Implosion: Patent Law Remains Troubled in the US

Headlines have been trumpeting the Indian Supreme Court's decision to deny a new patent for the cancer drug Gleevec as an attack on intellectual property rights and a win for patients in need of cheap drugs. Those headlines are misleading. What the ruling actually demonstrates is that India has set a high bar for determining what is "innovative." – Reuters

Dominant Social Theme: Nothing wrong with patent law. Let the haters hate.

Free-Market Analysis: A scholar with the Cato Institute, a libertarian think tank, has written about India's noted Gleevec case that has spawned such headlines as "Gleevec as an attack on intellectual property rights and a win for patients in need of cheap drugs ..."

The article posted at a Reuters blog points out that "Those headlines are misleading. What the ruling actually demonstrates is that India has set a high bar for determining what is 'innovative.'"

The article adds that the United States "could learn a thing or two from India – particularly since Washington's excessively liberal patent system led to a ridiculous spat last year between Samsung and Apple over whether a rectangular cellphone screen with rounded corners was patentable."
Here's more:

The court's ruling has highlighted the fundamental point that patents are monopoly rights – which should not to be granted too liberally. Competition must be promoted and monopolies penalized, with the exception that temporary monopolies are strongly justified to reward innovation.
This includes rewarding true drug innovations, not the tweaking or "evergreening" of old patents through slight variations. In stark contrast to India, Washington grants patents liberally, with a low bar for deciding what is innovative. As a result, the U.S. patent office has been snowed under by an avalanche of patent applications it can hardly scrutinize thoroughly.

This has three unfortunate consequences. First, many new initiatives (especially in software and business processes) attract dozens of lawsuits, making innovation risky and expensive. The winners are those with the best legal brains and largest budgets, not the best innovations. Second, liberal patents hamper follow-on innovations. Unlike Isaac Newton, today's innovators cannot stand on the shoulders of giants without being hit by lawsuits for patent infringement. Third, liberal patent-granting policies spur patent trolls and defensive patenting. Patent trolls buy quantities of patents, often from ailing or bankrupt companies, with no intention of using them.

There is little doubt the US patent system is broken, and the article does us the favor of pointing out that granting monopoly rights to "inventions" via patents (or copyrights and trademarks) is increasingly producing a dysfunctional system when it comes to innovation.

The bar for patents in the US especially has been both raised and lowered. Small inventors often have a terrible time gaining patents while large corporations can gain patents for questionable inventions.
Additionally, patent law is often "making law" outside of other existing legal channels. It is certainly not settled law that the human genome ought to be patented but people are trying anyway.

Patent law, copyright and trademarks all confer legal power on those who are successful in registering their product or production. But like so many government functions, patent law has expanded in ways that certainly weren't originally intended.

Conclusion: One could speculate that the system is due for a radical makeover – or perhaps just a significant implosion that will catch companies and investors alike off-guard.

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