want to write an article about copyright, you won't hear from me -- as important as culture may be it doesn't hold a candle to policy decisions that will influence development of life-saving drugs.  And while I question the wisdom of business method patents (and software patents for that matter, since copyright protection on top of patenting seems like a "double dip"), my objections to the statements in your article were focused on biotech and pharma patenting, where the stakes are, in my opinion, too high for the kind of sloppy arguments the anti-commons folks like to trot out.

As for university patenting, would you prefer that U.S. taxpayer funded technology be freely exported abroad as it was prior to Bayh-Dole, or that the producers of the research supporting the technology have the opportunity to license that technology and become more self-supporting (look at the data on licensing revenues for universities if you think it is insignificant)?

And remember, the whole "anti-commons" argument was based on how patenting would purportedly inhibit academic research, not commercial drug development.  The "creep" I see is in the arguments that anti-commons is somehow necessary to analyze commercial competition; trust me, these competitors don't need anti-commons crusaders protecting them from each other.  The negative effects on academic biotech research anticipated by Heller and Eisenberg just didn't happen.

You are correct that Congress could, within constitutional boundaries, expand the length of patent term, but I wouldn't be in favor of it and it wouldn't be good for innovation.  It would, in fact, create the fictional patent hell of your article, since then blimps might be our only option.  I think limited patent term is fine, because it satisfies the balance between the public benefit of disclosure and the fire of interest patenting brings to innovation.

Finally, I am a patent attorney.  I find it funny when people immediately point to my "vested interest" in the patent system, which is always presumed to be purely financial.  Don't fret:  unless Congress totally abolishes patent law, there will always be work for me to do, and the more Congress and the Patent Office and the Supreme Court monkeys with the rules, the more work there will be, and the more valuable my services will become.  So if money were the object, I would welcome the kinds of misinformed arguments made by Lemley and Lerner and Mauer and you, because it would mean more work for me.

But enough about me.  Your defense of Josh Lerner is surprisingly naive, in view of the competition academics rightly feel to publish work deemed to be important and significant.  Frankly, had Mr. Lerner "found" that patents were a good thing, he would have started to work on something else, because that has been the prevailing belief.  Academics don't get invited to testify before Congress and get interviewed on NPR because they verify beliefs; the point is to challenge them.  So while my interests appear clear to you, don't be too sure that you understand Mr. Lerner's.  Maybe you should look into who is funding his research, and how many of the anti-patent people are funded by think tanks and interest groups funded by Cisco, Microsoft, Intel and the other members of the IT community who want restricted patent rights to improve their corporate bottom lines and support the latest "gee-whiz" gadget.  That might be a quite a story.

Editor's Note:  Mr. Surowiecki's and Dr. Noonan's comments were edited to correct minor typographical and grammatical errors.  In addition, portions of the comments that were not relevant to the discussion of their articles were deleted.  However, the original comments can be found in their entirety at the end of Dr. Noonan's article.

Comments

[EG]

Kevin,

Nice responses to Mr. Surowiecki. I just wanted to let you know that we (or at least I) in the patent bar are with you on this one. So my comment about the anti-commons rhetoric "doom[ing] this country's remaining competitive advantage, namely innovation" is considered "hysteria" eh? May be Mr. Surowiecki should consider the comment made by Judge Chen (I believe that's his name) of China who wondered why this country wanted to put itself at a competitive disadvantage by weakening our patent laws through so-called Patent Reform Legislation. If those outside this country recognize that weakening out patent laws puts us at a competitive disadvantage, why is my view "hysteria"?

Like my dad before me (a former patent examiner and patent attorney), I'm not pro-patent but pro-patent system. Sure, as you astutely point out, we could earn more money with all the nonsense that so-called Patent Reform would bring, but I, like my dad, just want patent system that fairly rewards innovation, not so screwed up that the Davids of Innovation haven't got a chance against the Goliaths of Industry. Even the Soviet Union recognized a system of altruism (without patent protection) didn't work in the 1920's (I wrote a college thesis on the history of innovation in the Soviet Union). The only ones who benefit from a weak patent system are the Goliaths of Industry, not the David's of Innovation.

BTW, I find it interesting that Mr. Surowiecki comments on the airplane patent pool in the early 20th century. And yes, the Wright Brothers (only Orville by then) were a party to that pool. I just finished reading a biography on the Wright brothers, and they recognized the value of patents to them in trying to sell airplanes, versus Curtiss and others who used every trick in the legal book to stall against the Wright patents. And I would hardly call the Wright Brothers "Goliahs."

[Donald Zuhn]

EG:

I believe you are thinking about Mr. Yongshun Cheng, a former Senior Judge and Deputy Presiding Judge of the Intellectual Property Division of Beijing High People's Court, who wrote about the House patent reform bill last December. Mr. Cheng stated that the proponents of patent reform desired "a weaker patent system, or one that benefits companies that do not rely on patent protection to obtain market dominance." Our article on Mr. Cheng's piece can be found at http://www.patentdocs.net/patent_docs/2007/12/chinese-ip-judg.html.

Don

[EG]

Don,

Thanks, that's the one.

[broje]

As a patent attorney "deeply invested in the game" and being "incapable of objectivity," I would like to be unabashedly selfish and suggest a solution that will solve the supposed "permission problem," and simultaneously create a patent arms race that will be in my financial self-interest.

In addition to having patents convey a negative right to prevent others from practicing the invention, let them also convey a positive right to practice the invention. So, if a patentee has a patent on A+B+C, and his competitor has an earlier patent on A+B, the patentee is immune to suit from the competitor. The competitor can still enforce his claim to A+B against others who fail to innovate and just want to copy the A+B innovation. In other words, no dominant patents. So, if you encounter a patent thicket, you can just innovate your way over and above it. But the market players who want to gain dominance in the market place without innovating will be out of luck.

[Kevin E. Noonan]

Dear Broje:

While I think your suggestion will create some new problems (such as the converse of nonobviousness, "how much" innovation works, i.e., when is "C" not trivial), it is an excellent example of thinking "outside the box."

If you would like to flesh out the idea a little and have us post it for you, just let us know. It is intriguing.

Thanks for the comment.