The Unsung Role of Patents When It Comes to Prosperity

The Unsung Role of Patents When It Comes to Prosperity
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Do these things sound patentable? A noninvasive method to check a fetus for genetic defects? A new MRI machine? A new oil rig? A forehead scanning thermometer? A fighter pilot helmet? More importantly, is it just to reward their inventors? And by insisting on justice, might we “do well by doing good,” and inspire a cornucopia of new, life-enhancing ideas? The bad news is that the Supreme Court disagrees with you; the good news is that the Intellectual Property Owners Association (IPO) has proposed a legislative fix to this serious and growing problem.

Following several recent Supreme Court decisions, the courts have deemed all the above inventions unpatentable. This is because because courts no longer analyze the "claimed invention as a whole." Instead, they break inventions into parts, which they analyze separately. Frequently, this results in the courts misapplying legitimate exceptions to patentability. For example, since the process of using the new oil rig requires a computer, the court found the claimed invention to be "directed to" an (unpatentable) abstract idea. The Center for the Protection of Intellectual Property recently summed up this absurdity: "[It] should be apparent to all [that] an oil rig is not an abstract idea." Such faulty reasoning can have dire consequences: Consider that from 2000-2007, software was the main driver of American growth. But now, as former Patent Office head Dave Kappos puts it, "large swaths of software innovation are no longer protectable" by patents. Software and biotech have been the hardest-hit industries, but the legal ramifications have inexorably expanded to others.

A 2015 study by the USPTO explains why this is important to all of us: Patent protection gives inventors the confidence to fully (and more credibly) disclose their inventions to potential investors, who are thus more confident of a return. Patents serve startups and investors as a signal of quality, and statistics bear this out: Five years after approval of a first patent, startups show 36% more employment growth, 51% greater sales, and more (and higher-quality) patents. This synergy between inventor and investor confidence manifests as a much greater chance of a patent-winning startup eventually being listed in a stock exchange. But the operative word is confidence -- and this is what the Supreme Court has wrecked -- in the American patent system.

A recurring theme at a recent innovation conference in Washington was the fear of seeing patent-dependent investments "zeroed out." And, in his closing remarks, Kappos told of Chinese investors who solicit American inventors to file for patents in China. That patent office, once a joke, now processes more patent applications per year than the next twenty nations (including ours) combined. The Hill wasn't whistling Dixie by its recent headline, "US is Losing the Innovation War -- to China."

Our parade of life-enhancing innovation is not the only thing in danger. Half of our economy is based on the protection of intellectual property (IP). According to the Department of Commerce, IP intensive industries contribute over half ($5 trillion) of the private sector each year. These industries directly support 40 million jobs, and they indirectly account for another 12.9 million jobs. According to Kappos, now of the Partnership for American Innovation, these numbers mean, "IP policy is important not just to engineers and scientists -- it's important to everyone." In patent-intensive fields -- the ones under threat -- these jobs pay an average of $30,000 per year more than similar jobs in other industries. These same industries account for nearly three quarters of all American exports, or $775 billion a year.

I can state with certainty that all of us owe our jobs, our standard of living, or even our lives to the thinking and hard work of inventors. Supporting the legislation proposed by the IPO demonstrates your gratitude and commitment to justice. And -- as inventors show us every day -- life is not a zero-sum game. There is plenty of pie to go around when the bakers have incentives to bake. The cause of justice is your cause: When inventors and their backers know they can make money, they will create one marvel after another. Or, as a recent Stanford study put it, “[T]here are no wealthy countries with weak patent rights, and there are no poor countries with strong patent rights.” If Donald Trump and the GOP are serious about job creation, they will approve the IPO's proposal. But just in case, contact your representative and tell him or her to enact the IPO's proposal. Your future self will thank you.

Gus Van Horn frequently writes for Pajamas Media and Capitalism Magazine, plus he has his own eponmyous blog

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