Patent Reform, System Should Be Abolished, Fed Economists Say

Fed Economists Urge Radical Policy To Ditch Key Obama Reform, Patents

Two economists at the St. Louis Federal Reserve published a paper arguing to abolish the American patent system, saying there's "no evidence" patents improve productivity and that they have a "negative" effect on "innovation."

The research suggests that President Barack Obama's 2011 patent reform legislation -- one of only a handful of major bills to clear Congress with bipartisan support in recent years -- was wrong-headed.

Patents are designed to encourage innovation by granting inventors long-term monopolies on new products. In recent years, however, several innovators in high-tech sectors have complained that the large volume of vague patents has become a major barrier to innovation. When start-ups attempt to unveil a new product, they risk violating a broad, obscure patent.

"Our preferred policy solution is to abolish patents entirely," the paper's authors, economists Michele Boldrin and David K. Levine, wrote. They conclude that problems with patents in fact run much deeper than many critics of the recent system have emphasized.

"The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects," Boldrin and Levine wrote. "More generally, the initial eruption of innovations leading to the creation of a new industry—from chemicals to cars, from radio and television to personal computers and investment banking—is seldom, if ever, born out of patent protection and is instead the fruit of a competitive environment."

The paper also argues that the patent system is damaging public health by raising the cost of prescription drugs, while failing to generate a plethora of innovative new treatments for life-saving diseases.

"Rather than just ratcheting up patent protection, there are a number of moves we could make to reduce the risks and cost of developing new drugs," Boldrin and Levine wrote.

Those approaches were not taken by the 2011 patent reform bill. Rather than decrease the overall patent load, the legislation sought to expedite the process and provide more safeguards against awarding low-quality patents. In September, the Obama administration commemorated the first anniversary of its patent reform bill with a blog post boasting of a faster, streamlined patent approval system.

"The U.S. Patent and Trademark Office is implementing the legislation in a manner that makes it easier for American entrepreneurs and businesses to bring their inventions to the marketplace sooner, converting their ideas into new products and new jobs," the post reads. "It will help companies and inventors avoid costly delays and unnecessary litigation, and let them focus instead on innovation and job creation."

The White House did not immediately respond to a request for comment on the paper.

But the problem of patent lawsuits has not been mitigated by the law. Since its passage, large tech companies have embroiled themselves in high-profile cases claiming patent infringement for everything from rounded corners to double-tapping a smartphone screen.

Hoping to improve patent quality, Boldrin and Levine say, is a lost cause.

"Why use band-aids to staunch a major wound?" Boldrin and Levine wrote. "Economists fought for decades -- ultimately with considerable success -- to reduce restrictions on international trade. A similar approach, albeit less slow, should be adopted to phase out patents."

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