Even if overall venture capital investment is increasing, it’s not in the right sectors of the economy

c. In other words, how much is the current uncertainty costing our economy in terms of jobs, innovation, and development?

As noted in the prior answer (Question 3(b)), the patent system fosters what economists call “dynamic efficiency” in the U.S. innovation economy through incentivizing the creation and commercialization of new inventions. Right now, we are all benefiting from research and development programs that began approximately a decade or more ago, such as in the initial investments in 5G, AI, and the CRISPR gene editing and mRNA technologies. These new products and services, and the economic activities, jobs, and overall growth in the innovation economy they created are the result of the reliable and effective patent rights secured to innovators—before the Supreme Court created the Mayo-Alice inquiry and the resulting quagmire in patent eligibility doctrine.

The fundamental commercial uncertainty created for inventors since 2014 in whether they will be protected in their inventive labors reduces their incentive to invest in highly risky, longterm research and to develop these new technologies and medical treatments. More specifically, this uncertainty redirects investments toward other less risky and less innovative commercial activities, such as investments in entertainment sectors and food services. In the aggregate, one might see continued or even increased overall levels of venture capital investments, but these investments are not being made in the sectors of the economy that produce innovation in the twenty-first century, such as the life sciences and high-tech.

In the past several decades, the biopharmaceutical and high-tech sectors have been the primary source of economic growth, new jobs, and new innovative products and services—from the mobile revolution to the new drugs that have turned diseases like hepatitis or cancer that were death sentences forty years ago into manageable conditions in living a normal life. In the hightech sector, the patent system has driven an explosion in new products and services at a rate never before seen in any sector of the global innovation economy. “Several empirical studies demonstrate that the observed pattern in high-tech industries, especially in the smartphone industry, is one of constant lower quality-adjusted prices, increased entry and competition, and higher performance standards.”13 Notably, this incredible innovation and economic growth has occurred in one of the most patent-intensive sectors of the economy, and contrary to the theoretical predictions of legal academics and economists that “patent holdup” and “patent thickets” would kill innovation in mobile devices and lead to higher consumer prices.14

Legal and commercial uncertainty in these two core sectors of the U.S. innovation economy in the twenty-first century will lead to reduced economic growth, lost jobs, and fewer new products and services. The data is already indicating the beginning stages of these developments, as we are approximately one decade away from the creation of the Mayo-Alice inquiry. If current indications continue in the same trendline, there will be continued losses in innovation, jobs, and economic growth in the two patent-intensive sectors of the U.S. innovation economy—the high-tech and biopharmaceutical sectors.