Patents: Constitutionally Protected, Economically Vital

Since its founding, America has embraced and protected innovation and creativity. And it has proved to be a major economic advantage. But despite this, American patent rights are increasingly under attack, often because of commercial self-interest or a fundamental misunderstanding of the nature and importance of intellectual property.   

America’s leading role in innovation results directly from our historical respect for intellectual property (IP) rights — exclusive rights granted to inventors, writers, and artists to exploit their discoveries and creative works. Most of the great 19th century American inventions and the industries to which they gave rise were associated with patents — from Alexander Graham Bell’s telephone to Charles Goodyear’s process for vulcanized rubber. 

Patents have also been key to the commercialization of great 20th and 21st century innovations: transistors, lasers, semiconductors, smartphones, and breakthrough pharmaceutical drugs, to name just a few. In short, IP rights — and patents in particular — have been vital to the production of new technologies that are an integral part of modern life and have made the United States the world’s wealthiest economy and global high tech leader. 

The Constitution, itself, specifies (Art. I, Sec. 8, Cl. 8) that “Congress shall have Power To … promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Yet, IP skeptics have sometimes asserted that the Constitution treats those rights not as traditional property rights, but, rather, as “second class” special monopoly privileges that threaten competition and merit less protection than traditional property rights.

But the robust protection of patents as property is consistent with the original understanding of the Framers of the Constitution, who viewed IP through the lens of natural rights. For example, James Madison and other Founding Fathers held a broad understanding of property, which encompassed the fruits of one’s labor, mental as well as physical. Such an understanding of property clearly covers IP.

Certainly, IP rights were held in high regard during the early stages of the republic. The very first Congress enacted patent laws that were then strengthened steadily over time. Early 19th century constitutional commentators, including Justice Joseph Story and Chancellor James Kent, wrote very favorably about patents. Later, Abraham Lincoln said that patent laws “added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.” 

Supporters of robust patent rights can therefore lay claim both to the force of history and to constitutional political philosophy. So much for the notion that patent rights are special privileges that warrant greater government oversight and less deference than other property rights.

Yet, the American patent system — a bulwark of American leadership in technological innovation and the creative arts — now finds itself under unprecedented attack. More specifically:

1. Legislative proposals for sweeping changes to patent litigation procedures that would weaken patent rights have been before Congress since 2013.

2. The Supreme Court has constrained the enforceability and scope of patent rights in several recent decisions including KSR v. Teleflex (2007) and Alice Corp. v. CLS Bank (2014).

3. Federal enforcement agencies, such as the Federal Trade Commission and the Justice Department’s Antitrust Division, have begun to use antitrust law to try to limit returns to patents that cover key standardized technologies. 

Underlying these developments are claims that the Patent Office has been issuing “low quality” patents — i.e., patents that protect trivial improvements or non-original technical proposals. Increasingly, complaints about “excessive” patent privileges are flooding the judicial system, spurring wasteful litigation and deterring innovation. 

But the drive to pare back patent rights — spurred by this fashionable “bad patents” philosophy — flies in the face of compelling research that highlights the value of IP, in general, and patents, in particular.

For example, a comprehensive 2012 study by the U.S. Department of Commerce concluded that virtually every industry relies on some form of IP; that IP-intensive industries accounted for over $5 trillion in value added in 2010 alone; that a sample of 26 patent-intensive industries accounted for 3.9 million jobs in 2010; that IP-intensive jobs paid significantly better than other jobs; and that IP-intensive industries contribute substantially to U.S. merchandise and services exports. 

Similarly, a recently published peer-reviewed study by Professors Albert Hu and I.P.L. Png of the National University of Singapore, covering many countries over two decades, found a strong association between patent rights, economic growth, and increased productivity. 

Indeed, numerous studies over the past decade — by the Organization for Economic Co-operation and Development and Harvard Business School, among others — have found positive associations between the strengthening of IP rights (including patents) and important economic growth indicators including, for example, job growth by start-up companies.

Economic historians, meanwhile, have argued that the strong patent systems of the United Kingdom and the United States played a role in their rapid industrial development. These and other studies on law and economics demonstrate that the patent system functions as an engine of economic growth and innovation.

As Stanford University Professor Stephen Haber puts it in a new George Mason Law Review article, Patents and the Wealth of Nations, all of these studies — whether based on “the facts of history” or on “statistical modeling” — “yield the same answer; there is a causal relationship between strong patents and innovation.”      

Thus, the notion that U.S. IP rights — and, especially, patents — are special privileges meriting less protection than more traditional property rights is deeply flawed, both on constitutional and pragmatic, economic-policy grounds. To the contrary, America’s legal and historical commitment to protecting intellectual property has fueled U.S. economic growth and our global leadership on invention. Government officials should keep that in mind when making public policy.

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